UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

Washington Prime Group Inc.
Washington Prime Group, L.P.
(Exact name of Registrant as specified in its charter)

Indiana (Both Registrants)
(State of incorporation or organization)

001-36252 (Washington Prime Group Inc.)
333-205859 (Washington Prime Group, L.P.)
(Commission File No.)
180 East Broad Street
Columbus, Ohio 43215
(Address of principal executive offices)
46-4323686 (Washington Prime Group Inc.)
46-4674640 (Washington Prime Group, L.P.)
(I.R.S. Employer Identification No.)
(614) 621-9000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Washington Prime Group Inc. Yes x  No o
 
Washington Prime Group, L.P. Yes  x  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( § 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Washington Prime Group Inc. Yes x   No o
 
Washington Prime Group, L.P. Yes x   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Washington Prime Group Inc. (Check One) :
 
Large accelerated filer    x   Accelerated filer o
 
 
Non-accelerated filer o   Smaller reporting company o
 
 
Emerging growth company o
                 (Do not check if a smaller reporting company)
 
 
 
Washington Prime Group, L.P.    (Check One) :
 
Large accelerated filer    o             Accelerated filer o
 
 
Non-accelerated filer x   Smaller reporting company o
 
 
Emerging growth company o
                 (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Washington Prime Group Inc. Yes o   No x
 
Washington Prime Group, L.P. Yes o   No x
As of April 24, 2019 , Washington Prime Group Inc. had 186,496,269 shares of common stock outstanding. Washington Prime Group, L.P. has no publicly traded equity and no common stock outstanding.

1


EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2019 of Washington Prime Group ® Inc. and Washington Prime Group, L.P. Unless stated otherwise or the context requires otherwise, references to "WPG Inc." mean Washington Prime Group Inc., an Indiana corporation, and references to "WPG L.P." mean Washington Prime Group, L.P., an Indiana limited partnership, and its consolidated subsidiaries, in cases where it is important to distinguish between WPG Inc. and WPG L.P. We use the terms "WPG," the "Company,” “we,” "us," and “our” to refer to WPG Inc., WPG L.P., and entities in which WPG Inc. or WPG L.P. (or any affiliate) has a material interest on a consolidated basis, unless the context indicates otherwise.

WPG Inc. operates as a self-managed and self-administered real estate investment trust (“REIT”). WPG Inc. owns properties and conducts operations through WPG L.P., of which WPG Inc. is the sole general partner and of which it held approximately 84.4% of the partnership interests (“OP units”) at March 31, 2019 . The remaining OP units are owned by various limited partners. As the sole general partner of WPG L.P., WPG Inc. has the exclusive and complete responsibility for WPG L.P.’s day-to-day management and control. Management operates WPG Inc. and WPG L.P. as one enterprise. The management of WPG Inc. consists of the same persons who direct the management of WPG L.P. As general partner with control of WPG L.P., WPG Inc. consolidates WPG L.P. for financial reporting purposes, and WPG Inc. does not have significant assets other than its investment in WPG L.P. Therefore, the assets and liabilities of WPG Inc. and WPG L.P. are substantially the same on their respective consolidated financial statements and the disclosures of WPG Inc. and WPG L.P. also are substantially similar.
The Company believes, therefore, that the combination into a single report of the quarterly reports on Form 10-Q of WPG Inc. and WPG L.P. provides the following benefits:
•
enhances investors' understanding of the operations of WPG Inc. and WPG L.P. by enabling investors to view the business as a whole in the same manner as management views and operates the business;
•
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both WPG Inc. and WPG L.P.; and
•
creates time and cost efficiencies through the preparation of one set of disclosures instead of two separate sets of disclosures.
The substantive difference between WPG Inc.’s and WPG L.P.’s filings is the fact that WPG Inc. is a REIT with shares traded on a public stock exchange, while WPG L.P. is a limited partnership with no publicly traded equity. Moreover, the interests in WPG L.P. held by third parties are classified differently by the two entities (i.e., noncontrolling interests for WPG Inc. and partners' equity for WPG L.P.). In the consolidated financial statements, these differences are primarily reflected in the equity section of the consolidated balance sheets and in the consolidated statements of equity. Apart from the different equity presentation, the consolidated financial statements of WPG Inc. and WPG L.P. are nearly identical.
This combined Form 10-Q for WPG Inc. and WPG L.P. includes, for each entity, separate interim financial statements (but combined footnotes), separate reports on disclosure controls and procedures and internal control over financial reporting, and separate CEO/CFO certifications. In addition, if there were any material differences between WPG Inc. and WPG L.P. with respect to any other financial and non-financial disclosure items required by Form 10-Q, they would be discussed separately herein.

2


WASHINGTON PRIME GROUP INC. AND WASHINGTON PRIME GROUP, L.P.
FORM 10-Q

INDEX
PART I:
FINANCIAL INFORMATION
PAGE
 
 
 
Item 1.
Consolidated Financial Statements (unaudited)
 
 
 
 
 
Financial Statements for Washington Prime Group Inc.:
 
 
 
 
 
Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018
 
 
 
 
Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2019 and 2018
 
 
 
 
Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018
 
 
 
 
Consolidated Statements of Equity for the three months ended March 31, 2019 and 2018
 
 
 
 
Financial Statements for Washington Prime Group, L.P.:
 
 
 
 
 
Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018
 
 
 
 
Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2019 and 2018
 
 
 
 
Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018
 
 
 
 
Consolidated Statements of Equity for the three months ended March 31, 2019 and 2018
 
 
 
 
Condensed Notes to Consolidated Financial Statements
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
 
 
Item 4.
Controls and Procedures
 
 
 
PART II:
OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
 
 
 
Item 1A.
Risk Factors
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
Item 6.
Exhibits
 
 
 
SIGNATURES

3


PART I
FINANCIAL INFORMATION

Item 1.
Financial Statements
Washington Prime Group Inc.
Unaudited Consolidated Balance Sheets
(dollars in thousands, except share and par value amounts)
 
 
March 31, 2019
 
December 31, 2018
ASSETS:
 
 
 
 
Investment properties at cost
 
$
5,933,785

 
$
5,914,705

Less: accumulated depreciation
 
2,334,130

 
2,283,764


 
3,599,655

 
3,630,941

Cash and cash equivalents
 
29,244

 
42,542

Tenant receivables and accrued revenue, net
 
81,849

 
85,463

Investment in and advances to unconsolidated entities, at equity
 
428,130

 
433,207

Deferred costs and other assets
 
171,422

 
169,135

Total assets
 
$
4,310,300

 
$
4,361,288

LIABILITIES:
 
 
 
 
Mortgage notes payable
 
$
978,823

 
$
983,269

Notes payable
 
983,542

 
982,697

Unsecured term loans
 
685,792

 
685,509

Revolving credit facility
 
341,288

 
286,002

Accounts payable, accrued expenses, intangibles, and deferred revenues
 
216,172

 
253,862

Distributions payable
 
2,992

 
2,992

Cash distributions and losses in unconsolidated entities, at equity
 
15,421

 
15,421

Total liabilities
 
3,224,030

 
3,209,752

Redeemable noncontrolling interests
 
3,265

 
3,265

EQUITY:
 
 
 
 
Stockholders' Equity:
 
 
 
 
Series H Cumulative Redeemable Preferred Stock, $0.0001 par value, 4,000,000 shares issued and outstanding as of March 31, 2019 and December 31, 2018
 
104,251

 
104,251

Series I Cumulative Redeemable Preferred Stock, $0.0001 par value, 3,800,000 shares issued and outstanding as of March 31, 2019 and December 31, 2018
 
98,325

 
98,325

Common stock, $0.0001 par value, 350,000,000 shares authorized;
186,493,797 and 186,074,461 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
 
19

 
19

Capital in excess of par value
 
1,249,490

 
1,247,639

Accumulated deficit
 
(509,187
)
 
(456,924
)
Accumulated other comprehensive income
 
2,082

 
6,400

Total stockholders' equity
 
944,980

 
999,710

Noncontrolling interests
 
138,025

 
148,561

Total equity
 
1,083,005

 
1,148,271

Total liabilities, redeemable noncontrolling interests and equity
 
$
4,310,300

 
$
4,361,288


The accompanying notes are an integral part of these statements.

4


Washington Prime Group Inc.
Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income
(dollars in thousands, except per share amounts)
 
For the Three Months Ended March 31,
 
2019
 
2018
REVENUE:
 
 
 
Rental income
$
163,273

 
$
172,417

Other income
5,550

 
4,577

Total revenues
168,823

 
176,994

EXPENSES:

 

Property operating
39,429

 
36,366

Depreciation and amortization
66,378

 
61,294

Real estate taxes
22,114

 
22,041

Advertising and promotion
1,893

 
1,771

General and administrative
14,125

 
9,654

Ground rent
203

 
197

Total operating expenses
144,142

 
131,323

 


 


Interest expense, net
(36,830
)
 
(34,344
)
Gain on disposition of interests in properties, net
9,990

 
8,181

Income and other taxes
(356
)
 
(485
)
(Loss) income from unconsolidated entities, net
(48
)
 
1,162

NET (LOSS) INCOME
(2,563
)
 
20,185

Net (loss) income attributable to noncontrolling interests
(896
)
 
2,661

NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY
(1,667
)
 
17,524

Less: Preferred share dividends
(3,508
)
 
(3,508
)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
(5,175
)
 
$
14,016

 
 
 
 
(LOSS) EARNINGS PER COMMON SHARE, BASIC & DILUTED
$
(0.03
)
 
$
0.07

 
 
 
 
COMPREHENSIVE (LOSS) INCOME:
 
 
 
Net (loss) income
$
(2,563
)
 
$
20,185

Unrealized (loss) income on interest rate derivative instruments, net
(5,110
)
 
5,217

Comprehensive (loss) income
(7,673
)
 
25,402

Comprehensive (loss) income attributable to noncontrolling interests
(1,688
)
 
3,482

Comprehensive (loss) income attributable to common shareholders
$
(5,985
)
 
$
21,920

The accompanying notes are an integral part of these statements.

5


Washington Prime Group Inc.
Unaudited Consolidated Statements of Cash Flows
(dollars in thousands)
 
For the Three Months Ended March 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net (loss) income
$
(2,563
)
 
$
20,185

Adjustments to reconcile net (loss) income to net cash provided by operating activities:


 

Depreciation and amortization, including fair value rent, fair value debt, deferred financing costs and equity-based compensation
65,270

 
61,404

Gain on disposition of interests in properties and outparcels, net
(9,990
)
 
(8,181
)
Change in estimate of collectibility of rental income
2,980

 
3,346

Loss (income) from unconsolidated entities, net
48

 
(1,162
)
Distributions of income from unconsolidated entities
575

 
1,585

Changes in assets and liabilities:


 

Tenant receivables and accrued revenue, net
1,766

 
1,177

Deferred costs and other assets
(6,047
)
 
(11,612
)
Accounts payable, accrued expenses, deferred revenues and other liabilities
(39,388
)
 
(23,082
)
Net cash provided by operating activities
12,651

 
43,660

CASH FLOWS FROM INVESTING ACTIVITIES:


 

Capital expenditures, net
(35,162
)
 
(29,675
)
Net proceeds from disposition of interests in properties and outparcels
12,084

 
13,776

Investments in unconsolidated entities
(3,273
)
 
(10,048
)
Distributions of capital from unconsolidated entities
7,727

 
19,884

Net cash used in investing activities
(18,624
)
 
(6,063
)
CASH FLOWS FROM FINANCING ACTIVITIES:


 

Distributions to noncontrolling interest holders in properties
(66
)
 
(5
)
Redemption of limited partner units
—

 
(11
)
Net proceeds from issuance of common shares, including common stock plans
1

 
—

Distributions on common and preferred shares/units
(59,336
)
 
(59,167
)
Proceeds from issuance of debt, net of transaction costs
75,000

 
476,877

Repayments of debt
(24,142
)
 
(451,101
)
Net cash used in financing activities
(8,543
)
 
(33,407
)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(14,516
)
 
4,190

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
61,084

 
70,201

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
46,568

 
$
74,391


The accompanying notes are an integral part of these statements.

6


Washington Prime Group Inc.
Unaudited Consolidated Statements of Equity
(dollars in thousands, except per share/unit amounts)
 
 
Preferred Series H
 
Preferred Series I
 
Common
Stock
 
Capital in
Excess of
Par Value
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income
 
Total
Stockholders'
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Redeemable Non-Controlling Interests
Balance, December 31, 2018
 
$
104,251

 
$
98,325

 
$
19

 
$
1,247,639

 
$
(456,924
)
 
$
6,400

 
$
999,710

 
$
148,561

 
$
1,148,271

 
$
3,265

Other
 
—

 
—

 
—

 
(7
)
 
—

 
—

 
(7
)
 
—

 
(7
)
 
—

Exercise of stock options
 
—

 
—

 
—

 
1

 
—

 
—

 
1

 
—

 
1

 
—

Equity-based compensation
 
—

 
—

 
—

 
1,778

 
—

 
—

 
1,778

 
37

 
1,815

 
—

Adjustments to noncontrolling interests
 
—

 
—

 
—

 
79

 
—

 
—

 
79

 
(79
)
 
—

 
—

Distributions on common shares/units ($0.25 per common share/unit)
 
—

 
—

 
—

 
—

 
(47,088
)
 
—

 
(47,088
)
 
(8,746
)
 
(55,834
)
 
—

Distributions declared on preferred shares
 
—

 
—

 
—

 
—

 
(3,508
)
 
—

 
(3,508
)
 
—

 
(3,508
)
 
—

Other comprehensive loss
 
—

 
—

 
—

 
—

 
—

 
(4,318
)
 
(4,318
)
 
(792
)
 
(5,110
)
 
—

Net loss, excluding $60 of distributions to preferred unitholders
 
—

 
—

 
—

 
—

 
(1,667
)
 
—

 
(1,667
)
 
(956
)
 
(2,623
)
 
—

Balance, March 31, 2019
 
$
104,251

 
$
98,325

 
$
19

 
$
1,249,490

 
$
(509,187
)
 
$
2,082

 
$
944,980

 
$
138,025

 
$
1,083,005

 
$
3,265


The accompanying notes are an integral part of this statement.



7


Washington Prime Group Inc.
Unaudited Consolidated Statements of Equity
(dollars in thousands, except per share/unit amounts)
 
 
Preferred Series H
 
Preferred Series I
 
Common
Stock
 
Capital in
Excess of
Par Value
 
Accumulated Deficit
 
Accumulated Other Comprehensive Income
 
Total
Stockholders'
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Redeemable Non-Controlling Interests
Balance, December 31, 2017
 
$
104,251

 
$
98,325

 
$
19

 
$
1,240,483

 
$
(350,594
)
 
$
6,920

 
$
1,099,404

 
$
167,718

 
$
1,267,122

 
$
3,265

Cumulative effect of accounting standards
 
—

 
—

 
—

 
(389
)
 
1,890

 
584

 
2,085

 
389

 
2,474

 
—

Redemption of limited partner units
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(11
)
 
(11
)
 
—

Other
 
—

 
—

 
—

 
(36
)
 
—

 
—

 
(36
)
 
—

 
(36
)
 
—

Equity-based compensation
 
—

 
—

 
—

 
1,523

 
—

 
—

 
1,523

 
219

 
1,742

 
—

Adjustments to noncontrolling interests
 
—

 
—

 
—

 
397

 
—

 
—

 
397

 
(397
)
 
—

 
—

Distributions on common shares/units ($0.25 per common share/unit)
 
—

 
—

 
—

 
—

 
(46,909
)
 
—

 
(46,909
)
 
(8,695
)
 
(55,604
)
 
—

Distributions declared on preferred shares
 
—

 
—

 
—

 
—

 
(3,508
)
 
—

 
(3,508
)
 
—

 
(3,508
)
 
—

Other comprehensive income
 
—

 
—

 
—

 
—

 
—

 
4,396

 
4,396

 
821

 
5,217

 
—

Net income, excluding $60 of distributions to preferred unitholders
 
—

 
—

 
—

 
—

 
17,524

 
—

 
17,524

 
2,601

 
20,125

 
—

Balance, March 31, 2018
 
$
104,251

 
$
98,325

 
$
19

 
$
1,241,978

 
$
(381,597
)
 
$
11,900

 
$
1,074,876

 
$
162,645

 
$
1,237,521

 
$
3,265


The accompanying notes are an integral part of this statement.

8


Washington Prime Group, L.P.
Unaudited Consolidated Balance Sheets
(dollars in thousands, except unit amounts)
 
 
March 31, 2019
 
December 31, 2018
ASSETS:
 
 
 
 
Investment properties at cost
 
$
5,933,785

 
$
5,914,705

Less: accumulated depreciation
 
2,334,130

 
2,283,764


 
3,599,655

 
3,630,941

Cash and cash equivalents
 
29,244

 
42,542

Tenant receivables and accrued revenue, net
 
81,849

 
85,463

Investment in and advances to unconsolidated entities, at equity
 
428,130

 
433,207

Deferred costs and other assets
 
171,422

 
169,135

Total assets
 
$
4,310,300

 
$
4,361,288

LIABILITIES:
 
 
 
 
Mortgage notes payable
 
$
978,823

 
$
983,269

Notes payable
 
983,542

 
982,697

Unsecured term loans
 
685,792

 
685,509

Revolving credit facility
 
341,288

 
286,002

Accounts payable, accrued expenses, intangibles, and deferred revenues
 
216,172

 
253,862

Distributions payable
 
2,992

 
2,992

Cash distributions and losses in unconsolidated entities, at equity
 
15,421

 
15,421

Total liabilities
 
3,224,030

 
3,209,752

Redeemable noncontrolling interests
 
3,265

 
3,265

EQUITY:
 
 
 
 
Partners' Equity:
 
 
 
 
General partner
 
 
 
 
Preferred equity, 7,800,000 units issued and outstanding as of March 31, 2019 and December 31, 2018
 
202,576

 
202,576

Common equity, 186,493,797 and 186,074,461 units issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
 
742,404

 
797,134

Total general partners' equity
 
944,980

 
999,710

Limited partners, 34,755,660 and 34,755,660 units issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
 
137,019

 
147,493

Total partners' equity
 
1,081,999

 
1,147,203

Noncontrolling interests
 
1,006

 
1,068

Total equity
 
1,083,005

 
1,148,271

Total liabilities, redeemable noncontrolling interests and equity
 
$
4,310,300

 
$
4,361,288


The accompanying notes are an integral part of these statements.


9


Washington Prime Group, L.P.
Unaudited Consolidated Statements of Operations and Comprehensive (Loss) Income
(dollars in thousands, except per unit amounts)
 
For the Three Months Ended March 31,
 
2019
 
2018
REVENUE:
 
 
 
Rental income
$
163,273

 
$
172,417

Other income
5,550

 
4,577

Total revenues
168,823

 
176,994

EXPENSES:
 
 
 
Property operating
39,429

 
36,366

Depreciation and amortization
66,378

 
61,294

Real estate taxes
22,114

 
22,041

Advertising and promotion
1,893

 
1,771

General and administrative
14,125

 
9,654

Ground rent
203

 
197

Total operating expenses
144,142

 
131,323

 
 
 
 
Interest expense, net
(36,830
)
 
(34,344
)
Gain on disposition of interests in properties, net
9,990

 
8,181

Income and other taxes
(356
)
 
(485
)
(Loss) income from unconsolidated entities, net
(48
)
 
1,162

NET (LOSS) INCOME ATTRIBUTABLE TO UNITHOLDERS
(2,563
)
 
20,185

Less: Preferred unit distributions
(3,568
)
 
(3,568
)
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON UNITHOLDERS
$
(6,131
)
 
$
16,617

 
 
 
 
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON UNITHOLDERS:
 
 
 
General partner
$
(5,175
)
 
$
14,016

Limited partners
(956
)
 
2,601

Net (loss) income attributable to common unitholders
$
(6,131
)
 
$
16,617

 
 
 
 
(LOSS) EARNINGS PER COMMON UNIT, BASIC & DILUTED
$
(0.03
)
 
$
0.07

 
 
 
 
COMPREHENSIVE (LOSS) INCOME:
 
 
 
Net (loss) income
$
(2,563
)
 
$
20,185

Unrealized (loss) income on interest rate derivative instruments, net
(5,110
)
 
5,217

Comprehensive (loss) income
$
(7,673
)
 
$
25,402


The accompanying notes are an integral part of these statements.

10


Washington Prime Group, L.P.
Unaudited Consolidated Statements of Cash Flows
(dollars in thousands)
 
For the Three Months Ended March 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net (loss) income
$
(2,563
)
 
$
20,185

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization, including fair value rent, fair value debt, deferred financing costs and equity-based compensation
65,270

 
61,404

Gain on disposition of interests in properties and outparcels, net
(9,990
)
 
(8,181
)
Change in estimate of collectibility of rental income
2,980

 
3,346

Loss (income) from unconsolidated entities, net
48

 
(1,162
)
Distributions of income from unconsolidated entities
575

 
1,585

Changes in assets and liabilities:
 
 
 
Tenant receivables and accrued revenue, net
1,766

 
1,177

Deferred costs and other assets
(6,047
)
 
(11,612
)
Accounts payable, accrued expenses, deferred revenues and other liabilities
(39,388
)
 
(23,082
)
Net cash provided by operating activities
12,651

 
43,660

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures, net
(35,162
)
 
(29,675
)
Net proceeds from disposition of interests in properties and outparcels
12,084

 
13,776

Investments in unconsolidated entities
(3,273
)
 
(10,048
)
Distributions of capital from unconsolidated entities
7,727

 
19,884

Net cash used in investing activities
(18,624
)
 
(6,063
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Distributions to noncontrolling interest holders in properties
(66
)
 
(5
)
Redemption of limited partner units
—

 
(11
)
Net proceeds from issuance of common units, including equity-based compensation plans
1

 
—

Distributions to unitholders
(59,336
)
 
(59,167
)
Proceeds from issuance of debt, net of transaction costs
75,000

 
476,877

Repayments of debt
(24,142
)
 
(451,101
)
Net cash used in financing activities
(8,543
)
 
(33,407
)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(14,516
)
 
4,190

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
61,084

 
70,201

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
46,568

 
$
74,391


The accompanying notes are an integral part of these statements.

11


Washington Prime Group, L.P.
Unaudited Consolidated Statements of Equity
(dollars in thousands, except per unit amounts)
 
 
General Partner
 
 
 
 
 
 
 
 
 
 
 
 
Preferred
 
Common
 
Total
 
Limited Partners
 
Total
Partners'
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Redeemable Non-Controlling Interests
Balance, December 31, 2018
 
$
202,576

 
$
797,134

 
$
999,710

 
$
147,493

 
$
1,147,203

 
$
1,068

 
$
1,148,271

 
$
3,265

Other
 
—

 
(7
)
 
(7
)
 
—

 
(7
)
 
—

 
(7
)
 
—

Exercise of stock options
 
—

 
1

 
1

 
—

 
1

 
—

 
1

 
—

Equity-based compensation
 
—

 
1,778

 
1,778

 
37

 
1,815

 
—

 
1,815

 
—

Adjustments to limited partners' interests
 
—

 
79

 
79

 
(79
)
 
—

 
—

 
—

 
—

Distributions on common units ($0.25 per common unit)
 
—

 
(47,088
)
 
(47,088
)
 
(8,684
)
 
(55,772
)
 
(62
)
 
(55,834
)
 
—

Distributions declared on preferred units
 
(3,508
)
 
—

 
(3,508
)
 
—

 
(3,508
)
 
—

 
(3,508
)
 
(60
)
Other comprehensive loss
 
—

 
(4,318
)
 
(4,318
)
 
(792
)
 
(5,110
)
 
—

 
(5,110
)
 
—

Net loss
 
3,508

 
(5,175
)
 
(1,667
)
 
(956
)
 
(2,623
)
 
—

 
(2,623
)
 
60

Balance, March 31, 2019
 
$
202,576

 
$
742,404

 
$
944,980

 
$
137,019

 
$
1,081,999

 
$
1,006

 
$
1,083,005

 
$
3,265


 
 
General Partner
 
 
 
 
 
 
 
 
 
 
 
 
Preferred
 
Common
 
Total
 
Limited Partners
 
Total
Partners'
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Redeemable Non-Controlling Interests
Balance, December 31, 2017
 
$
202,576

 
$
896,828

 
$
1,099,404

 
$
166,660

 
$
1,266,064

 
$
1,058

 
$
1,267,122

 
$
3,265

Cumulative effect of accounting standards
 
—

 
2,085

 
2,085

 
389

 
2,474

 
—

 
2,474

 
—

Redemption of limited partner units
 
—

 
—

 
—

 
(11
)
 
(11
)
 
—

 
(11
)
 
—

Other
 
—

 
(36
)
 
(36
)
 
—

 
(36
)
 
—

 
(36
)
 
—

Equity-based compensation
 
—

 
1,523

 
1,523

 
219

 
1,742

 
—

 
1,742

 
—

Adjustments to limited partners' interests
 
—

 
397

 
397

 
(397
)
 
—

 
—

 
—

 
—

Distributions on common units ($0.25 per common unit)
 
—

 
(46,909
)
 
(46,909
)
 
(8,690
)
 
(55,599
)
 
(5
)
 
(55,604
)
 
—

Distributions declared on preferred units
 
(3,508
)
 
—

 
(3,508
)
 
—

 
(3,508
)
 
—

 
(3,508
)
 
(60
)
Other comprehensive income
 
—

 
4,396

 
4,396

 
821

 
5,217

 
—

 
5,217

 
—

Net income
 
3,508

 
14,016

 
17,524

 
2,601

 
20,125

 
—

 
20,125

 
60

Balance, March 31, 2018
 
$
202,576

 
$
872,300

 
$
1,074,876

 
$
161,592

 
$
1,236,468

 
$
1,053

 
$
1,237,521

 
$
3,265


The accompanying notes are an integral part of this statement.


12
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


1.
Organization
Washington Prime Group Inc. (“WPG Inc.”) is an Indiana corporation that operates as a fully integrated, self‑administered and self‑managed real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended (the "Code"). WPG Inc. will generally qualify as a REIT for U.S. federal income tax purposes as long as it continues to distribute at least 90% of its REIT taxable income and satisfy certain other requirements. WPG Inc. will generally be allowed a deduction against its U.S. federal income tax liability for dividends paid by it to REIT shareholders, thereby reducing or eliminating any corporate level taxation to WPG Inc. Washington Prime Group, L.P. (“WPG L.P.”) is WPG Inc.'s majority‑owned limited partnership subsidiary that owns, develops and manages, through its affiliates, all of WPG Inc.'s real estate properties and other assets. WPG Inc. is the sole general partner of WPG L.P. As of March 31, 2019 , our assets consisted of material interests in 108 shopping centers in the United States, consisting of open air properties and enclosed retail properties, comprised of approximately 58 million square feet of managed gross leasable area.
Unless the context otherwise requires, references to "WPG," the "Company," “we,” “us” or “our” refer to WPG Inc., WPG L.P. and entities in which WPG Inc. or WPG L.P. (or any affiliate) has a material ownership or financial interest, on a consolidated basis.
We derive our revenues primarily from retail tenant leases, including fixed minimum rent leases, overage and percentage rent leases based on tenants’ sales volumes, offering property operating services to our tenants and others, including energy, waste handling and facility services, and reimbursements from tenants for certain recoverable costs such as property operating, real estate taxes, repair and maintenance, and advertising and promotional expenses.
We seek to enhance the performance of our properties and increase our revenues by, among other things, securing leases of anchor and inline tenant spaces, re‑developing or renovating existing properties to increase the leasable square footage, and increasing the productivity of occupied locations through aesthetic upgrades, re‑merchandising and/or changes to the retail use of the space.
Severance
On February 5, 2019 , the Company's Executive Vice President, Head of Open Air Centers was terminated without cause from his position and received severance payments and other benefits pursuant to the terms and conditions of his employment agreement. In addition, the Company terminated, without cause, additional non-executive personnel in the Property Management department as part of an effort to reduce overhead costs. In connection with and as part of the aforementioned management changes, the Company recorded aggregate severance charges of $1.9 million , including $0.1 million of non-cash stock compensation in the form of accelerated vesting of equity incentive awards, which costs are included in general and administrative expense in the accompanying consolidated statements of operations and comprehensive (loss) income for the three months ended March 31, 2019 .
On March 18, 2019 , the Company's Executive Vice President, Development notified the Company of his resignation. The effective date of his resignation was March 28, 2019. There were no severance payments or accelerated vesting of stock compensation benefits in connection with this separation.
2.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated balance sheets as of March 31, 2019 and December 31, 2018 include the accounts of WPG Inc. and WPG L.P., as well as their majority owned and controlled subsidiaries. The accompanying consolidated statements of operations include the consolidated accounts of the Company. All intercompany transactions have been eliminated in consolidation. Due to the seasonal nature of certain operational activities, the results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year.
These consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by GAAP for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented. The Company believes that the disclosures made are adequate to prevent the information presented from being misleading. These consolidated unaudited financial statements should be read in conjunction with the audited consolidated and combined financial statements and related notes included in the combined 2018 Annual Report on Form 10-K for WPG Inc. and WPG L.P. (the " 2018 Form 10-K").

13
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


General
These consolidated financial statements reflect the consolidation of properties that are wholly owned or properties in which we own less than a 100% interest but that we control. Control of a property is demonstrated by, among other factors, our ability to refinance debt and sell the property without the consent of any other unaffiliated partner or owner, and the inability of any other unaffiliated partner or owner to replace us.
We consolidate a variable interest entity ("VIE") when we are determined to be the primary beneficiary. Determination of the primary beneficiary of a VIE is based on whether an entity has (1) the power to direct activities that most significantly impact the economic performance of the VIE and (2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our determination of the primary beneficiary of a VIE considers all relationships between us and the VIE, including management agreements and other contractual arrangements.
There have been no changes during the three months ended March 31, 2019 to any of our previous conclusions about whether an entity qualifies as a VIE or whether we are the primary beneficiary of any previously identified VIE. During the three months ended March 31, 2019 , we did not provide financial or other support to a previously identified VIE that we were not previously contractually obligated to provide.
Investments in partnerships and joint ventures represent our noncontrolling ownership interests in properties. We account for these investments using the equity method of accounting. We initially record these investments at cost and we subsequently adjust for net equity in income or loss, which we allocate in accordance with the provisions of the applicable partnership or joint venture agreement and cash contributions and distributions, if applicable. The allocation provisions in the partnership or joint venture agreements are not always consistent with the legal ownership interests held by each general or limited partner or joint venture investee primarily due to partner preferences. We separately report investments in joint ventures for which accumulated distributions have exceeded investments in and our share of net income from the joint ventures within cash distributions and losses in unconsolidated entities, at equity in the consolidated balance sheets. The net equity of certain joint ventures is less than zero because of financing or operating distributions that are usually greater than net income, as net income includes non-cash charges for depreciation and amortization, and WPG has committed to or intends to fund the venture.
As of March 31, 2019 , our assets consisted of material interests in 108 shopping centers. The consolidated financial statements as of that date reflect the consolidation of 91 wholly owned properties and four additional properties that are less than wholly owned, but which we control or for which we are the primary beneficiary. We account for our interests in the remaining 13 properties, or the joint venture properties, using the equity method of accounting. While we manage the day-to-day operations of the joint venture properties, we do not control the operations as we have determined that our partner or partners have substantive participating rights with respect to the assets and operations of these joint venture properties (see Note 5 - "Investment in Unconsolidated Entities, at Equity" for further details).
We allocate net operating results of WPG L.P. to third parties and to WPG Inc. based on the partners' respective weighted average ownership interests in WPG L.P. Net operating results of WPG L.P. attributable to third parties are reflected in net (loss) income attributable to noncontrolling interests. WPG Inc.'s weighted average ownership interest in WPG L.P. was 84.4% and 84.3% for the three months ended March 31, 2019 and 2018 , respectively. As of March 31, 2019 and December 31, 2018 , WPG Inc.'s ownership interest in WPG L.P. was 84.4% and 84.4% , respectively. We adjust the noncontrolling limited partners' interests at the end of each period to reflect their interest in WPG L.P.
3.
Summary of Significant Accounting Policies
Fair Value Measurements
The Company measures and discloses its fair value measurements in accordance with Accounting Standards Codification ("ASC") Topic 820 - “Fair Value Measurement” (“Topic 820”). The fair value hierarchy, as defined by Topic 820, contains three levels of inputs that may be used to measure fair value as follows:
•
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
•
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, such as interest rates, foreign exchange rates, and yield curves, that are observable at commonly quoted intervals.
•
Level 3 inputs are unobservable inputs for the asset or liability which are typically based on an entity's own assumptions, as there is little, if any, related market activity.

14
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under Topic 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions.
Use of Estimates
We prepared the accompanying consolidated financial statements in accordance with GAAP. This requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reported period. Our actual results could differ from these estimates.
Segment Disclosure
Our primary business is the ownership, development and management of retail real estate. We have aggregated our operations, including enclosed retail properties and open air properties, into one reportable segment because they have similar economic characteristics and we provide similar products and services to similar types of, and in many cases, the same tenants.
New Accounting Pronouncements
Adoption of New Standards
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)." This new guidance, including related ASUs that were subsequently issued, was effective January 1, 2019 and required lessees to recognize a lease liability and right of use ("ROU") asset, measured as the present value of lease payments, for both operating and financing leases with a term greater than 12 months. Additionally, the new standard made targeted changes to lessor accounting. The new leases standard required a modified retrospective transition approach for all leases existing at, or entered into after, January 1, 2017, with an option to use certain transition relief which allowed an entity to account for the impact of the adoption ASU 2016-02 with a cumulative adjustment to retained earnings, if necessary, on January 1, 2019, rather than January 1, 2017, eliminating the need to restate amounts presented prior to January 1, 2019.
The Company adopted the new standard on January 1, 2019 and applied the new guidance utilizing the optional transition method noted above. The Company elected to use the "package of practical expedients," which allowed the Company not to reassess under the new standard prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not make any adjustments to the opening balance of retained earnings upon adoption of the new standard given the nature of the impacts and other transition practical expedients elected by the Company.
Upon adoption, the Company recognized a lease liability and corresponding ROU asset of approximately $14.4 million for the four material ground leases, two material office leases, and one material garage lease with a term of more than 12 months. For leases with a term of 12 months or less, the Company made an accounting policy election by underlying asset to not recognize lease liabilities and ROU assets. Additionally, the Company excluded certain office equipment leases due to materiality. All of these leases were classified as operating leases under legacy GAAP and the current classification was carried forward under ASU 2016-02. See "Note 10 - Commitments and Contingencies" for additional details.
From a lessor perspective, the new guidance remained mostly similar to legacy GAAP as the Company elected the practical expedient to not separate non-lease components from lease components. This election resulted in a change on the Company's consolidated statements of operations and comprehensive (loss) income as the Company no longer presents minimum rents, overage rents, and tenant reimbursements as separate line items because the Company now accounts for these line items as a single combined lease component, rental income, on the basis of the lease component being the predominant component of the contract. As such, non-lease components, including common-area ("CAM") revenues, are now combined with lease components and are recognized on a straight-line basis to the extent the non-lease components are fixed. Additionally, ASU 2016-02 required the Company to recognize a change, after the commencement date, in their assessment of whether the collectibility of an operating lease receivable as probable as an adjustment to rental income rather than as a provision for credit losses. This requirement resulted in a change on the Company's consolidated statements of operations and comprehensive (loss) income as the Company no longer presents provision for credit losses as a separate line item and the adjustment is now recorded as a reduction to rental income. ASU 2016-02 also introduced certain changes to the lease classification rules for lessors. Accordingly, some leases may be classified as sales-type leases in the future. This change is not expected to have a material impact on the Company's financial statements. Finally, ASU 2016-02 disallowed the capitalization of internal leasing costs and legal costs, unless said costs are incremental to obtaining the lease contract, resulting in an increase in the Company's general and administrative expenses. For the three months ended March 31, 2018 , we capitalized approximately $4.1 million of internal legal and leasing costs that would no longer qualify for capitalization under the new standard. The Company elected to use the practical expedient in transition to not re-evaluate costs that were previously capitalized.

15
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


The cumulative effect of the change to our consolidated January 1, 2019 balance sheet for the adoption of ASU 2016-02 was as follows:
 
Balance at December 31, 2018
 
Adjustments Due to
ASU 2016-02
 
Balance at January 1, 2019
Balance Sheet
 
 
 
 
 
Assets
 
 
 
 
 
Deferred costs and other assets
$
169,135

 
$
14,412

 
$
183,547

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Accounts payable, accrued expenses, intangibles, and deferred revenues
$
253,862

 
$
14,412

 
$
268,274

New Standards Issued But Not Yet Adopted
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurements (ASC 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurements." ASU 2018-13 eliminates certain disclosure requirements for all entities, requires public entities to disclose certain new information, and modifies some disclosure requirements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact this ASU will have, if any, on our financial statements and related disclosures.
Reclassifications
Reclassifications were made to conform prior periods to our presentation of the consolidated statements of operations and comprehensive (loss) income due to the impact of adopting ASU 2016-02. Amounts previously disclosed as minimum rent, tenant reimbursements, and overage rent during the three months ended March 31, 2018 are now included in rental income and will no longer be presented as separate line items. Additionally, termination income of $1.8 million , which was previously disclosed in other income, and provision for credit losses of $3.3 million , which was previously disclosed as a separate line item during the three months ended March 31, 2018 , were also reclassified to rental income to conform with the impact of adopting ASU 2016-02.
Reconciliation of Cash, Cash Equivalents, and Restricted Cash
The following is a summary of our beginning and ending cash, cash equivalents and restricted cash totals as presented in our statements of cash flows for the three months ended March 31, 2019 and 2018 :
 
Balance at March 31,
 
Balance at December 31,
 
2019
 
2018
 
2018
 
2017
Cash and cash equivalents
$
29,244

 
$
45,871

 
$
42,542

 
$
52,019

Restricted cash
17,324

 
28,520

 
18,542

 
18,182

Total cash, cash equivalents and restricted cash
$
46,568

 
$
74,391

 
$
61,084

 
$
70,201

Restricted cash primarily relates to cash held in escrow for payment of real estate taxes and property reserves for maintenance, expansion or leasehold improvements as required by our mortgage loans. Restricted cash is included in "Deferred costs and other assets" in the accompanying balance sheets as of March 31, 2019 and December 31, 2018 .

16
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


4.
Investment in Real Estate
2019 Dispositions
We completed the sale of various tranches of restaurant outparcels to FCPT Acquisitions, LLC ("Four Corners") pursuant to the purchase and sale agreement executed on September 20, 2017 between the Company and Four Corners. The following table summarizes the key terms of each tranche sold during the three months ended March 31, 2019 :
Tranche
 
Sales Date
 
Parcels Sold
 
Purchase Price
 
Sales Proceeds
Tranche 6
 
January 18, 2019
 
8

 
$
9,435

 
$
9,364

Tranche 7
 
February 11, 2019
 
1

 
2,766

 
2,720

 
 
 
 
9

 
$
12,201

 
$
12,084

The net proceeds were used to fund ongoing redevelopment efforts and for general corporate purposes. In connection with the 2019 disposition activities, the Company recorded a gain of $10.0 million for the three months ended March 31, 2019 , which is included in gain on disposition of interests in properties, net in the accompanying consolidated statements of operations and comprehensive (loss) income. The Company expects to close on most of the approximately $25.3 million of remaining outparcels during 2019, subject to due diligence and closing conditions.
2018 Dispositions
On January 12, 2018 , we completed the sale of the first tranche of restaurant outparcels to Four Corners. The first tranche consisted of 10 outparcels, with an allocated purchase price of approximately $13.7 million . The net proceeds of approximately $13.5 million were used to fund a portion of the acquisition of certain Sears parcels on April 11, 2018 and for general corporate purposes.
In connection with the 2018 disposition activities, the Company recorded a net gain of $8.2 million for the three months ended March 31, 2018 , which is included in gain on disposition of interests in properties, net in the accompanying consolidated statements of operations and comprehensive (loss) income.
5.
Investment in Unconsolidated Entities, at Equity
The Company's investment activity in unconsolidated real estate entities during the three months ended March 31, 2019 and March 31, 2018 consisted of investments in the following material joint ventures:
•
The O'Connor Joint Venture I
This investment consists of a 51% noncontrolling interest held by the Company in a portfolio of five enclosed retail properties and related outparcels, consisting of the following: The Mall at Johnson City located in Johnson City, Tennessee; Pearlridge Center located in Aiea, Hawaii; Polaris Fashion Place® located in Columbus, Ohio; Scottsdale Quarter® located in Scottsdale, Arizona; and Town Center Plaza (which consists of Town Center Plaza and the adjacent Town Center Crossing) located in Leawood, Kansas. We retain management, leasing, and development responsibilities for the O'Connor Joint Venture I.
•
The O'Connor Joint Venture II
This investment consists of a 51% noncontrolling interest held by the Company in a portfolio of seven retail properties and certain related outparcels, consisting of the following: The Arboretum, located in Austin, Texas; Arbor Hills, located in Ann Arbor, Michigan; Classen Curve and The Triangle at Classen Curve, each located in Oklahoma City, Oklahoma and Nichols Hills Plaza, located in Nichols Hills, Oklahoma (the "Oklahoma City Properties"); Gateway Centers, located in Austin, Texas; Malibu Lumber Yard, located in Malibu, California; Palms Crossing I and II, located in McAllen, Texas; and The Shops at Arbor Walk, located in Austin, Texas (the "O'Connor Joint Venture II"). We retain management, leasing, and development responsibilities for the O'Connor Joint Venture II.
•
The Seminole Joint Venture
This investment consists of a 45% legal interest held by the Company in Seminole Towne Center, an approximate 1.1 million square foot enclosed regional retail property located in the Orlando, Florida area. The Company's effective financial interest in this property is estimated to be 0% for 2019 due to preferences. We retain management, leasing, and development responsibilities for the Seminole Joint Venture.

17
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


Individual agreements specify which services the Company is to provide to each joint venture. The Company, through its affiliates, provides management, development, construction, marketing, leasing and legal services for a fee to the joint ventures as noted above. We recorded fee income of $2.7 million and $2.3 million for the three months ended March 31, 2019 and March 31, 2018 , respectively, which are included in other income in the accompanying consolidated statements of operations and comprehensive (loss) income. Advances to the joint ventures totaled $3.3 million and $5.3 million as of March 31, 2019 and December 31, 2018 , respectively, which are included in investment in and advances to unconsolidated entities, at equity in the accompanying consolidated balance sheets. Management deems this balance to be collectible and anticipates repayment within one year.
The following table presents the combined balance sheets for the O'Connor Joint Venture I, O'Connor Joint Venture II, the Seminole Joint Venture, and an indirect 12.5% ownership interest in certain other real estate as of March 31, 2019 and December 31, 2018 :
 
 
March 31, 2019
 
December 31, 2018
Assets:
 
 
 
 
Investment properties at cost, net
 
$
1,949,510

 
$
1,964,699

Construction in progress
 
22,465

 
21,019

Cash and cash equivalents
 
35,674

 
43,169

Tenant receivables and accrued revenue, net
 
30,862

 
31,661

Deferred costs and other assets (1)
 
315,157

 
147,481

Total assets
 
$
2,353,668

 
$
2,208,029

Liabilities and Members’ Equity:
 
 

 
 

Mortgage notes payable
 
$
1,290,376

 
$
1,292,801

Accounts payable, accrued expenses, intangibles, and deferred revenues (2)
 
293,245

 
137,073

Total liabilities
 
1,583,621

 
1,429,874

Members’ equity
 
770,047

 
778,155

Total liabilities and members’ equity
 
$
2,353,668

 
$
2,208,029

Our share of members’ equity, net
 
$
392,530

 
$
396,229

 
 
 
 
 
Our share of members’ equity, net
 
$
392,530

 
$
396,229

Advances and excess investment
 
20,179

 
21,557

Net investment in and advances to unconsolidated entities, at equity (3)
 
$
412,709

 
$
417,786


(1)
Includes value of acquired in-place leases and acquired above-market leases with a net book value of $88,181 and $91,609 as of March 31, 2019 and December 31, 2018 , respectively. Additionally, includes ROU assets of $172,733 related to ground leases for which our joint ventures are the lessees as of March 31, 2019 .
(2)
Includes the net book value of below market leases of $53,653 and $57,392 as of March 31, 2019 and December 31, 2018 , respectively. Additionally, includes lease liabilities of $172,733 related to ground leases for which our joint ventures are the lessees as of March 31, 2019 .
(3)
Includes $428,130 and $433,207 of investment in and advances to unconsolidated entities, at equity as of March 31, 2019 and December 31, 2018 , respectively, and $15,421 of cash distributions and losses in unconsolidated entities, at equity as of March 31, 2019 and December 31, 2018 .

18
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


The following table presents the combined statements of operations for the O'Connor Joint Venture I, the O'Connor Joint Venture II, the Seminole Joint Venture, and an indirect 12.5% ownership interest in certain other real estate for the three months ended March 31, 2019 and 2018 :
 
For the Three Months Ended March 31,
 
2019
 
2018
Total revenues
$
66,022

 
$
65,376

Operating expenses
26,829

 
25,343

Depreciation and amortization
25,757

 
23,461

Operating income
13,436

 
16,572

Interest expense, taxes, and other, net
(13,065
)
 
(13,039
)
Net income of the Company's unconsolidated real estate entities
$
371

 
$
3,533

 
 
 
 
(Loss) income from the Company's unconsolidated real estate entities
$
(48
)
 
$
1,162

6.
Indebtedness
Mortgage Debt
Total mortgage indebtedness at March 31, 2019 and December 31, 2018 was as follows:
 
 
March 31,
2019
 
December 31,
2018
Face amount of mortgage loans
 
$
976,134

 
$
980,276

Fair value adjustments, net
 
5,189

 
5,764

Debt issuance cost, net
 
(2,500
)
 
(2,771
)
Carrying value of mortgage loans
 
$
978,823

 
$
983,269

A roll forward of mortgage indebtedness from December 31, 2018 to March 31, 2019 is summarized as follows:
Balance at December 31, 2018
$
983,269

Debt amortization payments
(4,142
)
Amortization of fair value and other adjustments
(575
)
Amortization of debt issuance costs
271

Balance at March 31, 2019
$
978,823

During the three months ended March 31, 2019 , the Company exercised the first of two options to extend the maturity of the $52.0 million mortgage note payable on Town Center at Aurora, located in Aurora, Colorado, for one year . The extended maturity date is April 1, 2020, subject to a one -year extension available at our option subject to compliance with the terms of the underlying loan agreement and payment of customary extension fees. Pursuant to the terms of the extension option, the Company entered into a derivative swap agreement that effectively fixed the interest rate of the note payable at 4.76% per annum through both extension periods.
Unsecured Debt
During the three months ended March 31, 2019 , Fitch Ratings, Moody's Investor Service, and S&P Global Ratings lowered their credit rating on WPG L.P.'s unsecured long-term indebtedness, which increased interest rates on our Facility, December 2015 Term Loan, and Senior Notes due 2024 (see below for capitalized terms) as of February 2, 2019. Due to the downgrade, our Revolver bears interest at LIBOR plus 1.65% (an increase of 40 basis points), our Term Loan bears interest at LIBOR plus 1.90% (an increase of 45 basis points), and our December 2015 Term Loan bears interest at LIBOR plus 2.35% (an increase of 55 basis points). Our Senior Notes due 2024 will bear interest at 6.450% , effective August 15, 2019 (an increase of 50 basis points).

19
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


The following table identifies our total unsecured debt outstanding at March 31, 2019 and December 31, 2018 :
 
 
March 31,
2019
 
December 31,
2018
Notes payable:
 
 
 
 
Face amount - the Exchange Notes (1)
 
$
250,000

 
$
250,000

Face amount - Senior Notes due 2024 (2)
 
750,000

 
750,000

Debt discount, net
 
(9,314
)
 
(9,680
)
Debt issuance costs, net
 
(7,144
)
 
(7,623
)
Total carrying value of notes payable
 
$
983,542

 
$
982,697

 
 
 
 
 
Unsecured term loans: (7)
 
 
 
 
Face amount - Term Loan (3)(4)
 
$
350,000

 
$
350,000

Face amount - December 2015 Term Loan (5)
 
340,000

 
340,000

Debt issuance costs, net
 
(4,208
)
 
(4,491
)
Total carrying value of unsecured term loans
 
$
685,792

 
$
685,509

 
 
 
 
 
Revolving credit facility: (3)(6)
 
 
 
 
Face amount
 
$
345,000

 
$
290,000

Debt issuance costs, net
 
(3,712
)
 
(3,998
)
Total carrying value of revolving credit facility
 
$
341,288

 
$
286,002

(1) The Exchange Notes were issued at a 0.028% discount, bear interest at 3.850% per annum and mature on April 1, 2020 .
(2) The Senior Notes due 2024 were issued at a 1.533% discount, bear interest at 5.950% per annum through August 14, 2019, at which time the interest rate will increase to 6.450% per annum due to the credit downgrade. The Senior Notes due 2024 mature on August 15, 2024 . The interest rate could vary in the future based upon changes to the Company's credit ratings.
(3) The unsecured revolving credit facility, or "Revolver" and unsecured term loan, or "Term Loan" are collectively known as the "Facility."
(4) The Term Loan bears interest at one-month LIBOR plus 1.90% per annum and will mature on December 30, 2022 . We have interest rate swap agreements totaling $250.0 million , which effectively fix the interest rate on a portion of the Term Loan at 4.66% through April 1, 2021 . At March 31, 2019 , the applicable interest rate on the unhedged portion of the Term Loan was one-month LIBOR plus 1.90% or 4.39% .
(5) The December 2015 Term Loan bears interest at one-month LIBOR plus 2.35% per annum and will mature on January 10, 2023 . We have interest rate swap agreements totaling $340.0 million which effectively fix the interest rate at 4.06% per annum through maturity.
(6) The Revolver provides borrowings on a revolving basis up to $650.0 million , bears interest at one-month LIBOR plus 1.65% , and will initially mature on December 30, 2021 , subject to two six month extensions available at our option subject to compliance with terms of the Facility and payment of a customary extension fee. At March 31, 2019 , we had an aggregate available borrowing capacity of $304.8 million under the Revolver, net of $0.2 million reserved for outstanding letters of credit. At March 31, 2019 , the applicable interest rate on the Revolver was one-month LIBOR plus 1.65% or 4.14% .
(7) While we have interest rate swap agreements in place that fix the LIBOR portion of the rates as noted above, the spread over LIBOR could vary in the future based upon changes to the Company's credit ratings and leveraged levels.
Covenants
Our unsecured debt agreements contain financial and other covenants. If we were to fail to comply with these covenants, after the expiration of the applicable cure periods, the debt maturity could be accelerated or other remedies could be sought by the lender including adjustments to the applicable interest rate. As of March 31, 2019 , management believes the Company is in compliance with all covenants of its unsecured debt.

20
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


The total balance of mortgages was approximately $976.1 million as of March 31, 2019 . At March 31, 2019 , certain of our consolidated subsidiaries were the borrowers under 21  non-recourse loans and two full-recourse loans secured by mortgages encumbering 26 properties, including one separate pool of cross-defaulted and cross-collateralized mortgages encumbering a total of four properties. Under these cross-default provisions, a default under any mortgage included in the cross-defaulted pool may constitute a default under all mortgages within that pool and may lead to acceleration of the indebtedness due on each property within the pool. Certain of our secured debt instruments contain financial and other non-financial covenants which are specific to the properties which serve as collateral for that debt. If the borrower fails to comply with these covenants, the lender could accelerate the debt and enforce its right against their collateral. Our existing non-recourse mortgage loans generally prohibit our subsidiaries that are borrowers thereunder from incurring additional indebtedness, subject to certain customary and limited exceptions. In addition, certain of these instruments limit the ability of the applicable borrower's parent entity from incurring mezzanine indebtedness unless certain conditions are satisfied, including compliance with maximum loan to value ratio and minimum debt service coverage ratio tests. Further, under certain of these existing agreements, if certain cash flow levels in respect of the applicable mortgaged property (as described in the applicable agreement) are not maintained for at least two consecutive quarters, the lender could accelerate the debt and enforce its right against its collateral.
On November 19, 2018 , we received a notice of default letter, dated November 15, 2018 , from the special servicer to the borrower, a consolidated subsidiary of WPG L.P., concerning the $49.8 million mortgage loan secured by West Ridge Mall and West Ridge Plaza, located in Topeka, Kansas (collectively known as "West Ridge"). The notice was issued by the special servicer because the borrower did not make certain reserve repayments or deposits as required by the loan agreement for the aforementioned loan. The borrower has initiated discussions with the special servicer regarding this non-recourse loan and is considering various options. The Company continues to manage and lease the property.
On April 11, 2018 , we received a notice of default letter, dated April 6, 2018 , from the special servicer to the borrower, a consolidated subsidiary of WPG L.P., concerning the $45.2 million mortgage loan secured by Towne West Square, located in Wichita, Kansas. The notice was issued by the special servicer because the borrower did not make certain reserve payments or deposits as required by the loan agreement for the aforementioned loan. On August 24, 2018, we received notification that a receiver had been appointed to manage and lease the property. An affiliate of the Company still holds title to the property.
At March 31, 2019 , management believes the applicable borrowers under our other non-recourse mortgage loans were in compliance with all covenants where non-compliance could individually, or giving effect to applicable cross-default provisions in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows. The Company has assessed each of the defaulted properties for impairment indicators and have concluded no impairment charges were warranted as of March 31, 2019 .
Fair Value of Debt
The carrying values of our variable-rate loans approximate their fair values. We estimate the fair values of fixed-rate mortgages and fixed-rate unsecured debt (including variable-rate unsecured debt swapped to fixed-rate) using cash flows discounted at current borrowing rates or Level 2 inputs. We estimate the fair values of consolidated fixed-rate unsecured notes payable using quoted market prices, or, if no quoted market prices are available, we use quoted market prices for securities with similar terms and maturities or Level 1 inputs.
The book value and fair value of these financial instruments and the related discount rate assumptions as of March 31, 2019 and December 31, 2018 are summarized as follows:
 
 
March 31, 2019
 
December 31, 2018
Book value of fixed-rate mortgages (1)
 
$911,134
 
$915,276
Fair value of fixed-rate mortgages
 
$916,561
 
$928,129
Weighted average discount rates assumed in calculation of fair value for fixed-rate mortgages
 
4.79
%
 
4.57
%
 
 
 
 
 
Book value of fixed-rate unsecured debt (1)
 
$1,590,000
 
$1,590,000
Fair value of fixed-rate unsecured debt
 
$1,546,685
 
$1,485,672
Weighted average discount rates assumed in calculation of fair value for fixed-rate unsecured debt
 
5.52
%
 
5.62
%
(1) Excludes debt issuance costs and applicable debt discounts.

21
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


7.
Derivative Financial Instruments
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future uncertain cash amounts, the value of which are determined by interest rates. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company's known or expected cash payments related to the Company's borrowings.
Cash Flow Hedges of Interest Rate Risk
The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives the Company primarily uses interest rate swaps or caps as part of its interest rate risk management strategy. Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The Company may also enter into forward starting swaps or treasury lock agreements to set the effective interest rate on a planned fixed-rate financing. In a forward starting swap or treasury lock agreement that the Company cash settles in anticipation of a fixed rate financing or refinancing, the Company will receive or pay an amount equal to the present value of future cash flow payments based on the difference between the contract rate and market rate on the settlement date.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in other comprehensive income ("OCI") or other comprehensive loss (“OCL”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Net realized gains or losses resulting from derivatives that were settled in conjunction with planned fixed-rate financings or refinancings continue to be included in accumulated other comprehensive income ("AOCI") during the term of the hedged debt transaction.
Amounts reported in AOCI relate to derivatives that will be reclassified to interest expense as interest payments are made on the Company's variable-rate debt. Realized gains or losses on settled derivative instruments included in AOCI are recognized as an adjustment to income over the term of the hedged debt transaction. During the next twelve months, the Company estimates that an additional $1.5 million will be reclassified as a decrease to interest expense.
On March 29, 2019 , the Company entered into one two -year swap, totaling $52.0 million with an effective date of April 1, 2019 , pursuant to the terms of the extension option executed on the mortgage note payable loan at Town Center at Aurora. As of March 31, 2019 , the Company had 11 outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk with a notional value of $642.0 million .
The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2019 and December 31, 2018 :
Derivatives designated as hedging instruments:
Balance Sheet
Location
 
March 31, 2019
 
December 31, 2018
Interest rate products
Asset derivatives
Deferred costs and other assets
 
$
5,392

 
$
9,306

Interest rate products
Liability derivatives
Accounts payable, accrued expenses, intangibles, and deferred revenue
 
$
3,081

 
$
1,913

The asset derivative instruments were reported at their fair value of $5,392 and $9,306 in deferred costs and other assets at March 31, 2019 and December 31, 2018 , respectively, with a corresponding adjustment to OCI for the unrealized gains and losses (net of noncontrolling interest allocation). The liability derivative instruments were reported at their fair value of $3,081 and $1,913 at March 31, 2019 and December 31, 2018 , respectively, with a corresponding adjustment to OCL for the unrealized gains and losses (net of noncontrolling interest allocation). Over time, the unrealized gains and losses held in AOCI will be reclassified to earnings. This reclassification will correlate with the recognition of the hedged interest payments in earnings.

22
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of comprehensive (loss) income for the three months ended March 31, 2019 and 2018 :
Derivatives in Cash Flow Hedging Relationships
(Interest rate products)
 
Location of Gain or Loss Recognized in Income on Derivatives
 
For the Three Months Ended March 31,
 
2019
 
2018
Amount of (Loss) or Gain Recognized in OCI on Derivative
 
Interest expense
 
$
(4,565
)
 
$
5,997

 
 
 
 
 
 
 
Amount of Gain Reclassified from AOCI into Income
 
Interest expense
 
$
(545
)
 
$
(780
)
The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations for the three months ended March 31, 2019 and 2018 :
Effect of Cash Flow Hedges on Consolidated Statements of Operations
 
For the Three Months Ended March 31,
 
2019
 
2018
Total interest expense presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded
 
$
(36,830
)
 
$
(34,344
)
 
 
 
 
 
Amount of gain reclassified from accumulated other comprehensive income into interest expense
 
$
(545
)
 
$
(780
)
 
 
 
 
 
Credit Risk-Related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision that if the Company either defaults or is capable of being declared in default on any of its consolidated indebtedness, then the Company could also be declared in default on its derivative obligations.
The Company has agreements with its derivative counterparties that incorporate the loan covenant provisions of the Company's indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with the loan covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.
As of March 31, 2019 , the fair value of the derivatives in a net liability position, plus accrued interest but excluding any adjustment for nonperformance risk, related to these agreements was $3,081 . As of March 31, 2019 , the Company has not posted any collateral related to these agreements. The Company is not in default with any of these provisions as of March 31, 2019 . If the Company had breached any of these provisions at March 31, 2019 , it would have been required to settle its obligation under these agreements at their termination value of $3,081 .
Fair Value Considerations
Currently, the Company uses interest rate swaps and caps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. Based on these inputs the Company has determined that its interest rate swap and cap valuations are classified within Level 2 of the fair value hierarchy.
To comply with the provisions of Topic 820, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2019 and December 31, 2018 , the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

23
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


The tables below presents the Company’s net assets and liabilities measured at fair value as of March 31, 2019 and December 31, 2018 aggregated by the level in the fair value hierarchy within which those measurements fall:
 
Quoted Prices in Active Markets for Identical Liabilities
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Balance at March 31, 2019
Derivative instruments, net
$
—

 
$
2,311

 
$
—

 
$
2,311

 
Quoted Prices in Active Markets for Identical Liabilities
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Balance at December 31, 2018
Derivative instruments, net
$
—

 
$
7,393

 
$
—

 
$
7,393

8.
Rental Income
We receive rental income from the leasing of retail and other space under operating leases, as we retain substantially all of the risks and benefits of ownership of the investment properties. The majority of these leases contain extension options, typically at the lessee's election, and/or early termination provisions. Further, our leases do not contain any provisions that would allow the lessee to purchase the underlying assets throughout the lease term. In most cases, consideration received typically includes a fixed minimum rent component, reimbursement of a fixed portion of our property operating expenses, including utility, security, janitorial, landscaping, food court and other administrative expenses (also known as CAM), and reimbursement of lessor costs such as real estate taxes and insurance, computed based upon a formula in accordance with the lease terms. When not reimbursed by the fixed CAM component, CAM expense reimbursements and lessor costs are based on the tenant's proportionate share of the allocable operating expenses and CAM capital expenditures for the property. We accrue reimbursements from tenants for recoverable portions of all these expenses as revenue in the period the applicable expenditures are incurred. We recognize differences between estimated recoveries and the final billed amounts in the subsequent year. Additionally, a large number of our tenants are also required to pay overage rents based on sales during the applicable lease year over a base amount stated in the lease agreement. We recognize overage rents only when each tenant's sales exceed the applicable sales threshold as defined in their lease. We also collect lease termination income from tenants to allow for the tenant to vacate their space prior to their scheduled lease termination date. We recognize lease termination income in the period when a termination agreement is signed, collectability is assured, and we are no longer obligated to provide space to the tenant. In the event that a tenant is in bankruptcy when the termination agreement is signed, termination fee income is deferred and recognized when, and if, it is received. We record an adjustment to rental income in the period there is a change in our assessment of whether the collectibility of an operating lease receivable is probable.
We have elected the practical expedient in ASU 2016-02 to not separate non-lease components from lease components as our underlying leases qualify as operating leases and the timing and pattern of transfer of the lease and non-lease components are the same. We note that the predominant component of our leases is the lease component and thus account for the combined lease and non-lease component of the non-cancelable lease term on a straight-line basis in accordance with ASC 842.
Rental income also includes accretion related to above-market and below-market lease intangibles related to the acquisition of operating properties. We amortize any tenant inducements as a reduction of rental income utilizing the straight-line method over the term of the related lease or occupancy term of the tenant, if shorter.
The following table summarizes our rental income for the three months ended March 31, 2019 and 2018 :
 
 
For the Three Months Ended March 31,
 
 
2019
 
2018
Operating lease payments, fixed
 
$
144,176

 
$
153,978

Operating lease payments, variable
 
18,062

 
17,977

Amortization of straight-line rent, inducements, and rent abatements
 
1,109

 
760

Net amortization/accretion of above and below-market leases
 
2,906

 
3,048

Change in estimate of collectibility of rental income
 
(2,980
)
 
(3,346
)
Total rental income
 
$
163,273

 
$
172,417


24
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


Future payments to be received under non-cancelable operating leases for each of the next five years and thereafter, excluding variable payments of tenant reimbursements, percentage or overage rents, and lease termination payments as of March 31, 2019 are as follows:
2019
 
$
377,282

2020
 
428,891

2021
 
352,756

2022
 
293,090

2023
 
234,351

Thereafter
 
707,932

 
 
$
2,394,302

9.
Equity
Exchange Rights
Subject to the terms of the limited partnership agreement of WPG L.P., limited partners in WPG L.P. have, at their option, the right to exchange all or any portion of their units for shares of WPG Inc. common stock on a one‑for‑one basis or cash, as determined by WPG Inc. Therefore, the common units held by limited partners are considered by WPG Inc. to be share equivalents and classified as noncontrolling interests within permanent equity, and classified by WPG L.P. as permanent equity. The amount of cash to be paid if the exchange right is exercised and the cash option is selected will be based on the market value of WPG Inc.'s common stock as determined pursuant to the terms of the WPG L.P. Partnership Agreement. At March 31, 2019 , WPG Inc. had reserved 34,755,660 shares of common stock for possible issuance upon the exchange of units held by limited partners.
The holders of the Series I-1 Preferred Units have, at their option, the right to have their units purchased by WPG L.P. subject to the satisfaction of certain conditions. Therefore, the Series I-1 Preferred Units are classified as redeemable noncontrolling interests outside of permanent equity.
Stock Based Compensation
On May 28, 2014 , the Board adopted the Washington Prime Group, L.P. 2014 Stock Incentive Plan (the "Plan"), which permits the Company to grant awards to current and prospective directors, officers, employees and consultants of the Company or any affiliate. An aggregate of 10,000,000 shares of common stock has been reserved for issuance under the Plan. In addition, the maximum number of awards to be granted to a participant in any calendar year is 500,000 shares/units. Awards may be in the form of stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs") or other stock-based awards in WPG Inc., long term incentive units ("LTIP units" or "LTIPs") or performance units ("Performance LTIP Units") in WPG L.P. The Plan terminates on May 28, 2024.
The following is a summary by type of the awards that the Company issued during the three months ended March 31, 2019 and March 31, 2018 under the Plan.
Annual Long-Term Incentive Awards
During the three months ended March 31, 2019 and 2018 , the Company approved the terms and conditions of the 2019 and 2018 annual awards (the "2019 Annual Long-Term Incentive Awards" and "2018 Long-Term Incentive Awards," respectively) for certain executive officers and employees of the Company. Under the terms of the awards program, each participant is provided the opportunity to receive (i) time-based RSUs and (ii) performance-based stock units ("PSUs"). RSUs represent a contingent right to receive one WPG Inc. common share for each vested RSU. RSUs will vest in one-third installments on each annual anniversary of the respective Grant Date (as referenced below), subject to the participant's continued employment with the Company through each vesting date and the participant's continued compliance with certain applicable covenants. During the service period, dividend equivalents will be paid with respect to the RSUs corresponding to the amount of any dividends paid by the Company to the Company's common shareholders for the applicable dividend payment dates. Compensation expense is recognized on a straight-line basis over the three year vesting term. Actual PSUs earned may range from 0% - 150% of the PSUs allocated to the award recipient, based on the Company's total shareholder return ("TSR") compared to a peer group based on companies with similar assets and revenue over a three -year performance period that commenced on the respective Grant Date (as referenced below).

25
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


During the performance period, dividend equivalents corresponding to the amount of any regular cash dividends paid by the Company to the Company’s common shareholders for the applicable dividend payment dates will accrue and be deemed reinvested in additional PSUs, which will be settled in common shares at the same time and only to the extent that the underlying PSU is earned and settled in common shares. Payout of the PSUs is also subject to the participant’s continued employment with the Company through the end of the performance period. The PSUs were valued through the use of a Monte Carlo model and the related compensation expense is recognized over the three -year performance period.
The following table summarizes the issuance of the 2019 Annual Long-Term Incentive Awards and 2018 Annual Long-Term Incentive Awards, respectively:
 
 
2019 Annual Long-Term Incentive Awards
 
2018 Annual Long-Term Incentive Awards
Grant Date
 
February 20, 2019
 
February 20, 2018
 
 
 
 
 
RSUs issued
 
572,163
 
587,000
Grant date fair value per unit
 
$5.77
 
$6.10
 
 
 
 
 
PSUs issued
 
572,163
 
587,000
Grant date fair value per unit
 
$4.98
 
$4.88
Stock Options
During the three months ended March 31, 2019 , no stock options were granted from the Plan to employees, 391 stock options were exercised by employees and 6,299 stock options were canceled, forfeited or expired. As of March 31, 2019 , there were 673,051 stock options outstanding.
During the three months ended March 31, 2018 , no stock options were granted from the Plan to employees, no stock options were exercised by employees and 23,296 stock options were canceled, forfeited or expired.
Share Award Related Compensation Expense
During the three months ended March 31, 2019 and 2018 , the Company recorded compensation expense pertaining to the awards granted under the Plan of $1.8 million and $1.7 million , respectively, in general and administrative and property operating expense within the consolidated statements of operations and comprehensive (loss) income. In certain instances, employment agreements and stock compensation programs provide for accelerated vesting when executives are terminated without cause. Additionally, the Compensation Committee of the Board may, in its discretion, accelerate the vesting for retiring Board members.
Distributions
During the three months ended March 31, 2019 and 2018 , the Board declared common share/unit dividends of $0.25 per common share/unit.
10.
Commitments and Contingencies
Litigation
We are involved from time-to-time in various legal proceedings that arise in the ordinary course of our business, including, but not limited to commercial disputes, environmental matters, and litigation in connection with transactions including acquisitions and divestitures. We believe that such litigation, claims and administrative proceedings will not have a material adverse impact on our financial position or our results of operations. We record a liability when a loss is considered probable and the amount can be reasonably estimated.
Concentration of Credit Risk
Our properties rely heavily upon anchor or major tenants to attract customers; however, these retailers do not constitute a material portion of our financial results. Additionally, many anchor retailers in the enclosed retail properties own their spaces further reducing their contribution to our operating results. All operations are within the United States and no customer or tenant accounts for 5% or more of our consolidated revenues.

26
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


Lease Commitments
As of March 31, 2019 , a total of four consolidated properties are subject to ground leases. The termination dates of these ground leases range from 2026 to 2076. These ground leases generally require us to make fixed annual rental payments, or a fixed annual rental plus a percentage rent component based upon the revenues or total sales of the property. Some of these leases also include escalation clauses and renewal options. We incurred ground lease expense, which is included in ground rent in the accompanying consolidated statements of operations and comprehensive (loss) income, for the three months ended March 31, 2019 and 2018 of $203 and $197 , respectively, of which $5 and $13 related to straight-line rent expense, respectively. Additionally, the Company has two material office leases and one material garage lease. The termination dates of these leases range from 2023 to 2026. These leases generally require us to make fixed annual rental payments, plus our share of CAM expense and real estate taxes and insurance. We incurred lease expense, which is included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive (loss) income, for the three months ended March 31, 2019 and 2018 of $631 and $833 , respectively. On January 1, 2019, we recorded a lease liability and corresponding ROU asset of approximately $14.4 million . The weighted average remaining lease term for our consolidated operating leases was 18.5 years and the weighted average discount rate for determining the lease liabilities was 8.67% at January 1, 2019. The discount rates utilized in calculating the lease liabilities represents our estimate of the Company's incremental borrowing rate over the terms that correspond to the leases.
Future minimum lease payments due under these leases for each of the next five years and thereafter, excluding applicable extension options, as of March 31, 2019 are as follows:
2019
 
$
1,523

2020
 
2,049

2021
 
2,069

2022
 
2,099

2023
 
1,427

Thereafter
 
21,377

Total lease payments
 
30,544

Less: Discount
 
16,507

Present value of lease liabilities
 
$
14,037

The weighted average remaining lease term for our consolidated operating leases was 18.6 years and the weighted average discount rate for determining the lease liabilities was 8.68% at March 31, 2019 . We had no financing leases as of March 31, 2019 .
11.
(Loss) Earnings Per Common Share/Unit
WPG Inc. (Loss) Earnings Per Common Share
We determine WPG Inc.'s basic (loss) earnings per common share based on the weighted average number of shares of common stock outstanding during the period and we consider any participating securities for purposes of applying the two-class method. We determine WPG Inc.'s diluted (loss) earnings per share based on the weighted average number of shares of common stock outstanding combined with the incremental weighted average shares that would have been outstanding assuming all potentially dilutive securities were converted into common shares at the earliest date possible.

27
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


The following table sets forth the computation of WPG Inc.'s basic and diluted (loss) earnings per common share:
 
 
For the Three Months Ended March 31,
 
 
2019
 
2018
(Loss) Earnings Per Common Share, Basic:
 
 
 
 
Net (loss) income attributable to common shareholders - basic
 
$
(5,175
)
 
$
14,016

Weighted average shares outstanding - basic
 
188,082,289

 
187,309,744

(Loss) Earnings per common share, basic
 
$
(0.03
)
 
$
0.07

 
 
 
 
 
(Loss) Earnings Per Common Share, Diluted:
 
 
 
 
Net (loss) income attributable to common shareholders - basic
 
$
(5,175
)
 
$
14,016

Net (loss) income attributable to limited partner unitholders
 
(956
)
 
2,601

Net (loss) income attributable to common shareholders - diluted
 
$
(6,131
)
 
$
16,617

Weighted average common shares outstanding - basic
 
188,082,289

 
187,309,744

Weighted average operating partnership units outstanding
 
34,731,075

 
34,680,058

Weighted average additional dilutive securities outstanding
 
—

 
1,288,678

Weighted average common shares outstanding - diluted
 
222,813,364

 
223,278,480

(Loss) Earnings per common share, diluted
 
$
(0.03
)
 
$
0.07

For the three months ended March 31, 2019 and 2018 , additional potentially dilutive securities include contingently-issuable outstanding stock options and performance based components of annual awards. For the three months ended March 31, 2019 , the effect of 394,264 securities were excluded as their inclusion would be anti-dilutive. We accrue distributions when they are declared.
WPG L.P. (Loss) Earnings Per Common Unit
We determine WPG L.P.'s basic (loss) earnings per common unit based on the weighted average number of common units outstanding during the period and we consider any participating securities for purposes of applying the two-class method. We determine WPG L.P.'s diluted (loss) earnings per unit based on the weighted average number of common units outstanding combined with the incremental weighted average units that would have been outstanding assuming all potentially dilutive securities were converted into common units at the earliest date possible.
The following table sets forth the computation of WPG L.P.'s basic and diluted (loss) earnings per common unit:
 
 
For the Three Months Ended March 31,
 
 
2019
 
2018
(Loss) Earnings Per Common Unit, Basic & Diluted:
 
 
 
 
Net (loss) income attributable to common unitholders - basic and diluted
 
$
(6,131
)
 
$
16,617

Weighted average common units outstanding - basic
 
222,813,364

 
221,989,802

Weighted average additional dilutive securities outstanding
 
—

 
1,288,678

Weighted average units outstanding - diluted
 
222,813,364

 
223,278,480

(Loss) Earnings per common unit, basic & diluted
 
$
(0.03
)
 
$
0.07

For the three months ended March 31, 2019 and 2018 , additional potentially dilutive securities include contingently-issuable units related to WPG Inc.'s outstanding stock options and WPG Inc.'s performance based components of annual awards. For the three months ended March 31, 2019 , the effect of 394,264 securities were excluded as their inclusion would be anti-dilutive. We accrue distributions when they are declared.

28
Washington Prime Group Inc. and Washington Prime Group, L.P.
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
(dollars in thousands, except share, unit and per share amounts and where indicated as in millions or billions)


12.
Subsequent Events
On April 8, 2019 , the Company exercised the second of three options to extend the maturity date of the $65.0 million term loan secured by Weberstown Mall, located in Stockton, California, for one year. The extended maturity date is June 8, 2020, subject to a one -year extension available at our option subject to compliance with the terms of the underlying loan agreement and payment of customary extension fees.
On April 16, 2019 , an affiliate of WPG Inc. closed on a $180.0 million non-recourse mortgage note payable with a ten -year term and a fixed rate of 4.86% secured by Waterford Lakes Town Center, located in Orlando, Florida. The mortgage note payable requires monthly principal and interest payments and will mature on May 6, 2029. The net proceeds were primarily used to reduce corporate debt.

29



Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this report.
Overview - Basis of Presentation
Washington Prime Group Inc. (“WPG Inc.”) is an Indiana corporation that operates as a fully integrated, self‑administered and self‑managed real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended (the "Code"). WPG Inc. will generally qualify as a REIT for U.S. federal income tax purposes as long as it continues to distribute at least 90% of its REIT taxable income and satisfy certain other requirements. WPG Inc. will generally be allowed a deduction against its U.S. federal income tax liability for dividends paid by it to REIT shareholders, thereby reducing or eliminating any corporate level taxation to WPG Inc. Washington Prime Group, L.P. (“WPG L.P.”) is WPG Inc.'s majority‑owned limited partnership subsidiary that owns, develops and manages, through its affiliates, all of WPG Inc.'s real estate properties and other assets. WPG Inc. is the sole general partner of WPG L.P. As of March 31, 2019 , our assets consisted of material interests in 108 shopping centers in the United States, consisting of open air properties and enclosed retail properties, comprised of approximately 58 million square feet of managed gross leasable area.
Unless the context otherwise requires, references to "WPG," the "Company," “we,” “us” and “our” refer to WPG Inc., WPG L.P. and entities in which WPG Inc. or WPG L.P. (or any affiliate) has a material ownership or financial interest, on a consolidated basis.
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The consolidated balance sheets as of March 31, 2019 and December 31, 2018 include the accounts of WPG Inc. and WPG L.P., as well as their majority owned and controlled subsidiaries. The consolidated statements of operations include the consolidated accounts of the Company. All intercompany transactions have been eliminated in consolidation. In the opinion of management, the consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented. The Company believes that the disclosures made are adequate to prevent the information presented from being misleading.
Severance
On February 5, 2019 , the Company's Executive Vice President, Head of Open Air Centers was terminated without cause from his position and received severance payments and other benefits pursuant to the terms and conditions of his employment agreement. In addition, the Company terminated, without cause, additional non-executive personnel in the Property Management department as part of an effort to reduce overhead costs. In connection with and as part of the aforementioned management changes, the Company recorded aggregate severance charges of $1.9 million , including $0.1 million of non-cash stock compensation in the form of accelerated vesting of equity incentive awards, which costs are included in general and administrative expense in the consolidated statements of operations and comprehensive (loss) income for the three months ended March 31, 2019 .
On March 18, 2019 , the Company's Executive Vice President, Development notified the Company of his resignation. The effective date of his resignation was March 28, 2019. There were no severance payments or accelerated vesting of stock compensation benefits in connection with this separation.
Impact of the Adoption of the New Lease Accounting Standard
On January 1, 2019 we adopted Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)." This new guidance, including related ASUs that were subsequently issued, required us to recognize a lease liability and right of use ("ROU") asset, measured as the present value of lease payments, for both operating and financing leases with a term greater than 12 months under which we were the lessee. Upon adoption, we recognized a lease liability and corresponding ROU asset of approximately $14.4 million for the four material ground leases, two material office leases, and one material garage lease with a term of more than 12 months. We elected to use the "package of practical expedients," which allowed us not to reassess under the new standard prior conclusions about lease identification, lease classification, and initial direct costs.
From a lessor perspective, the new guidance remained mostly similar as we elected the practical expedient to not separate non-lease components from lease components. This election resulted in a change on the Company's consolidated statements of operations and comprehensive (loss) income as we no longer present minimum rents, overage rents, and tenant reimbursements as separate line items because we now account for these line items as a single combined lease component, rental income, on the basis of the lease component being the predominant component of the contract. As such, non-lease components, including common-area ("CAM") revenues, are now combined with lease components and are recognized on a straight-line basis to the extent the non-lease components are fixed. Additionally, ASU 2016-02 required us to recognize a change, after the commencement date, in assessment of whether the collectibility of an operating lease receivable as probable as an adjustment to rental income rather than as a provision for credit losses. This requirement resulted in a change on the Company's consolidated statements of operations and comprehensive (loss) income as we no longer present provision for credit losses as a separate line item and the adjustment is n

30


ow recorded as a reduction to rental income. Finally, ASU 2016-02 disallowed the capitalization of internal leasing costs and legal costs, unless said costs are incremental to obtaining the lease contract, resulting in an increase in the Company's general and administrative expenses (see "Results of Operations"). The Company elected to use the practical expedient in transition to not re-evaluate costs that were previously capitalized.
Outparcel Sale
We completed the sale of various tranches of restaurant outparcels to FCPT Acquisitions, LLC ("Four Corners") pursuant to the purchase and sale agreement executed on September 20, 2017 between the Company and Four Corners. The following table summarizes the key terms of each tranche sold during the three months ended March 31, 2019 :
Tranche
 
Sales Date
 
Parcels Sold
 
Purchase Price
 
Sales Proceeds
Tranche 6
 
January 18, 2019
 
8

 
$
9,435

 
$
9,364

Tranche 7
 
February 11, 2019
 
1

 
2,766

 
2,720

 
 
 
 
9

 
$
12,201

 
$
12,084

The net proceeds were used to fund ongoing redevelopment efforts and for general corporate purposes. The Company expects to close on most of the approximately $25.3 million of remaining outparcels in 2019, subject to due diligence and closing conditions.
Business Opportunities
We derive our revenues primarily from retail tenant leases, including fixed minimum rent leases, percentage rent leases based on tenants' sales volumes and reimbursements from tenants for certain expenses. We seek to re-lease our spaces at higher rents and increase our occupancy rates, and to enhance the performance of our properties and increase our revenues by, among other things, adding or replacing anchors or big-box tenants, re-developing or renovating existing properties to increase the leasable square footage, and increasing the productivity of occupied locations through aesthetic upgrades, re-merchandising and/or changes to the retail use of the space. We seek growth in earnings, funds from operations ("FFO") and cash flows by enhancing the profitability and operation of our properties and investments.
Additionally, we feel there are opportunities to enhance our portfolio and balance sheet through active portfolio management. We believe that there are opportunities for us to acquire additional shopping centers that match our investment and strategic criteria. We invest in real estate properties to maximize total financial return which includes both operating cash flows and capital appreciation. We also seek to dispose of assets that no longer meet our strategic criteria. These dispositions will be a combination of asset sales and transitions of over-levered properties to lenders.
We consider FFO, net operating income, or NOI, and comparable NOI (NOI for properties owned and operating in both periods under comparison) to be key measures of operating performance that are not specifically defined by GAAP. We use these measures internally to evaluate the operating performance of our portfolio and provide a basis for comparison with other real estate companies. Reconciliations of these measures to the most comparable GAAP measure are included elsewhere in this report.
Portfolio Data
The portfolio data discussed in this overview includes key operating statistics for the Company including ending occupancy, average base minimum rent per square foot and comparable NOI for the core properties owned and managed at March 31, 2019 . The Company generates approximately 93% of the NOI from our Tier 1 and open air properties. As these properties are core to our future growth and receive the majority of our capital allocation, we disclose our operating metrics for this portion of our portfolio and exclude our five noncore properties as well as our ten Tier 2 properties. Refer to Item 7 of Part II of the 2018 Form 10-K for our property listing.
When excluding the impact of bankruptcies, store closings, and co-tenancy impact primarily related to the Bon-Ton Stores, Inc., Sears, and Toys R' Us (the "Anchor Store Impact"), business fundamentals in our core portfolio for the first quarter of 2019 were generally stable compared to 2018 . Ending occupancy for the Tier 1 and open air properties was 93.3% as of March 31, 2019 , as compared to 93.7% as of March 31, 2018 . Average base minimum rent per square foot for the core portfolio decreased 0.5% when comparing March 31, 2019 to March 31, 2018 . Comparable NOI for the Tier 1 and open air properties decreased 4.0% in the first quarter of 2019 compared to the first quarter of 2018 . The Tier 1 properties had a decrease in comparable NOI of 5.7%, and the open air properties had an increase in comparable NOI of 0.6% in the first quarter of 2019. The significant drivers of the quarterly drop in NOI for the Tier 1 properties primarily relate to the Anchor Store Impact.

31


The following table sets forth key operating statistics for the combined portfolio of the Tier 1 and open air properties:
 
 
March 31, 2019
 
March 31, 2018
 
% Change
Ending occupancy (1)
 
93.3%
 
93.7%
 
(0.4)%
Average base minimum rent per square foot (2)
 
$21.75
 
$21.85
 
(0.5)%
(1)
Ending occupancy is the percentage of gross leasable area, or GLA, which is leased as of the last day of the reporting period. We include all Company-owned space except for anchors, majors, freestanding office and outlots at our enclosed retail properties in the calculation of ending occupancy. Open air property GLA included in the calculation relates to all Company-owned space other than office space.
(2)
Average base minimum rent per square foot is the average base minimum rent charge in effect for the reporting period for all tenants that would qualify to be included in ending occupancy.
Current Leasing Activities
During the three months ended March 31, 2019 , we signed new leases and renewal leases with terms in excess of a year (excluding enclosed retail property anchors, majors, offices, and in-line spaces in excess of 10,000 square feet) across the Tier 1 and open air portfolio, comprising approximately 597,400 square feet. The average annual initial base minimum rent for new leases was $23.90 per square foot ("psf") and for renewed leases was $27.15 psf. For these leases, the average for tenant allowances was $44.37 psf for new leases and $16.60 psf for renewals. During the three months ended March 31, 2018 , we signed new leases and renewal leases with terms in excess of a year (excluding enclosed retail property anchors, majors, offices, and in-line spaces in excess of 10,000 square feet) across the Tier 1 and open air portfolio, comprising approximately 502,600 square feet. The average annual initial base minimum rent for new leases was $25.14 psf and for renewed leases was $23.85 psf. For these leases, the average for tenant allowances was $37.31 psf for new leases and $2.10 psf for renewals.
Results of Operations
Activities Affecting Results
The following property related transactions affected our results in the comparative periods:
• On February 11, 2019, we completed the sale of the seventh tranche of restaurant outparcels with Four Corners.
• On January 18, 2019, we completed the sale of the sixth tranche of restaurant outparcels with Four Corners.
• On November 16, 2018, we completed the sale of the fifth tranche of restaurant outparcels with Four Corners.
• On October 31, 2018, we completed the sale of the fourth tranche of restaurant outparcels with Four Corners.
• On October 23, 2018, we transitioned Rushmore Mall, located in Rapid City, South Dakota, to the lender.
• On July 27, 2018, we completed the sale of the third tranche of restaurant outparcels with Four Corners.
• On June 29, 2018, we completed the sale of the second tranche of restaurant outparcels with Four Corners.
• On April 24, 2018, we closed on the acquisition of Southgate Mall.
• On April 11, 2018, we closed on the acquisition of four Sears department stores located at Longview Mall, Polaris Fashion Place® (unconsolidated), Southern Hills Mall, and Town Center at Aurora.
• On January 12, 2018, we completed the sale of the first tranche of restaurant outparcels with Four Corners.
For the purposes of the following comparisons, the transactions listed above are referred to as the "Property Transactions," and "comparable properties" refers to the remaining properties we owned and operated throughout both of the periods under comparison.
Three Months Ended March 31, 2019 vs. Three Months Ended March 31, 2018
Rental income decreased $9.1 million due to a $9.4 million decrease attributable to the comparable properties, primarily attributed to the Anchor Store Impact and a reduction in lease termination proceeds, offset by a $0.3 million increase attributable to the Property Transactions. Other income increased $1.0 million due to increases of $0.5 million in insurance proceeds, $0.4 million in fee revenue, and $0.1 million in ancillary income.

32


Property operating expenses increased $3.1 million , of which $3.0 million was attributable to the comparable properties, primarily driven by an overall increase in property and liability insurance costs, professional fees, repairs and maintenance costs, and trash removal costs, and $0.1 million was attributable to the Property Transactions. Depreciation and amortization increased $5.1 million , primarily due to a $4.8 million increase in the comparable properties due to the accelerated depreciation of certain building assets, tenant related improvements, and intangibles in addition to development assets placed into service and a $0.3 million increase attributable to the Property Transactions. General and administrative expenses increased $4.5 million , of which $3.5 million was attributable to the impact of the new lease accounting standard which prohibits the Company from capitalizing non-incremental internal leasing and legal efforts, and $1.9 million was attributable to severance costs incurred during the first quarter of 2019. Offsetting these increases was a decrease of $0.9 million, which was primarily attributable to a reduction in executive compensation and benefits.
Interest expense, net, increased $2.5 million , of which a net $2.8 million was attributable to corporate debt activity primarily related to higher borrowings on the Revolver and the credit rating downgrade, and $0.2 million related to default interest on properties transitioned, or to be transitioned, to lenders. Offsetting these increases was a drop of $0.5 million primarily attributable to the Property Transactions.
For WPG Inc., net (loss) income attributable to noncontrolling interests primarily relates to the allocation of (loss) income to third parties based on their respective weighted average ownership interest in WPG L.P., which percentage remained consistent over the periods.
Liquidity and Capital Resources
Our primary uses of cash include payment of operating expenses, working capital, debt repayment, including principal and interest, reinvestment in properties, development and redevelopment of properties, tenant allowance and dividends. Our primary sources of cash are operating cash flow and borrowings under our debt arrangements, including our Revolver, unsecured notes payable and senior unsecured term loans as further discussed below.
We derive most of our liquidity from leases that generate positive net cash flow from operations, the total of which was $12.7 million during the three months ended March 31, 2019 .
Our balance of cash and cash equivalents decreased $13.3 million during 2019 to $29.2 million as of March 31, 2019 . The decrease was primarily due to dividend distributions, and capital expenditures, partially offset by operating cash flow from properties, net distributions from our joint ventures, the net proceeds from the disposition of properties, and net proceeds from the issuance of debt. See "Cash Flows" below for more information.
Because we own primarily long-lived income-producing assets, our financing strategy relies on a combination of long-term mortgage debt as well as unsecured debt supported by a quality unencumbered asset pool, providing us with ample flexibility from a liquidity perspective. Our strategy is to have the majority of our debt fixed either through fixed rate mortgages or interest rate swaps that effectively fix the interest rate. At March 31, 2019 , floating rate debt (excluding loans hedged to fixed interest) comprised 16.8% of our total consolidated debt. We will continue to monitor our borrowing mix to limit market risk.
During the quarter ended March 31, 2019 , Fitch Ratings, Moody's Investor Service, and S&P Global Ratings lowered their credit rating on WPG L.P.'s unsecured long-term indebtedness, which increased interest rates on our Facility (as defined in "Overview - Basis of Presentation - Financing and Debt."), December 2015 Term Loan, and Senior Notes due 2024 as of February 2, 2019. Due to the downgrade, our Revolver bears interest at LIBOR plus 1.65% (an increase of 40 basis points), our Term Loan bears interest at LIBOR plus 1.90% basis points (an increase of 45 basis points), and our December 2015 Term Loan bears interest at LIBOR plus 2.35% basis points (an increase of 55 basis points). Our Senior Notes due 2024 will bear interest at 6.450% , effective August 15, 2019 (an increase of 50 basis points). Such a downgrade may also impact terms and conditions of future borrowings in addition to adversely affecting our ability to access the public markets.
On March 31, 2019 , we had an aggregate available borrowing capacity of $304.8 million under the Revolver, net of outstanding borrowings of $345.0 million and $0.2 million reserved for outstanding letters of credit. The weighted average interest rate on the Revolver was 4.0% during the three months ended March 31, 2019 .
The consolidated indebtedness of our business was approximately $3.0 billion as of March 31, 2019 , or an increase of approximately $52.0 million from December 31, 2018 . The change in consolidated indebtedness from December 31, 2018 is described in greater detail under "Financing and Debt."

33


Outlook
Our business model and WPG Inc.'s status as a REIT require us to regularly access the debt markets to raise funds for acquisition, development and redevelopment activity, and to refinance maturing debt. We may also, from time to time, access the equity capital markets to accomplish our business objectives. We believe we have sufficient cash on hand, availability under the Revolver and cash flow from operations to address our debt maturities, distributions and capital needs throughout 2019 and beyond.
The successful execution of our business strategy will require the availability of substantial amounts of operating and development capital both currently and over time. Sources of such capital could include additional bank borrowings, public and private offerings of debt or equity, including rights offerings, sale of certain assets and joint ventures.
Cash Flows
Our net cash flow from operating activities totaled $ 12.7 million  during the three months ended March 31, 2019 . During this period we also:
•
funded capital expenditures of $ 35.2 million ;
•
received net proceeds from the sale of interests in properties and outparcels of $ 12.1 million ;
•
funded investments in unconsolidated entities of $ 3.3 million ;
•
received distributions of capital from unconsolidated entities of $ 7.7 million ;
•
received net proceeds from our debt financing, refinancing and repayment activities of $ 50.9 million ; and
•
funded distributions to common and preferred shareholders and unitholders of $ 59.3 million .
In general, we anticipate that cash generated from operations will be sufficient in 2019 to meet operating expenses, monthly debt service, recurring capital expenditures, and distributions to shareholders necessary to maintain WPG Inc.'s status as a REIT on a long-term basis. In addition, we expect to be able to generate or obtain capital for nonrecurring capital expenditures, such as acquisitions, major building renovations and expansions, as well as for scheduled principal maturities on outstanding indebtedness, from:
•
excess cash generated from operating performance and working capital reserves;
•
borrowings on our debt arrangements;
•
opportunistic asset sales;
•
additional secured or unsecured debt financing; or
•
additional equity raised in the public or private markets.
We expect to generate positive cash flow from operations in 2019 , and we consider these projected cash flows in our sources and uses of cash. These cash flows are principally derived from rents paid by our retail tenants. A significant deterioration in projected cash flows from operations could cause us to increase our reliance on available funds from our debt arrangements, curtail planned capital expenditures, reduce common dividend distributions, or seek other additional sources of financing as discussed above.
Financing and Debt
Mortgage Debt
Total mortgage indebtedness at March 31, 2019 and December 31, 2018 was as follows (in thousands):
 
 
March 31,
2019
 
December 31,
2018
Face amount of mortgage loans
 
$
976,134

 
$
980,276

Fair value adjustments, net
 
5,189

 
5,764

Debt issuance cost, net
 
(2,500
)
 
(2,771
)
Carrying value of mortgage loans
 
$
978,823

 
$
983,269


34


A roll forward of mortgage indebtedness from December 31, 2018 to March 31, 2019 is summarized as follows (in thousands):
Balance at December 31, 2018
$
983,269

Debt amortization payments
(4,142
)
Amortization of fair value and other adjustments
(575
)
Amortization of debt issuance costs
271

Balance at March 31, 2019
$
978,823

On April 16, 2019 , an affiliate of WPG Inc. closed on a $180.0 million non-recourse mortgage note payable with a ten -year term and a fixed rate of 4.86% secured by Waterford Lakes Town Center, located in Orlando, Florida. The mortgage note payable requires monthly principal and interest payments and will mature on May 6, 2029. The net proceeds were primarily used to reduce corporate debt.
On April 8, 2019 , the Company exercised the second of three options to extend the maturity date of the $65.0 million term loan secured by Weberstown Mall, located in Stockton, California, for one year. The extended maturity date is June 8, 2020, subject to a one -year extension available at our option subject to compliance with the terms of the underlying loan agreement and payment of customary extension fees.
During the three months ended March 31, 2019 , the Company exercised the first of two options to extend the maturity of the $52.0 million mortgage note payable on Town Center at Aurora, located in Aurora, Colorado, for one year. The extended maturity date is April 1, 2020, subject to a one -year extension available at our option subject to compliance with the terms of the underlying loan agreement and payment of customary extension fees. Pursuant to the terms of the extension option, the Company entered into a derivative swap agreement that effectively fixed the interest rate of the note payable at 4.76% through both extension periods.
Highly-levered Assets
As of March 31, 2019 , we have identified four consolidated mortgage loans that have leverage levels in excess of our targeted leverage and have plans to work with the special servicers on these non-recourse mortgages. These mortgage loans total $174.6 million and encumber Charlottesville Fashion Square, located in Charlottesville Virginia, Muncie Mall, located in Muncie, Indiana, Towne West Square, located in Wichita, Kansas and West Ridge Mall and West Ridge Plaza, located in Topeka, Kansas, all of which have been identified as noncore properties. Additionally, we have identified the unconsolidated mortgage loan encumbering Seminole Towne Center, located in Sanford, Florida, as having leverage levels in excess of our targeted leverage. Our pro-rata share of this mortgage loan is $0.0 million based upon our effective interest in the property due to preferences. We expect to improve our leverage once all, or a portion of them, are transitioned to the lenders, with minimal impact to net cash flows. See "Covenants" below for further discussion on these highly-levered assets and for events that occurred subsequent to March 31, 2019 .

35


Unsecured Debt
The following table identifies our total unsecured debt outstanding at March 31, 2019 and December 31, 2018 (in thousands):
 
 
March 31,
2019
 
December 31,
2018
Notes payable:
 
 
 
 
Face amount - the Exchange Notes (1)
 
$
250,000

 
$
250,000

Face amount - Senior Notes due 2024 (2)
 
750,000

 
750,000

Debt discount, net
 
(9,314
)
 
(9,680
)
Debt issuance costs, net
 
(7,144
)
 
(7,623
)
Total carrying value of notes payable
 
$
983,542

 
$
982,697

 
 
 
 
 
Unsecured term loans: (7)
 
 
 
 
Face amount - Term Loan (3)(4)
 
$
350,000

 
$
350,000

Face amount - December 2015 Term Loan (5)
 
340,000

 
340,000

Debt issuance costs, net
 
(4,208
)
 
(4,491
)
Total carrying value of unsecured term loans
 
$
685,792

 
$
685,509

 
 
 
 
 
Revolving credit facility: (3)(8)
 
 
 
 
Face amount
 
$
345,000

 
$
290,000

Debt issuance costs, net
 
(3,712
)
 
(3,998
)
Total carrying value of revolving credit facility
 
$
341,288

 
$
286,002

(1) The Exchange Notes were issued at a 0.028% discount, bear interest at 3.850% per annum and mature on April 1, 2020 .
(2) The Senior Notes due 2024 were issued at a 1.533% discount, bear interest at 5.950% per annum through August 14, 2019, at which time the interest rate will increase to 6.450% per annum due to the credit downgrade. The Senior Notes due 2024 mature on August 15, 2024 . The interest rate could vary in the future based upon changes to the Company's credit ratings.
(3) The unsecured revolving credit facility, or "Revolver" and unsecured term loan, or "Term Loan" are collectively known as the "Facility."
(4) The Term Loan bears interest at one-month LIBOR plus 1.90% per annum and will mature on December 30, 2022 . We have interest rate swap agreements totaling $250.0 million , which effectively fix the interest rate on a portion of the Term Loan at 4.66% through April 1, 2021 . At March 31, 2019 , the applicable interest rate on the unhedged portion of the Term Loan was one-month LIBOR plus 1.90% or 4.39% .
(5) The December 2015 Term Loan bears interest at one-month LIBOR plus 2.35% per annum and will mature on January 10, 2023 . We have interest rate swap agreements totaling $340.0 million which effectively fix the interest rate at 4.06% per annum through maturity.
(6) The Revolver provides borrowings on a revolving basis up to $650.0 million , bears interest at one-month LIBOR plus 1.65% , and will initially mature on December 30, 2021 , subject to two six month extensions available at our option subject to compliance with terms of the Facility and payment of a customary extension fee. At March 31, 2019 , we had an aggregate available borrowing capacity of $304.8 million under the Revolver, net of $0.2 million reserved for outstanding letters of credit. At March 31, 2019 , the applicable interest rate on the Revolver was one-month LIBOR plus 1.65% or 4.14% .
(7) While we have interest rate swap agreements in place that fix the LIBOR portion of the rates as noted above, the spread over LIBOR could vary in the future based upon changes to the Company's credit ratings and leveraged levels.

36


Covenants
Our unsecured debt agreements contain financial and other covenants. If we were to fail to comply with these covenants, after the expiration of the applicable cure periods, the debt maturity could be accelerated or other remedies could be sought by the lender including adjustments to the applicable interest rate. As of March 31, 2019 , management believes the Company is in compliance with all covenants of its unsecured debt.
The total balance of mortgages was approximately $976.1 million as of March 31, 2019 . At March 31, 2019 , certain of our consolidated subsidiaries were the borrowers under 21  non-recourse loans and two full-recourse loan secured by mortgages encumbering 26 properties, including one separate pool of cross-defaulted and cross-collateralized mortgages encumbering a total of four properties. Under these cross-default provisions, a default under any mortgage included in the cross-defaulted pool may constitute a default under all mortgages within that pool and may lead to acceleration of the indebtedness due on each property within the pool. Certain of our secured debt instruments contain financial and other non-financial covenants which are specific to the properties which serve as collateral for that debt. If the borrower fails to comply with these covenants, the lender could accelerate the maturity for the debt and enforce its right against their collateral. Our existing non-recourse mortgage loans generally prohibit our subsidiaries that are borrowers thereunder from incurring additional indebtedness, subject to certain customary and limited exceptions. In addition, certain of these instruments limit the ability of the applicable borrower's parent entity from incurring mezzanine indebtedness unless certain conditions are satisfied, including compliance with maximum loan to value ratio and minimum debt service coverage ratio tests. Further, under certain of these existing agreements, if certain cash flow levels in respect of the applicable mortgaged property (as described in the applicable agreement) are not maintained for at least two consecutive quarters, the lender could accelerate the maturity for the debt and enforce its right against its collateral.
On November 19, 2018 , we received a notice of default letter, dated November 15, 2018 , from the special servicer to the borrower, a consolidated subsidiary of WPG L.P., concerning the $49.8 million mortgage loan secured by West Ridge Mall and West Ridge Plaza (collectively known as "West Ridge"). The notice was issued by the special servicer because the borrower did not make certain reserve repayments or deposits as required by the loan agreement for the aforementioned loan. The borrower has initiated discussions with the special servicer regarding this non-recourse loan and is considering various options. The Company continues to manage and lease the property.
On April 11, 2018 , we received a notice of default letter, dated April 6, 2018 , from the special servicer to the borrower, a consolidated subsidiary of WPG L.P., concerning the $45.2 million mortgage loan secured by Towne West Square. The notice was issued by the special servicer because the borrower did not make certain reserve payments or deposits as required by the loan agreement for the aforementioned loan. On August 24, 2018, we received notification that a receiver had been appointed to manage and lease the property. An affiliate of the Company still holds title to the property.
At March 31, 2019 , management believes the applicable borrowers under our other non-recourse mortgage loans were in compliance with all covenants where non-compliance could individually, or giving effect to applicable cross-default provisions in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows.
Summary of Financing
Our consolidated debt and the effective weighted average interest rates as of March 31, 2019 and December 31, 2018 , consisted of the following (dollars in thousands):
 
 
March 31, 2019
 
Weighted
Average
Interest Rate
 
December 31, 2018
 
Weighted
Average
Interest Rate
Fixed-rate debt, face amount  (1)
 
$
2,501,134

 
5.03
%
 
$
2,505,276

 
4.91
%
Variable-rate debt, face amount
 
510,000

 
4.28
%
 
455,000

 
3.87
%
Total face amount of debt
 
3,011,134

 
4.90
%
 
2,960,276

 
4.75
%
Note discount
 
(9,314
)
 
 
 
(9,680
)
 
 
Fair value adjustments, net
 
5,189

 
 
 
5,764

 
 
Debt issuance costs, net
 
(17,564
)
 
 
 
(18,883
)
 
 
Total carrying value of debt
 
$
2,989,445

 
 
 
$
2,937,477

 
 
(1) Includes variable rate debt whose interest rates have been fixed via swap agreements.

37


Contractual Obligations
The following table summarizes the material aspects of the Company's future obligations for consolidated entities as of March 31, 2019 , for the remainder of 2019 and for subsequent years thereafter assuming the obligations remain outstanding through maturities noted below (in thousands):
 
 
2019
 
2020 - 2021
 
2022 - 2023
 
Thereafter
 
Total
Long term debt (1)
 
$
60,139

 
$
665,097

 
$
1,230,977

 
$
1,054,921

 
$
3,011,134

Interest payments (2)
 
114,056

 
257,879

 
180,859

 
33,797

 
586,591

Distributions (3)
 
3,568

 
—

 
—

 
—

 
3,568

Ground rent/operating leases (4)
 
1,701

 
4,499

 
3,596

 
21,376

 
31,172

Purchase/tenant obligations (5)
 
118,339

 
—

 
—

 
—

 
118,339

Total
 
$
297,803

 
$
927,475

 
$
1,415,432

 
$
1,110,094

 
$
3,750,804

(1) Represents principal maturities only and therefore excludes net fair value adjustments of $5,189 , debt issuance costs of $(17,564) and bond discount of $(9,314) as of March 31, 2019 . In addition, the principal maturities reflect any available extension options within the control of the Company.
(2) Variable rate interest payments are estimated based on the LIBOR rate at March 31, 2019 .
(3) Since there is no required redemption, distributions on the Series H Preferred Shares/Units, Series I Preferred Shares/Units and Series I-1 Preferred Units may be paid in perpetuity; for purposes of this table, such distributions are included upon declaration by the Board as the preferred shares/units are callable at the Company's discretion.
(4) Represents minimum future lease payments due through the end of the initial lease term under executed leases.
(5) Includes amounts due under executed leases and commitments to vendors for development and other matters.
The following table summarizes the material aspects of the Company's proportionate share of future obligations for unconsolidated entities as of March 31, 2019 , for the remainder of 2019 and for subsequent years thereafter assuming the obligations remain outstanding through maturities noted below (in thousands):
 
 
2019
 
2020 - 2021
 
2022 - 2023
 
Thereafter
 
Total
Long term debt (1)
 
$
2,517

 
$
69,938

 
$
20,062

 
$
528,068

 
$
620,585

Interest payments (2)
 
26,375

 
50,404

 
42,428

 
44,585

 
163,792

Ground rent/operating leases (3)
 
2,954

 
7,942

 
8,053

 
189,002

 
207,951

Purchase/tenant obligations (4)
 
12,799

 
—

 
—

 
—

 
12,799

Total
 
$
44,645

 
$
128,284

 
$
70,543

 
$
761,655

 
$
1,005,127

(1) Represents principal maturities only and therefore excludes net fair value adjustments of $5,023 and debt issuance costs of $(2,339) as of March 31, 2019 . In addition, the principal maturities reflect any available extension options.
(2) Variable rate interest payments are estimated based on the LIBOR rate at March 31, 2019 .
(3) Represents minimum future lease payments due through the end of the initial lease term under executed leases.
(4) Includes amounts due under executed leases and commitments to vendors for development and other matters.
Off-Balance Sheet Arrangements
Off-balance sheet arrangements consist primarily of investments in joint ventures which are common in the real estate industry. Joint ventures typically fund their cash needs through secured debt financings obtained by and in the name of the joint venture entity. The joint venture debt is secured by a first mortgage, is without recourse to the joint venture partners, and does not represent a liability of the partners, except to the extent the partners or their affiliates expressly guarantee the joint venture debt. As of March 31, 2019 , there were no guarantees of joint venture related mortgage indebtedness. In addition to obligations under mortgage indebtedness, our joint ventures have obligations under ground leases and purchase/tenant obligations. Our share of obligations under joint venture debt, ground leases and purchase/tenant obligations is quantified in the unconsolidated entities table within "Contractual Obligations" above. WPG may elect to fund cash needs of a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans, although such fundings are not required contractually or otherwise.

38


Equity Activity
Exchange Rights
Subject to the terms of the limited partnership agreement of WPG L.P., limited partners in WPG L.P. have, at their option, the right to exchange all or any portion of their units for shares of WPG Inc. common stock on a one‑for‑one basis or cash, as determined by WPG Inc. Therefore, the common units held by limited partners are considered by WPG Inc. to be share equivalents and classified as noncontrolling interests within permanent equity, and classified by WPG L.P. as permanent equity. The amount of cash to be paid if the exchange right is exercised and the cash option is selected will be based on the market value of WPG Inc.'s common stock as determined pursuant to the terms of the WPG L.P. Partnership Agreement. At March 31, 2019 , WPG Inc. had reserved 34,755,660 shares of common stock for possible issuance upon the exchange of units held by limited partners.
Stock Based Compensation
On May 28, 2014, the Board adopted the Washington Prime Group, L.P. 2014 Stock Incentive Plan (the "Plan"), which permits the Company to grant awards to current and prospective directors, officers, employees and consultants of the Company or any affiliate. An aggregate of 10,000,000 shares of common stock has been reserved for issuance under the Plan. In addition, the maximum number of awards to be granted to a participant in any calendar year is 500,000 shares/units. Awards may be in the form of stock options, stock appreciation rights, restricted stock, restricted stock units or other stock-based awards in WPG Inc., long term incentive units ("LTIP units" or "LTIPs") or performance units ("Performance LTIP Units") in WPG L.P. The Plan terminates on May 28, 2024. The Board approved another equity incentive plan in February 2019 to replace the Plan and is presenting this new plan to the common shareholders for approval at the 2019 Annual Shareholder Meeting scheduled for May 16, 2019.
The following is a summary by type of the awards that the Company issued during the three months ended March 31, 2019 and March 31, 2018 under the Plan.
Annual Long-Term Incentive Awards
During the three months ended March 31, 2019 and 2018 , the Company approved the terms and conditions of the 2019 and 2018 annual awards (the "2019 Annual Long-Term Incentive Awards" and "2018 Long-Term Incentive Awards," respectively) for certain executive officers and employees of the Company. Under the terms of the awards program, each participant is provided the opportunity to receive (i) time-based RSUs and (ii) performance-based stock units ("PSUs"). RSUs represent a contingent right to receive one WPG Inc. common share for each vested RSU. RSUs will vest in one-third installments on each annual anniversary of the respective Grant Date (as referenced below), subject to the participant's continued employment with the Company through each vesting date and the participant's continued compliance with certain applicable covenants. During the service period, dividend equivalents will be paid with respect to the RSUs corresponding to the amount of any dividends paid by the Company to the Company's common shareholders for the applicable dividend payment dates. Compensation expense is recognized on a straight-line basis over the three year vesting term. Actual PSUs earned may range from 0%-150% of the PSUs allocated to the award recipient, based on the Company's total shareholder return ("TSR") compared to a peer group based on companies with similar assets and revenue over a three-year performance period that commenced on the respective Grant Date (as referenced below). During the performance period, dividend equivalents corresponding to the amount of any regular cash dividends paid by the Company to the Company’s common shareholders for the applicable dividend payment dates will accrue and be deemed reinvested in additional PSUs, which will be settled in common shares at the same time and only to the extent that the underlying PSU is earned and settled in common shares. Payout of the PSUs is also subject to the participant’s continued employment with the Company through the end of the performance period. The PSUs were valued through the use of a Monte Carlo model and the related compensation expense is recognized over the three-year performance period.

39


The following table summarizes the issuance of the 2019 Annual Long-Term Incentive Awards and 2018 Annual Long-Term Incentive Awards, respectively:
 
 
2019 Annual Long-Term Incentive Awards
 
2018 Annual Long-Term Incentive Awards
Grant Date
 
February 20, 2019
 
February 20, 2018
 
 
 
 
 
RSUs issued
 
572,163
 
587,000
Grant date fair value per unit
 
$5.77
 
$6.10
 
 
 
 
 
PSUs issued
 
572,163
 
587,000
Grant date fair value per unit
 
$4.98
 
$4.88
Stock Options
During the three months ended March 31, 2019 , no stock options were granted from the Plan to employees, 391 stock options were exercised by employees and 6,299 stock options were canceled, forfeited or expired. As of March 31, 2019 , there were 673,051 stock options outstanding.
During the three months ended March 31, 2018 , no stock options were granted from the Plan to employees, no stock options were exercised by employees and 23,296 stock options were canceled, forfeited or expired.
Share Award Related Compensation Expense
During the three months ended March 31, 2019 , the Company recorded compensation expense pertaining to the awards granted under the Plan of $1.8 million and $1.7 million , respectively, in general and administrative and property operating expense within the consolidated statements of operations and comprehensive (loss) income. In certain instances, employment agreements and stock compensation programs provide for accelerated vesting when executives are terminated without cause. Additionally, the Compensation Committee of the Board may, in its discretion, accelerate the vesting for retiring Board members.
Distributions
During the three months ended March 31, 2019 and 2018 , the Board declared common share/unit dividends of $0.25 per common share/unit.
Acquisitions and Dispositions
Buy-sell, marketing rights, and other exit mechanisms are common in real estate partnership agreements. Most of our partners are institutional investors who have a history of direct investment in retail real estate. We and our partners in our joint venture properties may initiate these provisions (subject to any applicable lock up or similar restrictions). If we determine it is in our shareholders' best interests for us to purchase the joint venture interest and we believe we have adequate liquidity to execute the purchase without hindering our cash flows, then we may initiate these provisions or elect to buy. If we decide to sell any of our joint venture interests, we expect to use the net proceeds to reduce outstanding indebtedness or to reinvest in development, redevelopment, or expansion opportunities.
Acquisitions.     We pursue the acquisition of properties that meet our strategic criteria.
Dispositions.     We pursue the disposition of properties that no longer meet our strategic criteria or interests in properties to generate proceeds for alternate business uses.
On February 11, 2019, we completed the sale of the seventh tranche of restaurant outparcels which consisted of one outparcel and an allocated purchase price of approximately $2.8 million of the total purchase price (see details under "Overview - Basis of Presentation - Outparcel Sale"). The net proceeds were used to fund ongoing redevelopment efforts and for general corporate purposes.
On January 18, 2019, we completed the sale of the sixth tranche of restaurant outparcels which consisted of eight outparcels and an allocated purchase price of approximately $9.4 million of the total purchase price (see details under "Overview - Basis of Presentation - Outparcel Sale"). The net proceeds were used to fund ongoing redevelopment efforts and for general corporate purposes.
In connection with the sales noted above, the Company recorded a gain of $10.0 million for the three months ended March 31, 2019 , which is included in gain on disposition of interests in properties, net in the consolidated statements of operations and comprehensive (loss) income.

40


Development Activity
New Development, Expansions and Redevelopments.   We routinely incur costs related to construction for significant redevelopment and expansion projects at our properties. We expect our share of development costs for calendar year 2019 related to these activities to be approximately $100 million to $125 million. Our estimated stabilized return or yield, on invested capital typically ranges in the high single digits.
We have identified 29 department stores (currently vacant or anticipated vacancies) in our portfolio that we plan to redevelop and we are actively working on repositioning 25 of the locations. These department stores represent an opportunity to enhance the experience at the property by bringing in offerings such as dining, grocery, entertainment, home furnishings, mixed-use components as well as dynamic retail offerings. These stores are in our Tier 1 and open air properties and exclude department stores that are owned by third parties, such as Seritage. We project that we will invest between $300 million to $350 million over the next three to five years to complete the redevelopment of these department stores.
During the fourth quarter of 2016, we held our grand opening of our new approximately 400,000 square foot shopping center in the Houston metropolitan area, Fairfield Town Center. The project features retailers such as H-E-B, Academy Sports, Marshall's, Party City, Old Navy, and Ulta Cosmetics. In addition, a number of dining options are at the center such as Chipotle, PeiWei, Whataburger, and Zoe's Kitchen. The project is 100% leased as of March 31, 2019 . During the third quarter of 2017, we approved the final phase of this new development for an additional investment of approximately $28 million, which will add an additional 130,000 square feet of new GLA to accommodate the strong demand at the project. Leasing for this new phase is over 50% committed for small shops and we are finalizing deals with a national theater, a national value fashion apparel retailer as well as an additional big box user.
At Scottsdale Quarter in Scottsdale, Arizona, our most recent redevelopment effort involves the final phase of the significant expansion of our initial development of the project. The first part of the expansion has been completed and consists of buildings on the north and south parcels with tenancy including Design Within Reach, as well as luxury apartment homes and office space. The final component of the expansion will be comprised of approximately 300 new luxury apartment homes and 30,000 to 35,000 square feet of new street-level retail. The street-level retail and luxury apartment homes will have substantial amenities, such as new on-site parking and roof-top terraces overlooking Scottsdale Quarter and the McDowell Mountains. On February 7, 2018, the rights to construct the luxury apartment homes on the land of this final component were sold to an unrelated third party for $12.5 million and construction has since commenced. The interest in the retail unit of the planned development was retained. Tenants are expected to begin opening in this final component in 2019.
At Cottonwood Mall in Albuquerque, New Mexico, we acquired the former Macy’s store for a planned redevelopment at the property. We plan to replace the former department store with two home furnishings stores, Mor Furniture for Less and Homelife Furniture, which opened in January 2019, as well as a new Hobby Lobby store, which opened in November 2018. We will invest between $20 million and $22 million in this redevelopment with an expected yield of 6% - 7%.
At Grand Central Mall in Parkersburg, West Virginia, we replaced an Elder-Beerman with a new 20,000 square foot H&M store, their first store in West Virginia, which opened in October 2018. Additionally, we added a new Five Below and Ulta Beauty, which opened in September 2018, in the former hhgregg store, and we are adding a Big Lots in the former Toys R Us location. Lastly, we have finalized our redevelopment plans for the former Sears space which will add an exciting exterior facing element to the center featuring dynamic first-to-market retailers. This new open air component will complete the transformation of Grand Central Mall from a traditional enclosed regional center into a hybrid town center. We will invest between $31 million and $33 million in this redevelopment with an expected yield of 6% - 8%.
At Dayton Mall in Dayton, Ohio, we have signed leases with Ross Dress for Less and The RoomPlace to enhance the retail offering at the property. Ross Dress for Less will replace a former hhgregg store and The RoomPlace will be located in a newly combined larger store from previous small shop space. The estimated investment in adding these two retailers to the property will be between $8 million and $10 million with an anticipated yield of 10% - 12%.
At Lincolnwood Town Center in Lincolnwood, Illinois, we have a signed lease with The RoomPlace to take approximately two thirds of the recently vacated Carson Pirie Scott department store. The estimated investment in the redevelopment will be between $16 million and $18 million and the yield is anticipated to be 7% - 8%.
On April 11, 2018 we acquired, through a sale-leaseback transaction, four Sears department stores and adjacent Sears Auto Centers located at Longview Mall, located in Longview, Texas; Polaris Fashion Place®, located in Columbus, Ohio; Southern Hills Mall, located in Sioux City, Iowa; and Town Center at Aurora, located in Aurora, Colorado. The purchase price was approximately $28.5 million. During the first quarter of 2019, the stores at Longview Mall, Polaris Fashion Place, and Southern Hills Mall all closed, and redevelopment plans have commenced.

41


In addition to the purchase of four Sears stores discussed above, we also proactively negotiated early termination of Sears leases to gain control of the real estate and commence redevelopment efforts at four of our Tier 1 assets. The first lease relates to the Sears store at Grand Central Mall, which closed in December 2018, and the redevelopment of the property is discussed above. The second lease relates to the Sears store at Southern Park Mall in Youngstown, Ohio which closed during the third quarter of 2018. We are in discussions with new tenants for the high visibility anchor space. The third lease relates to the Sears store at The Mall at Fairfield Commons in Beavercreek, Ohio, which closed in December 2018. We will be adding The RoomPlace and Round 1 Entertainment, both first to market. The RoomPlace will replace the upper level of Sears and complement the hybrid town center format with dynamic retail, dining and entertainment options. Round 1 Entertainment will replace the lower level of Sears. Both The RoomPlace and Round 1 Entertainment are expected to open in late 2019. The fourth lease relates to the Sears store at WestShore Plaza in Tampa, Florida which terminated during the first quarter of 2019, and we are currently in the entitlement process. We are actively working on redevelopment plans, and additional details will be announced in the future.
Dillard’s has agreed to open and/or expand within two Tier 1 assets. Mesa Mall, located in Grand Junction, Colorado, will receive a newly constructed Dillard’s which will be their first location within the catchment area and will replace Sears which formerly occupied the site. In addition, Dillard’s will add a second location within Southgate Mall, located in Missoula, Montana, replacing a former Herberger’s (former Bon-Ton, Inc. Stores) further illustrating robust demand within the catchment area. Our combined investment in these two department store repositioning efforts is expected to be less than $7 million.
At The Outlet Collection® | Seattle, in Auburn, Washington, we have plans to add a FieldhouseUSA to the property in a former Sam’s Club store. FieldhouseUSA specializes in sporting leagues, events and tournaments by offering year-round league and tournament play in team sports such as basketball, soccer, volleyball and flag football in addition to programs such as birthday parties, corporate events, performance training and skills training. This use will greatly complement the recently added Dave & Buster’s at the property and we anticipate announcing further details about this exciting redevelopment in the near future. The estimated investment in the redevelopment will be between $11 million and $13 million and the yield is anticipated to be 9% - 10%.
At Morgantown Mall in Morgantown, West Virginia we have plans to add a 70,000 square foot Dunham’s Sports store to replace a former Elder-Beerman (former Bon-Ton, Inc. Stores). The lease is fully executed and the store is expected to open in mid-2020.
Capital Expenditures
The following table summarizes total consolidated capital expenditures on a cash basis for the three months ended March 31, 2019 (in thousands):
Redevelopments and expansions
 
$
15,623

Tenant allowances
 
9,918

Operational capital expenditures
 
6,958

Total (1)
 
$
32,499

(1) Excludes capitalized interest, wages and real estate taxes, as well as expenditures for certain equipment and fixtures, commissions, and project costs, which are included in capital expenditures, net on the consolidated statement of cash flows.

42


Forward-Looking Statements
Certain statements made in this section or elsewhere in this report may be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and it is possible that our actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such factors include, but are not limited to: changes in asset quality and credit risk; ability to sustain revenue and earnings growth; changes in political, economic or market conditions generally and the real estate and capital markets specifically; the impact of increased competition; the availability of capital and financing; tenant or joint venture partner(s) bankruptcies; the failure to increase enclosed retail store occupancy and same-store operating income; risks associated with acquisitions, dispositions, development, re-development, expansion, leasing and management of properties; changes in market rental rates; trends in the retail industry; relationships with anchor tenants; risks relating to joint venture properties; costs of common area maintenance; competitive market forces; the level and volatility of interest rates; the rate of revenue increases as compared to expense increases; the financial stability of tenants within the retail industry; the restrictions in current financing arrangements or the failure to comply with such arrangements; the liquidity of real estate investments; the impact of changes to tax legislation and our tax positions; failure to qualify as a real estate investment trust; the failure to refinance debt at favorable terms and conditions; loss of key personnel; material changes in the dividend rates on securities or the ability to pay dividends on common shares or other securities; possible restrictions on the ability to operate or dispose of any partially-owned properties; the failure to achieve earnings/funds from operations targets or estimates; the failure to achieve projected returns or yields on development, re-development and investment properties (including joint ventures); expected gains on debt extinguishment; changes in generally accepted accounting principles or interpretations thereof; terrorist activities and international hostilities; the unfavorable resolution of legal or regulatory proceedings; the impact of future acquisitions and divestitures; assets that may be subject to impairment charges; and significant costs related to environmental issues. We discussed these and other risks and uncertainties under Part I, "Item 1A. Risk Factors" in the combined Annual Report on Form 10-K for WPG Inc. and WPG L.P. for the year ended December 31, 2018 . We undertake no duty or obligation to update or revise these forward-looking statements, whether as a result of new information, future developments, or otherwise.
Non-GAAP Financial Measures
Industry practice is to evaluate real estate properties in part based on FFO, NOI and comparable NOI. We believe that these non-GAAP measures are helpful to investors because they are widely recognized measures of the performance of REITs and provide a relevant basis for our comparison among REITs. We also use these measures internally to measure the operating performance of our portfolio.
We determine FFO based on the definition set forth by the National Association of Real Estate Investment Trusts, or NAREIT, as net (loss) income computed in accordance with GAAP:
•
excluding real estate related depreciation and amortization;
•
excluding gains and losses from extraordinary items and cumulative effects of accounting changes;
•
excluding gains and losses from the sales or disposals of previously depreciated retail operating properties;
•
excluding gains and losses upon acquisition of controlling interests in properties;
•
excluding impairment charges of depreciable real estate;
•
plus the allocable portion of FFO of unconsolidated entities accounted for under the equity method of accounting based upon economic ownership interest.
We include in FFO gains and losses realized from the sale of land, marketable and non-marketable securities, and investment holdings of non-retail real estate.
You should understand that our computation of these non-GAAP measures might not be comparable to similar measures reported by other REITs and that these non-GAAP measures:
•
do not represent cash flow from operations as defined by GAAP;
•
should not be considered as alternatives to net (loss) income determined in accordance with GAAP as a measure of operating performance; and
•
are not alternatives to cash flows as a measure of liquidity.

43


The following schedule reconciles total FFO to net (loss) income for the three months ended March 31, 2019 and 2018 (in thousands, except share/unit amounts):
 
 
For the Three Months Ended March 31,
 
 
2019
 
2018
Net (loss) income
 
$
(2,563
)
 
$
20,185

Less: Preferred dividends and distributions on preferred operating partnership units
 
(3,568
)
 
(3,568
)
Adjustments to Arrive at FFO:
 
 
 
 
Real estate depreciation and amortization, including joint venture impact
 
76,214

 
70,199

Gain on disposition of interests in properties, net
 
—

 
(295
)
FFO of the Operating Partnership (1)
 
70,083

 
86,521

FFO allocable to limited partners
 
10,905

 
13,439

FFO allocable to common shareholders/unitholders
 
$
59,178

 
$
73,082

 
 
 
 
 
Diluted (loss) earnings per share/unit
 
$
(0.03
)
 
$
0.07

Adjustments to arrive at FFO per share/unit:
 
 
 
 
Real estate depreciation and amortization, including joint venture impact
 
0.34

 
0.32

Gain on disposition of interests in properties, net
 
0.00

 
0.00

Diluted FFO per share/unit
 
$
0.31

 
$
0.39

 
 
 
 
 
Weighted average shares outstanding - basic
 
188,082,289

 
187,309,744

Weighted average limited partnership units outstanding
 
34,731,075

 
34,680,058

Weighted average additional dilutive securities outstanding (2)
 
394,264

 
1,288,678

Weighted average shares/units outstanding - diluted
 
223,207,628

 
223,278,480


(1)
FFO of the operating partnership decreased $16.4 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 . During the three months ended March 31, 2019, we received $9.3 million less in operating income related to comparable properties. This decline can be primarily attributed to the Anchor Store Impact, and a reduction in lease termination proceeds. General and administrative expenses increased $4.5 million, of which $3.5 million was attributable to the impact of the new lease accounting standard which prohibits the Company from capitalizing non-incremental internal leasing and legal efforts, and $1.9 million was attributable to severance costs incurred during the first quarter of 2019. Offsetting these increases to general and administrative expense was a decrease of $0.9 million primarily attributable to a reduction in executive compensation and benefits. Lastly, interest expense, net, increased $2.5 million, which was primarily attributable to corporate debt activity primarily related to higher borrowings on the Revolver and the credit rating downgrade.

(2)
The weighted average additional dilutive securities for the three months ended March 31, 2019 are excluded for purposes of calculating diluted (loss) earnings per share/unit because their effect would have been anti-dilutive.

44


We deem NOI and comparable NOI to be important measures for investors and management to use in assessing our operating performance, as these measures enable us to present the core operating results from our portfolio, excluding certain non-cash, corporate-level and nonrecurring items. Specifically, we exclude from operating income the following items in our calculations of comparable NOI:
•
straight-line rents and fair value rent amortization;
•
management fee allocation to promote comparability across periods; and
•
termination income, out-parcel sales and material insurance proceeds, which are deemed to be outside of normal operating results.
The following schedule reconciles comparable NOI for our Tier 1 and open air properties to net (loss) income and presents comparable NOI percent change for the three months ended March 31, 2019 and 2018 (in thousands):
 
 
For the Three Months Ended March 31,
 
 
2019
 
2018
Net (loss) income
 
$
(2,563
)
 
$
20,185

Loss (income) from unconsolidated entities
 
48

 
(1,162
)
Income and other taxes
 
356

 
485

Gain on disposition of interests in properties, net
 
(9,990
)
 
(8,181
)
Interest expense, net
 
36,830

 
34,344

Operating income
 
24,681

 
45,671

 
 
 
 
 
Depreciation and amortization
 
66,378

 
61,294

General and administrative
 
14,125

 
9,654

Fee income
 
(2,747
)
 
(2,342
)
Management fee allocation
 
5

 
(16
)
Pro-rata share of unconsolidated joint ventures in comp NOI
 
17,445

 
17,282

Property allocated corporate expense
 
3,495

 
4,124

Non-comparable properties and other  (1)
 
(311
)
 
(591
)
NOI from sold properties
 
2

 
(1,796
)
Termination income
 
(786
)
 
(1,766
)
Straight-line rents
 
(1,132
)
 
(859
)
Ground lease adjustments for straight-line and fair market value
 
5

 
13

Fair market value and inducement adjustments to base rents
 
(2,900
)
 
(3,042
)
Less: Tier 2 and noncore properties  (2)
 
(8,938
)
 
(13,743
)
 
 
 
 
 
Comparable NOI - Tier 1 and open air properties
 
$
109,322

 
$
113,883

   Comparable NOI percentage change - Tier 1 and open air properties
 
(4.0)%
 


(1)
Represents an adjustment to remove the NOI amounts from properties not owned and operated in all periods presented, certain non-recurring expenses (such as hurricane related expenses), as well as material insurance proceeds and other non-recurring income received in the periods presented. This also includes adjustments related to the rents from the outparcels sold to Four Corners.

(2)
NOI from the Tier 2 and noncore properties held in each period presented.

45


Item 3.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in interest rates, primarily LIBOR. We seek to limit the impact of interest rate changes on earnings and cash flows and to lower the overall borrowing costs by closely monitoring our variable rate debt and converting such debt to fixed rates when we deem such conversion advantageous. From time to time, we may enter into interest rate swap agreements or other interest rate hedging contracts. While these agreements are intended to lessen the impact of rising interest rates, they also expose us to the risks that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly effective cash flow hedges under GAAP guidance. As of March 31, 2019 , $502.1 million (net of $7.9 million in debt issuance costs) of our aggregate consolidated indebtedness ( 16.8% of total consolidated indebtedness) was subject to variable interest rates, excluding amounts outstanding under variable rate loans that have been hedged to fixed interest rates.
If LIBOR rates of interest on our variable rate debt fluctuated, our future earnings and cash flows would be impacted, depending upon the current LIBOR rates and the existence of any derivative contracts currently in effect.  Based upon our variable rate debt balance as of March 31, 2019 , a 50 basis point increase in LIBOR rates would result in a decrease in earnings and cash flow of $2.6 million annually and a 50 basis point decrease in LIBOR rates would result in an increase in earnings and cash flow of $2.6 million annually.  This assumes that the amount outstanding under our variable rate debt remains at $502.1 million , the balance as of March 31, 2019 .
Item 4.
Controls and Procedures
Controls and Procedures of Washington Prime Group Inc.
Evaluation of Disclosure Controls and Procedures. WPG Inc. maintains disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) that are designed to provide reasonable assurance that information required to be disclosed in the reports that WPG Inc. files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
Management of WPG Inc., with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of WPG Inc.'s disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the disclosure controls and procedures of WPG Inc. were effective.
Changes in Internal Control Over Financial Reporting.   There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Controls and Procedures of Washington Prime Group, L.P.
Evaluation of Disclosure Controls and Procedures. WPG L.P. maintains disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports that WPG L.P. files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer of WPG Inc., WPG L.P.'s general partner, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
Management of WPG L.P., with the participation of the Chief Executive Officer and Chief Financial Officer of WPG Inc., WPG L.P.'s general partner, evaluated the effectiveness of the design and operation of WPG L.P.'s disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of WPG Inc., WPG L.P.'s general partner, concluded that, as of the end of the period covered by this report, WPG L.P.'s disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting.   There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

46


PART II
OTHER INFORMATION

Item 1.
Legal Proceedings
We are involved from time-to-time in various legal proceedings that arise in the ordinary course of our business, including, but not limited to commercial disputes, environmental matters, and litigation in connection with transactions including acquisitions and divestitures. We believe that such litigation, claims, and administrative proceedings will not have a material adverse impact on our financial position or our results of operations. We record a liability when a loss is considered probable, and the amount can be reasonably estimated.
Item 1A.
Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the combined Annual Report on Form 10-K for WPG Inc. and WPG L.P. for the year ended December 31, 2018 (the “ 2018 Form 10-K”). Except for additional risk factors as noted below, there have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A, of the 2018 Form 10-K.
We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.
As of  March 31, 2019 , we had approximately  $502.1 million (net of $7.9 million in debt issuance costs) of our aggregate consolidated indebtedness that was indexed to the London Interbank Offered Rate (“LIBOR”). Central banks around the world, including the Federal Reserve, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacements for LIBOR based on observable market transactions. It is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next few years. The U.K. Financial Conduct Authority (FCA), which regulates LIBOR, has announced that it has commitments from panel banks to continue to contribute to LIBOR through the end of 2021, but that it will not use its powers to compel contributions beyond such date. Accordingly, there is considerable uncertainty regarding the publication of such rates beyond 2021. The Federal Reserve Bank of New York and various other authorities have commenced the publication of reforms and actions relating to alternatives to U.S. dollar LIBOR. Although the full impact of such reforms and actions, together with any transition away from LIBOR, including the potential or actual discontinuance of LIBOR publication, remains unclear, these changes may have a material adverse impact on the availability of financing, including LIBOR-based loans, and on our financing costs.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3.    Defaults Upon Senior Securities
Not applicable.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5.    Other Information
Not applicable.

47


Item 6.    Exhibits
Exhibit
Number
Exhibit
Descriptions
31.1*
31.2*
31.3*
31.4*
32.1*
32.2*
10.1*+
10.2*+
10.3*+
10.4*+
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document

* Filed electronically herewith.
+ Represents management contract or compensatory plan or arrangement.


48


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
 
Washington Prime Group Inc.
 
 
Washington Prime Group, L.P.
 
 
 
by: Washington Prime Group Inc., its sole general partner
 
 
 
 
Date:
April 25, 2019
By:
/s/ Mark E. Yale
 
 
 
Mark E. Yale
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

Date:
April 25, 2019
By:
/s/ Melissa A. Indest
 
 
 
Melissa A. Indest
Executive Vice President, Finance and Chief Accounting Officer
(Principal Accounting Officer)

49


WASHINGTON PRIME GROUP INC.
EMPLOYEE PERFORMANCE STOCK UNIT AWARD AGREEMENT
(For Employee with Employment Agreement)

This Performance Stock Unit Award Agreement (“ Agreement ”) made as of _____________, 20___ (the “ Award Date ”) among Washington Prime Group Inc., an Indiana corporation (the “ Company ”), its subsidiary, Washington Prime Group, L.P., an Indiana limited partnership and the entity through which the Company conducts substantially all of its operations (the “ Partnership ”), and the individual listed as participant on the signature page hereto (the “ Participant ”).
Recitals
A. The Participant is an employee of the Company or one of its Affiliates and provides services to the Partnership.
B.      The Partnership has adopted the Partnership’s 2014 Stock Incentive Plan (as further amended, restated or supplemented from time to time hereafter, the “ Plan ”) to provide, among others, employees of the Partnership or an Affiliate (including the Company) with equity-based incentives to maintain and enhance the performance and profitability of the Partnership and the Company. Capitalized terms used herein without definitions shall have the meanings given to those terms in the Plan unless otherwise indicated.
C.      Reference is made to the Amended and Restated Employment Agreement between the Participant and the Company dated as of ___________ (the “ Employment Agreement ”). This Award is intended to comply with the terms of the Employment Agreement and the terms of the Plan, and if there are any inconsistencies or ambiguity between (x) the same, then the terms of the Plan shall control, or (y) the Employment Agreement and this Agreement, then this Agreement shall control. For avoidance of doubt, the provisions of Section 7 of this Agreement shall override any similar provisions in the Employment Agreement.
D.      This Agreement evidences an award (the “Award”) of the number of performance stock units (“Performance Stock Units”) specified in Section 2 of this Agreement, as approved by the Committee.
NOW, THEREFORE , the Company, the Partnership and the Participant agree as follows:
1.      Administration; Incorporation of the Plan . This Award shall be administered by the Committee which has the powers and authority as set forth in the Plan. The Committee will make the determinations and certifications required by this Award as promptly as reasonably practicable following the occurrence of the event or events necessitating such determinations or certifications. The provisions of the Plan are hereby incorporated by reference as if set forth herein. Should there be any conflict between the terms of this Agreement on the one hand, and the Plan on the other hand, the terms of this Agreement shall prevail.




2.      Award .
(a)      Grant of PSUs . Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Participant is hereby granted ________ Performance Stock Units as of the Award Date (the “ Target PSU ”). Each Performance Stock Unit represents a conditional right to receive one share of Common Stock.
(b)      Vesting . The Performance Stock Units granted hereunder shall be performance based and shall vest on __________, 20__ or such earlier date pursuant to the applicable provisions of the Employment Agreement (the “ Vesting Date ”), based on the achievement of the performance goal as described on Exhibit X attached hereto (“Exhibit X”), and upon certification of achievement by the Compensation Committee, provided that the Participant is actively employed by the Company in “good standing” through Vesting Date and is in continued compliance with the provisions of Section 7 of this Agreement. The Committee shall in its sole and absolute discretion determine the “good standing” of the Participant, and in making such determination, the Committee may consider such factors as it deems appropriate including, but not limited to, whether the Participant was placed on a performance plan or received corrective action or counseling.
Notwithstanding the foregoing, in the event of a termination of Participant’s employment with the Company prior to the Vesting Date, Participant’s then unvested Performance Stock Units shall be forfeited or vest in accordance with the applicable provisions of the Employment Agreement, and in the event of a Change in Control, Participant’s then unvested Performance Stock Units shall be treated in the manner set forth in Section 5 of the Employment Agreement.
(c)      Settlement . As soon as practicable following the Vesting Date (but in no event later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs), subject to Section 4 (pertaining to withholding of taxes), the Company shall deliver to the Participant one share of Common Stock in respect of each of the Performance Stock Units that vested as of the Vesting Date free of any restrictions (including any dividend equivalent rights that are paid in shares of Common Stock in accordance with Section 5 below).
3.      Restrictions . Subject to any exceptions set forth in the Plan, no Performance Stock Unit granted hereunder may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged, in any manner (including through the use of any cash-settled instrument), whether voluntarily or involuntarily and whether by operation of law or otherwise, other than by will or by the laws of descent and distribution. Any sale, exchange, transfer, assignment, pledge, hypothecation, or other disposition in violation of the provisions of this Section 3 will be null and void and any Performance Stock Unit which is hedged in any manner will immediately be forfeited. All of the terms and conditions of the Plan and this Agreement will be binding upon any permitted successors and assigns. Except as provided in Section 5 of this Agreement, a Performance Stock Unit shall not entitle the Participant to any incidents of ownership (including, without limitation, dividend and voting rights) in any Share until the Participant is issued the Share to which such Performance Stock Unit relates pursuant to Section 2(c) hereof.

2


4.      Tax Withholding. No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal, state, local or foreign income tax purposes with respect to any Performance Stock Units, the Participant will pay to the Company or make arrangements satisfactory to the Company regarding the payment of any United States federal, state or local or foreign taxes of any kind required by law to be withheld with respect to the Performance Stock Units. The obligations of the Company under this Agreement shall be conditioned on compliance by the Participant with this Section 4 , and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant, including deducting such amount from the delivery of Shares issued upon settlement of the Performance Stock Units, that gives rise to the withholding requirement.
5.      Dividend Equivalent Rights . So long as the Award is outstanding, the Participant shall be paid (in shares of Common Stock as set forth below) dividend equivalent payments equal to the regular cash dividends paid on the shares of Common Stock covered by this Award as if such Shares had been delivered pursuant to such Award, notwithstanding that such Shares are in respect of unvested Performance Stock Units. Such dividend equivalents will be deemed reinvested in additional Performance Stock Units which will themselves accrue dividend equivalents. Unless the Company determines otherwise in its sole discretion, the dividend equivalents paid pursuant to this Section 5 shall be paid by the issuance of Shares of Common Stock based on the average of the closing prices of the Common Stock for the twenty (20) trading days prior to the dividend payment date, and shall accrue and be held in escrow by the Company and be subject to the same restrictions as the Performance Stock Units with regard to which they are issued, including without limitation, as to vesting (including accelerated vesting) and shall be delivered to the Participant at the time the corresponding shares of Common Stock are delivered to the Participant in accordance with Section 2(c) . The Participant will not receive escrowed dividend equivalents on any Performance Stock Units which are forfeited and all such dividend equivalents shall be forfeited along with the Performance Stock Units which are forfeited. For the avoidance of doubt, the provisions of this Section 5 shall not apply to any extraordinary dividends or distributions. The Participant will have only the rights of a general unsecured creditor of the Company in respect of such dividend equivalent payments until delivered as specified herein.
6.      Tax Representations. The Participant hereby represents and warrants to the Company as follows:
(a)    The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this Award and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its employees or agents.
(b)    The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this Award or the transactions contemplated by this Agreement.

3


7.      Restrictive Covenants .
(a)      Confidential Information .  During such time as the Participant is employed by the Company and thereafter, the Participant shall keep secret and retain in the strictest confidence, and shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, including without limitation, any data, information, ideas, knowledge and papers pertaining to the customers, prospective customers, prospective products or business methods of the Company, including without limitation the business methods, plans and procedures of the Company, that shall have been obtained by the Participant during the Participant’s employment by the Company or any of its affiliated companies and that shall not be or become public knowledge (other than by acts by the Participant or representatives of the Participant in violation of this Agreement).  After termination of the Participant’s employment with the Company, the Participant shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process after reasonable advance written notice to the Company, use, communicate or divulge any such information, knowledge or data, directly or indirectly, to anyone other than the Company and those designated by it.  Nothing contained in this Agreement shall prohibit the Participant from disclosing or using information (i) which is now known by or hereafter becomes available to the general public (other than by acts by the Participant or representatives of the Participant in violation of this Agreement); (ii) which became known to the Participant from a source other than Company, or any of its subsidiaries or affiliates, other than as a result of a breach (known or which should have been known to the Participant) by such source of an obligation of confidentiality owed by it to Company, or any of its subsidiaries or affiliates (but not if such information was known by the Participant at such time of disclosure or use to be confidential); (iii) in connection with the proper performance of Participant’s duties to the Company, (iv) which is otherwise legally required (but only if the Participant gives reasonable advance notice to the Company of such disclosure obligation to the extent legally permitted, and cooperates with the Company (at the Company’s expense), if requested, in resisting such disclosure) or (v) which is reasonably appropriate in connection with a litigation or arbitration related to Participant’s employment with the Company or this Agreement.

(b)      Non-competition . During the period commencing on the Award Date and ending one (1) year after the termination of Participant’s employment by the Company (the “ Covenant Period ”), the Participant shall not engage in, have an interest in, or otherwise be employed by or, as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, lender, or representative, associate with, or permit Participant’s name to be used in connection with the activities of, any business or organization engaged in the ownership, development, management, leasing, expansion or acquisition of indoor or outdoor shopping centers or malls (the “ Business ”) that, (i) if such business or organization is a public company, has a market capitalization of greater than $1 billion or, (ii) if such business or organization is a private company, has assets which may be reasonably valued of more than $1 billion, in (x) North America or (y) any country outside of North America in which the Company or any of its affiliates is engaged in the ownership, development,

4


management, leasing, expansion or acquisition of indoor or outdoor shopping centers or malls, or has indicated an intent to do so or interest in doing so as evidenced by a written plan or proposal prepared by or presented to senior management of the Company prior to the date the Participant’s employment with the Company terminates; other than for or on behalf of, or at the request of, the Company or any affiliate; provided , that passive ownership of less than two percent (2%) of the outstanding stock of any publicly traded corporation (or private company through an investment in a hedge fund or private equity fund, or similar vehicle) shall not be deemed to be a violation of this Section 7(b)  solely by reason thereof.  Notwithstanding the foregoing, the provisions of this Section 7(b)  shall not be violated by the Participant being employed by, associating with or otherwise providing services to a subsidiary, division or unit of any entity where such entity has a subsidiary, division or unit (other than the subsidiary, division or unit with which the Participant is employed, associated with or otherwise provides services to) which is engaged in the Business so long as the Participant does not provide services or advice, with or without specific compensation, to the subsidiary, division or unit engaged in the Business.

(c)      Non-Solicitation of Employees .  During the Covenant Period, the Participant shall not, directly or indirectly, (i) induce or attempt to induce any employee of the Company to leave the employ of the Company or in any way interfere with the relationship between the Company, on the one hand, and any employee thereof, on the other hand, (ii) hire any person who was an employee of the Company until one (1) year after such individual’s employment relationship with the Company has been terminated or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company to cease doing business with the Company, or in any way knowingly interfere with the relationship between any such customer, supplier, licensee or business relation, on the one hand, and the Company, on the other hand; provided , that solicitations incidental to general advertising or other general solicitations in the ordinary course not specifically targeted at such persons and employment of any person not otherwise solicited in violation hereof shall not be considered a violation of this Section 7(c) . The Participant shall not be in violation of this Section 7(c)  solely by providing a reference for a former employee of the Company.

(d)      Non-Disparagement . The Participant agrees not to make any public disparaging, negative, or defamatory comments about the Company including the Company’s business, its directors, officers, employees, parents, subsidiaries, partners, affiliates, operating divisions, representatives or agents, or any of them, whether written, oral, or electronic.  In particular, the Participant agrees to make no public statements including, but not limited to, press releases, statements to journalists, employees, prospective employers, interviews, editorials, commentaries, or speeches, that disparage or may disparage the Company’s business, are critical of the Company or its business, or would cast the Company or its business in a negative light.  In addition to the confidentiality requirements set forth in this Agreement and those imposed by law, the Participant further agrees not to provide any third party, directly or indirectly, with any documents, papers, recordings, e-mail, internet postings, or other written or recorded communications referring or relating the Company’s business, that would support, directly or indirectly, any disparaging, negative or defamatory statement, whether written or oral. This

5


Section 7(d)  shall not be violated by (i) responding publicly to incorrect, disparaging, or derogatory public statements to the extent reasonably necessary to correct or refute such public statements or (ii) making any truthful statement to the extent (y) reasonably necessary in connection with any litigation, arbitration, or mediation or (z) required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with apparent jurisdiction to order the person to disclose or make accessible such information.  The Company agrees not to make any public statement which is disparaging or defamatory about the Participant, whether written, oral, or electronic.  The Company’s obligations under the preceding sentence shall be limited to communications by its senior corporate executives having the rank of Senior Vice President or above and any member of the Board (“ Specified Executives ”), and it is agreed and understood that any such communication by any Specified Executive (or by any executive at the behest of a Specified Executive) shall be deemed to be a breach of this Section 7(d)  by the Company.

(e)      Prior Notice Required .  The Participant hereby agrees that, prior to accepting employment with any other person or entity during the Covenant Period, the Participant will provide such prospective employer with written notice of the provisions of this Section 7 , with a copy of such notice delivered simultaneously to the General Counsel of the Company.

(f)      Return of Company Property/Passwords .  The Participant hereby expressly covenants and agrees that following termination of the Participant’s employment with the Company for any reason or at any time upon the Company’s written request, the Participant will promptly return to the Company all property of the Company in Participant’s possession or control (whether maintained at Participant’s office, home or elsewhere), including, without limitation, all Company passwords, credit cards, keys, beepers, laptop computers, cell phones and all copies of all management studies, business or strategic plans, budgets, notebooks and other printed, typed or written materials, documents, diaries, calendars and data of or relating to the Company or its personnel or affairs.  Notwithstanding the foregoing, the Participant shall be permitted to retain Participant’s rolodex (or similar list of personal contacts), compensation-related data, information needed for tax purposes and other personal items.

(g)      Participant Covenants Generally .

(i)      The Participant’s covenants as set forth in this Section 7 are from time to time referred to herein as the “ Participant Covenants .” If any of the Participant Covenants is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such Participant Covenant shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining Participant Covenants shall not be affected thereby; provided , however , that if any of the Participant Covenants is finally held to be invalid, illegal or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such Participant Covenant will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder.


6


(ii)      The Participant understands that the foregoing restrictions may limit Participant’s ability to earn a livelihood in a business similar to the business of the Company and its controlled affiliates, but the Participant nevertheless believes that Participant has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder to clearly justify such restrictions which, in any event (given Participant’s education, skills and ability), the Participant does not believe would prevent Participant from otherwise earning a living.  The Participant has carefully considered the nature and extent of the restrictions placed upon Participant by this Section 7 , and hereby acknowledges and agrees that the same are reasonable in time and territory and do not confer a benefit upon the Company disproportionate to the detriment of the Participant.

(h)      Enforcement .  Because the Participant’s services are unique and because the Participant has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Section 7 .  Therefore, in the event of a breach or threatened breach of this Section 7 , the Company or its respective successors or assigns may, in addition to other rights and remedies existing in their favor at law or in equity, apply to any court of competent jurisdiction for specific performance and/or injunctive relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security) or require the Participant to account for and pay over to the Company all compensation, profits, moneys, accruals or other benefits derived from or received as a result of any transactions constituting a breach of the covenants contained herein, if and when final judgment of a court of competent jurisdiction is so entered against the Participant.

(i)      Interpretation .  For purposes of this Section 7 , references to “the Company” shall mean the Company as hereinbefore defined and any of its controlled affiliated companies.

8.      Amendment . No amendment of this Agreement shall materially adversely impair the rights of the Participant without the Participant’s consent, except such an amendment made to comply with applicable law (including Applicable Exchange listing standards or accounting rules) or avoid the incurrence of tax penalties under Section 409A of the Code.
9.      Successors and Assigns . This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiary, if applicable.
10.      Captions . Captions provided herein are for convenience only and shall not affect the scope, meaning, intent or interpretation of the provisions of this Agreement.
11.      Severability; Entire Agreement . If any provision of the Plan or this Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision will be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions will not be affected thereby; provided that if any of such provision is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum

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scope determined to be acceptable to permit such provision to be enforceable, such provision will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and this Agreement contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.
12.      Clawback . The Participant acknowledges that all securities issued and payments made pursuant to this Award are subject to clawback by the Company to the extent required by applicable law or the policies of the Company as in effect from time to time.
13.      Governing Law; Choice of Forum . This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without reference to principles of conflict of laws. Venue for a dispute in respect of this Agreement shall be the federal courts located in Columbus, Ohio.
 
14.      Acceptance . The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the Performance Stock Units subject to all of the terms and conditions of the Plan and this Agreement.
15.      Section 409A . The amounts payable under this Agreement are intended to avoid the incurrence of tax penalties under Section 409A of the Code. This Agreement shall in all respects be administered in accordance with Section 409A of the Code. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may the Participant, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. Notwithstanding anything herein to the contrary, in the event that the Participant is a “specified employee” within the meaning of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the Date of Termination), amounts that constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code that would otherwise be payable and benefits that would otherwise be provided hereunder during the six-month period immediately following the Participant’s separation from service shall instead be paid, with interest in the case of cash payments (calculated at the applicable federal rate) determined as of the separation from service, or provided on the first business day after the date that is six months following the Participant’s separation from service; provided that, if the Participant dies following the Participant’s separation from service and prior to the payment of the any amounts delayed on account of Section 409A of the Code hereunder, such amounts shall be paid to the personal representative of the Participant’s estate within 30 days after the date of the Participant’s death.


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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the ___ day of _____________, 20___.
WASHINGTON PRIME GROUP INC.,
an Indiana corporation


By:                           
Name:    _________________________
Title:    _________________________

    

WASHINGTON PRIME GROUP, L.P.,
an Indiana limited partnership


By:  Washington Prime Group Inc.,
an Indiana corporation, its general partner


By:                           
Name:    _________________________
Title:    _________________________
    

PARTICIPANT


By:                           
Name:    _________________________


[ Signature Page to WPG Employee PSU Award Agreement ]



EXHIBIT X
PSU Performance Goals for 20 Annual Award
A.
Performance Goals .
1.      Except as expressly provided in the Employment Agreement, the performance goals for the Performance Period (as defined below) shall be based on the Company’s relative total shareholder return (“ TSR ”) percentile for the Performance Period.
2.      Unvested PSUs shall be earned if the Company ranks in the following TSR percentiles for the Performance Period:
WPG 3-Year TSR
Percentile Rank
Vested PSUs
<30 th  Percentile
0%
30 th  Percentile
25%
40 th  Percentile
50%
50 th  Percentile
75%
60 th  Percentile
100%
70 th  Percentile
125%
80 th  Percentile
150%
There shall be interpolation on a straight-line basis (i.e., linearly interpolated) between the foregoing levels of achievement.
3.      Notwithstanding the foregoing, if the Company’s absolute TSR for the Performance Period is negative, the maximum payment shall be 100% of the Target PSU.
4.      Subject to the terms of the Agreement and the Employment Agreement, the number of PSUs earned during the Performance Period shall vest on _____________ (or such earlier date as provided by the applicable provisions of the Employment Agreement), provided Participant remains in continuous active employment with the Company and its Affiliates in “good standing” through such date and is in continued compliance with the provisions of Section 7 of this Agreement. The Committee shall in its sole and absolute discretion determine the “good standing” of the Participant, and in making such determination, the Committee may consider such factors as it deems appropriate including, but not limited to, whether the Participant was placed on a performance plan or received corrective action or counseling.
5.      PSUs that do not become vested on or before ___________ shall automatically be forfeited, except as otherwise expressly provided in Section 2 (b) of the Award.
B.     Fractional Shares . Any fractional PSUs shall be eliminated.



C.     Definitions .
“Beginning Price” means, with respect to the Company and any other Comparative Group member, the average of the closing market prices of such company’s common stock on the principal exchange on which such stock is traded for the twenty (20) consecutive trading days ending with the last trading day before the beginning of the Performance Period. For the purpose of determining Beginning Price, the value of dividends and other distributions shall be determined by treating them as reinvested in additional shares of stock at the closing market price on the ex-dividend date.
“ Comparative Group ” means the Company and each other company included on Annex A attached hereto, provided that, except as provided below, the common stock (or similar equity security) of such company is continually listed or traded on a national securities exchange from the first day of the Performance Period through the last trading day of the Performance Period. In the event a member of the Comparative Group files for bankruptcy or liquidates due to an insolvency or is delisted due to failure to meet the national securities exchange’s minimum market capitalization requirement, such company shall continue to be treated as a Comparative Group member, and such company’s Ending Price will be treated as $0 if the common stock (or similar equity security) of such company is no longer listed or traded on a national securities exchange on the last trading day of the Performance Period (and if multiple members of the Comparative Group file for bankruptcy or liquidate due to an insolvency or are delisted, such members shall be ranked in order of when such bankruptcy or liquidation occurs, with earlier bankruptcies/liquidations/delistings ranking lower than later bankruptcies/liquidations/ delistings). In the event of a formation of a new parent company by a Comparative Group member, substantially all of the assets and liabilities of which consist immediately after the transaction of the equity interests in the original Comparative Group member or the assets and liabilities of such Comparative Group member immediately prior to the transaction, such new parent company shall be substituted for the Comparative Group member to the extent (and for such period of time) as its common stock (or similar equity securities) are listed or traded on a national securities exchange but the common stock (or similar equity securities) of the original Comparative Group member are not. In the event of a merger or other business combination of two Comparative Group members (including, without limitation, the acquisition of one Comparative Group member, or all or substantially all of its assets, by another Comparative Group member), the surviving, resulting or successor entity, as the case may be, shall continue to be treated as a member of the Comparative Group, provided that the common stock (or similar equity security) of such entity is listed or traded on a national securities exchange through the last trading day of the Performance Period. With respect to the preceding two sentences, the applicable stock prices shall be equitably and proportionately adjusted to the extent (if any) necessary to preserve the intended incentives of the awards and mitigate the impact of the transaction.
“Ending Price” means, with respect to the Company and any other Comparative Group member, the average of the closing market prices of such company’s common stock on the principal exchange on which such stock is traded for the twenty (20) consecutive trading days ending on the last trading day of the Performance Period. For the purpose of determining Ending Price, the value of dividends and other distributions shall be determined by treating them as reinvested in additional shares of stock at the closing market price on the ex-dividend date.

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“Performance Period ” means the period from the Award Date through and including the earlier of (i) ______________ or (ii) the date required by the applicable provisions of Sections 4 and 5 of the Employment Agreement.
“ Total Shareholder Return ” or “TSR” shall be determined with respect to the Company and any other Comparative Group member by dividing: (a) the sum of (i) the difference obtained by subtracting the applicable Beginning Price from the applicable Ending Price plus (ii) all dividends and other distributions on the respective shares with an ex-dividend date that falls during the Performance Period by (b) the applicable Beginning Price. Any non-cash distributions shall be valued at fair market value. For the purpose of determining TSR, the value of dividends and other distributions shall be determined by treating them as reinvested in additional shares of stock at the closing market price on the date of distribution.
“ TSR Percentile Rank ” means the percentile ranking of the Company’s TSR among the TSRs for the Comparative Group members for the Performance Period. TSR Percentile Rank is determined by ordering the Comparative Group members (plus the Company if the Company is not one of the Comparative Group members) from highest to lowest based on TSR for the relevant Performance Period and counting down from the company with the highest TSR (ranked first) to the Company’s position on the list. If two companies are ranked equally, the ranking of the next company shall account for the tie, so that if one company is ranked first, and two companies are tied for second, the next company is ranked fourth. In determining the Company’s TSR Percentile Rank for the Performance Period, in the event that the Company’s TSR for the Performance Period is equal to the TSR(s) of one or more other Comparative Group members for that same period, the Company’s TSR Percentile Rank ranking will be determined by ranking the Company’s TSR for that period as being greater than such other Comparative Group members. After this ranking, the TSR Percentile Rank will be calculated using the following formula, rounded to the nearest whole percentile by application of regular rounding:
 
 
 
TSR Percentile Rank =
( N  -  R )
* 100

N

“N” represents the number of Comparative Group members for the Performance Period (plus the Company if the Company is not one of the Comparative Group).

“R” represents the Company’s ranking among the Comparative Group members (plus the Company if the Company is not one of the Comparative Group members).

D.
Miscellaneous .
Vesting shall only occur upon the certification by the Compensation Committee of the achievement, whose good faith certification shall determine whether such achievement occurred. The Compensation Committee shall meet for the purpose of certification and, to the extent appropriate, provide the applicable certification promptly (and in any event no later than March 15 of the calendar year following the calendar year in which the Vesting Date occurs).

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ANNEX A
Comparative Group
Acadia Realty Trust
Pennsylvania REIT
Brixmor Property Group
Regency Centers
CBL & Associates
Retail Prop. Of America
Federal Realty Inv. Trust
Site Centers Corp.
Kimco Realty Corp.
Taubman Centers
Kite Realty Group Trust
Weingarten Realty
 
 
Excludes Rouse Properties, which was acquired by Brookfield in 2016.






WASHINGTON PRIME GROUP INC.
EMPLOYEE RESTRICTED STOCK UNIT AWARD AGREEMENT
(For Employee with Employment Agreement)
This Restricted Stock Unit Award Agreement (“ Agreement ”) made as of ___________, 20___ (the “ Award Date ”) among Washington Prime Group Inc., an Indiana corporation (the “ Company ”), its subsidiary, Washington Prime Group, L.P., an Indiana limited partnership and the entity through which the Company conducts substantially all of its operations (the “ Partnership ”), and the individual listed as participant on the signature page hereto (the “ Participant ”).
Recitals
A. The Participant is an employee of the Company or one of its Affiliates and provides services to the Partnership.
B.      The Partnership has adopted the Partnership’s 2014 Stock Incentive Plan (as further amended, restated or supplemented from time to time hereafter, the “ Plan ”) to provide, among others, employees of the Partnership or an Affiliate (including the Company) with equity-based incentives to maintain and enhance the performance and profitability of the Partnership and the Company. Capitalized terms used herein without definitions shall have the meanings given to those terms in the Plan unless otherwise indicated.
C.      Reference is made to the Amended and Restated Employment Agreement between the Participant and the Company dated as of _____________ (the “ Employment Agreement ”). This Award is intended to comply with the terms of the Employment Agreement, this Agreement and the terms of the Plan, and if there are any inconsistencies or ambiguity between (x) the same, then the terms of the Plan shall control, or (y) the Employment Agreement and this Agreement, then this Agreement shall control. For avoidance of doubt, the provisions of Section 7 of this Agreement shall override any similar provisions in the Employment Agreement.
D.      This Agreement evidences an award (the “Award”) of the number of Restricted Stock Units specified in Section 2 of this Agreement, as approved by the Committee.
NOW, THEREFORE , the Company, the Partnership and the Participant agree as follows:
1.      Administration; Incorporation of the Plan . This Award shall be administered by the Committee which has the powers and authority as set forth in the Plan. The Committee will make the determinations and certifications required by this Award as promptly as reasonably practicable following the occurrence of the event or events necessitating such determinations or certifications. The provisions of the Plan are hereby incorporated by reference as if set forth herein. Should there be any conflict between the terms of this Agreement on the one hand, and the Plan on the other hand, the terms of this Agreement shall prevail.





2.      Award .
(a)      Grant of RSUs . Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Participant is hereby granted _________ Restricted Stock Units as of the Award Date. Each Restricted Stock Unit represents a conditional right to receive one share of Common Stock.

(b)      Vesting . The Restricted Stock Units granted hereunder will vest and become nonforfeitable with respect to one-third of the Award on each of _________, 20___, _________, 20___ and _________, 20___ (each such date, a “ Vesting Date ”), provided that the Participant is actively employed by the Company in “good standing” through the applicable Vesting Date and is in continued compliance with the provisions of Section 7 of this Agreement. The Committee shall in its sole and absolute discretion determine the “good standing” of the Participant, and in making such determination, the Committee may consider such factors as it deems appropriate including, but not limited to, whether the Participant was placed on a performance plan or received corrective action or counseling. Unless otherwise determined by the Board or the Committee, and except as set forth in the following paragraph hereof, upon a termination of the Participant’s employment with the Company for any reason prior to the third anniversary of the Award Date, all of the then unvested Restricted Stock Units granted hereunder shall be forfeited without any consideration, and the Participant shall have no further rights thereto.

Notwithstanding the foregoing, in the event of a termination of Participant’s employment with the Company prior to the third anniversary of the Award Date, Participant’s then unvested Restricted Stock Units shall be forfeited or vest in accordance with the applicable provisions of the Employment Agreement, and in the event of a Change in Control, Participant’s then unvested Restricted Stock Units shall be treated in the manner set forth in Section 5 of the Employment Agreement.
(c)      Settlement . As soon as practicable following the applicable Vesting Date (but in no event later than March 15 th of the calendar year following the calendar year in which the applicable Vesting Date occurs), subject to Section 4 (pertaining to withholding of taxes), the Company shall deliver to the Participant one share of Common Stock in respect of each of the Restricted Stock Units that vested as of such Vesting Date free of any restrictions.

3.      Restrictions . Subject to any exceptions set forth in the Plan, no Restricted Stock Unit granted hereunder may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged, in any manner (including through the use of any cash-settled instrument), whether voluntarily or involuntarily and whether by operation of law or otherwise, other than by will or by the laws of descent and distribution. Any sale, exchange, transfer, assignment, pledge, hypothecation, or other disposition in violation of the provisions of this Section 3 will be null and void and any Restricted Stock Unit which is hedged in any manner will immediately be forfeited. All of the terms and conditions of the Plan and this Agreement will be binding upon any permitted successors and assigns. Except as provided in Section 5 of this Agreement, a Restricted Stock Unit shall not entitle the Participant to any incidents of ownership (including, without

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limitation, dividend and voting rights) in any Share until the Participant is issued the Share to which such Restricted Stock Unit relates pursuant to Section 2(c) hereof.

4.      Tax Withholding. No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal, state, local or foreign income tax purposes with respect to any Restricted Stock Units, the Participant will pay to the Company or make arrangements satisfactory to the Company regarding the payment of any United States federal, state or local or foreign taxes of any kind required by law to be withheld with respect to the Restricted Stock Units. The obligations of the Company under this Agreement shall be conditioned on compliance by the Participant with this Section 4 , and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant, including deducting such amount from the delivery of Shares issued upon settlement of the Restricted Stock Units, that gives rise to the withholding requirement.

5.      Dividend Equivalent Rights . So long as the Award is outstanding, the Participant shall be paid dividend equivalent payments equal to the regular cash dividends paid on the shares of Common Stock covered by this Award as if such Shares had been delivered pursuant to such Award, notwithstanding that such Shares are in respect of unvested Restricted Stock Units, provided such Restricted Stock Units shall not theretofore have been forfeited pursuant to the terms of the Award. Such amounts will be paid in cash at the same time as the applicable dividends are paid on shares of Common Stock. For the avoidance of doubt, the provisions of this Section 5 shall not apply to any extraordinary dividends or distributions. The Participant will have only the rights of a general unsecured creditor of the Company in respect of such dividend equivalent payments until paid as specified herein.

6.      Tax Representations. The Participant hereby represents and warrants to the Company as follows:
(a)    The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this Award and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its employees or agents.
(b)    The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this Award or the transactions contemplated by this Agreement.
7.      Restrictive Covenants .

(a)      Confidential Information .  During such time as the Participant is employed by the Company and thereafter, the Participant shall keep secret and retain in the strictest confidence, and shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, including without limitation, any data, information, ideas, knowledge and papers pertaining to the customers, prospective

3




customers, prospective products or business methods of the Company, including without limitation the business methods, plans and procedures of the Company, that shall have been obtained by the Participant during the Participant’s employment by the Company or any of its affiliated companies and that shall not be or become public knowledge (other than by acts by the Participant or representatives of the Participant in violation of this Agreement).  After termination of the Participant’s employment with the Company, the Participant shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process after reasonable advance written notice to the Company, use, communicate or divulge any such information, knowledge or data, directly or indirectly, to anyone other than the Company and those designated by it.  Nothing contained in this Agreement shall prohibit the Participant from disclosing or using information (i) which is now known by or hereafter becomes available to the general public (other than by acts by the Participant or representatives of the Participant in violation of this Agreement); (ii) which became known to the Participant from a source other than Company, or any of its subsidiaries or affiliates, other than as a result of a breach (known or which should have been known to the Participant) by such source of an obligation of confidentiality owed by it to Company, or any of its subsidiaries or affiliates (but not if such information was known by the Participant at such time of disclosure or use to be confidential); (iii) in connection with the proper performance of Participant’s duties to the Company, (iv) which is otherwise legally required (but only if the Participant gives reasonable advance notice to the Company of such disclosure obligation to the extent legally permitted, and cooperates with the Company (at the Company’s expense), if requested, in resisting such disclosure) or (v) which is reasonably appropriate in connection with a litigation or arbitration related to Participant’s employment with the Company or this Agreement.

(b)      Non-competition . During the period commencing on the Award Date and ending one (1) year after the termination of Participant’s employment by the Company (the “ Covenant Period ”), the Participant shall not engage in, have an interest in, or otherwise be employed by or, as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, lender, or representative, associate with, or permit Participant’s name to be used in connection with the activities of, any business or organization engaged in the ownership, development, management, leasing, expansion or acquisition of indoor or outdoor shopping centers or malls (the “ Business ”) that, (i) if such business or organization is a public company, has a market capitalization of greater than $1 billion or, (ii) if such business or organization is a private company, has assets which may be reasonably valued of more than $1 billion, in (x) North America or (y) any country outside of North America in which the Company or any of its affiliates is engaged in the ownership, development, management, leasing, expansion or acquisition of indoor or outdoor shopping centers or malls, or has indicated an intent to do so or interest in doing so as evidenced by a written plan or proposal prepared by or presented to senior management of the Company prior to the date the Participant’s employment with the Company terminates; other than for or on behalf of, or at the request of, the Company or any affiliate; provided , that passive ownership of less than two percent (2%) of the outstanding stock of any publicly traded corporation (or private company through an investment in a hedge fund or private equity fund, or similar vehicle) shall not be deemed to be a violation of this Section 7(b)  solely by reason thereof. 

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Notwithstanding the foregoing, the provisions of this Section 7(b)  shall not be violated by the Participant being employed by, associating with or otherwise providing services to a subsidiary, division or unit of any entity where such entity has a subsidiary, division or unit (other than the subsidiary, division or unit with which the Participant is employed, associated with or otherwise provides services to) which is engaged in the Business so long as the Participant does not provide services or advice, with or without specific compensation, to the subsidiary, division or unit engaged in the Business.

(c)      Non-Solicitation of Employees .  During the Covenant Period, the Participant shall not, directly or indirectly, (i) induce or attempt to induce any employee of the Company to leave the employ of the Company or in any way interfere with the relationship between the Company, on the one hand, and any employee thereof, on the other hand, (ii) hire any person who was an employee of the Company until one (1) year after such individual’s employment relationship with the Company has been terminated or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company to cease doing business with the Company, or in any way knowingly interfere with the relationship between any such customer, supplier, licensee or business relation, on the one hand, and the Company, on the other hand; provided , that solicitations incidental to general advertising or other general solicitations in the ordinary course not specifically targeted at such persons and employment of any person not otherwise solicited in violation hereof shall not be considered a violation of this Section 7(c) . The Participant shall not be in violation of this Section 7(c)  solely by providing a reference for a former employee of the Company.

(d)      Non-Disparagement . The Participant agrees not to make any public disparaging, negative, or defamatory comments about the Company including the Company’s business, its directors, officers, employees, parents, subsidiaries, partners, affiliates, operating divisions, representatives or agents, or any of them, whether written, oral, or electronic.  In particular, the Participant agrees to make no public statements including, but not limited to, press releases, statements to journalists, employees, prospective employers, interviews, editorials, commentaries, or speeches, that disparage or may disparage the Company’s business, are critical of the Company or its business, or would cast the Company or its business in a negative light.  In addition to the confidentiality requirements set forth in this Agreement and those imposed by law, the Participant further agrees not to provide any third party, directly or indirectly, with any documents, papers, recordings, e-mail, internet postings, or other written or recorded communications referring or relating the Company’s business, that would support, directly or indirectly, any disparaging, negative or defamatory statement, whether written or oral. This Section 7(d)  shall not be violated by (i) responding publicly to incorrect, disparaging, or derogatory public statements to the extent reasonably necessary to correct or refute such public statements or (ii) making any truthful statement to the extent (y) reasonably necessary in connection with any litigation, arbitration, or mediation or (z) required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with apparent jurisdiction to order the person to disclose or make accessible such information.  The Company agrees not to make any public statement which is disparaging or defamatory about the Participant, whether written, oral, or electronic.  The Company’s

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obligations under the preceding sentence shall be limited to communications by its senior corporate executives having the rank of Senior Vice President or above and any member of the Board (“ Specified Executives ”), and it is agreed and understood that any such communication by any Specified Executive (or by any executive at the behest of a Specified Executive) shall be deemed to be a breach of this Section 7(d)  by the Company.

(e)      Prior Notice Required .  The Participant hereby agrees that, prior to accepting employment with any other person or entity during the Covenant Period, the Participant will provide such prospective employer with written notice of the provisions of this Section 7 , with a copy of such notice delivered simultaneously to the General Counsel of the Company.

(f)      Return of Company Property/Passwords .  The Participant hereby expressly covenants and agrees that following termination of the Participant’s employment with the Company for any reason or at any time upon the Company’s written request, the Participant will promptly return to the Company all property of the Company in Participant’s possession or control (whether maintained at Participant’s office, home or elsewhere), including, without limitation, all Company passwords, credit cards, keys, beepers, laptop computers, cell phones and all copies of all management studies, business or strategic plans, budgets, notebooks and other printed, typed or written materials, documents, diaries, calendars and data of or relating to the Company or its personnel or affairs.  Notwithstanding the foregoing, the Participant shall be permitted to retain Participant’s rolodex (or similar list of personal contacts), compensation-related data, information needed for tax purposes and other personal items.

(g)      Participant Covenants Generally .

(i)      The Participant’s covenants as set forth in this Section 7 are from time to time referred to herein as the “ Participant Covenants .” If any of the Participant Covenants is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such Participant Covenant shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining Participant Covenants shall not be affected thereby; provided , however , that if any of the Participant Covenants is finally held to be invalid, illegal or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such Participant Covenant will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder.

(ii)      The Participant understands that the foregoing restrictions may limit Participant’s ability to earn a livelihood in a business similar to the business of the Company and its controlled affiliates, but the Participant nevertheless believes that Participant has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder to clearly justify such restrictions which, in any event (given Participant’s education, skills and ability), the Participant does not believe would prevent Participant from otherwise earning a living.  The Participant has carefully considered the nature and extent of the restrictions placed upon Participant by this Section 7 ,

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and hereby acknowledges and agrees that the same are reasonable in time and territory and do not confer a benefit upon the Company disproportionate to the detriment of the Participant.

(h)      Enforcement .  Because the Participant’s services are unique and because the Participant has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Section 7 .  Therefore, in the event of a breach or threatened breach of this Section 7 , the Company or its respective successors or assigns may, in addition to other rights and remedies existing in their favor at law or in equity, apply to any court of competent jurisdiction for specific performance and/or injunctive relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security) or require the Participant to account for and pay over to the Company all compensation, profits, moneys, accruals or other benefits derived from or received as a result of any transactions constituting a breach of the covenants contained herein, if and when final judgment of a court of competent jurisdiction is so entered against the Participant.

(i)      Interpretation .  For purposes of this Section 7 , references to “the Company” shall mean the Company as hereinbefore defined and any of its controlled affiliated companies.

8.      Amendment . No amendment of this Agreement shall materially adversely impair the rights of the Participant without the Participant’s consent, except such an amendment made to comply with applicable law (including Applicable Exchange listing standards or accounting rules) or avoid the incurrence of tax penalties under Section 409A of the Code.

9.      Successors and Assigns . This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiary, if applicable.

10.      Captions . Captions provided herein are for convenience only and shall not affect the scope, meaning, intent or interpretation of the provisions of this Agreement.

11.      Severability; Entire Agreement . If any provision of the Plan or this Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision will be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions will not be affected thereby; provided that if any of such provision is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and this Agreement contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.

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12.      Governing Law; Choice of Forum . This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without reference to principles of conflict of laws. Venue for a dispute in respect of this Agreement shall be the federal courts located in Columbus, Ohio.

13.      Acceptance . The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the Restricted Stock Units subject to all of the terms and conditions of the Plan and this Agreement.

14.      Section 409A . The amounts payable under this Agreement are intended to avoid the incurrence of tax penalties under Section 409A of the Code. This Agreement shall in all respects be administered in accordance with Section 409A of the Code. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may the Participant, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. Notwithstanding anything herein to the contrary, in the event that the Participant is a “specified employee” within the meaning of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the Date of Termination), amounts that constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code that would otherwise be payable and benefits that would otherwise be provided hereunder during the six-month period immediately following the Participant’s separation from service shall instead be paid, with interest in the case of cash payments (calculated at the applicable federal rate) determined as of the separation from service, or provided on the first business day after the date that is six months following the Participant’s separation from service; provided that, if the Participant dies following the Participant’s separation from service and prior to the payment of the any amounts delayed on account of Section 409A of the Code hereunder, such amounts shall be paid to the personal representative of the Participant’s estate within 30 days after the date of the Participant’s death.


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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the ___ day of _________, 20__.
WASHINGTON PRIME GROUP INC.,
an Indiana corporation


By:                           
Name:                 
Title:

WASHINGTON PRIME GROUP, L.P.,
an Indiana limited partnership


By:  Washington Prime Group Inc.,
an Indiana corporation, its general partner


By:                           
Name:                 
Title:

PARTICIPANT

By:                           
Name:                          
    

    

[ Signature Page to WPG Employee RSU Award Agreement ]



WASHINGTON PRIME GROUP INC.
EMPLOYEE RESTRICTED STOCK UNIT AWARD AGREEMENT
This Restricted Stock Unit Award Agreement (“ Agreement ”) made as of ___________, 20___ (the “ Award Date ”) among Washington Prime Group Inc., an Indiana corporation (the “ Company ”), its subsidiary, Washington Prime Group, L.P., an Indiana limited partnership and the entity through which the Company conducts substantially all of its operations (the “ Partnership ”), and the individual listed as participant on the signature page hereto (the “ Participant ”).
Recitals
A. The Participant is an employee of the Company or one of its Affiliates and provides services to the Partnership.
B.      The Partnership has adopted the Partnership’s 2014 Stock Incentive Plan (as further amended, restated or supplemented from time to time hereafter, the “ Plan ”) to provide, among others, employees of the Partnership or an Affiliate (including the Company) with equity-based incentives to maintain and enhance the performance and profitability of the Partnership and the Company. Capitalized terms used herein without definitions shall have the meanings given to those terms in the Plan unless otherwise indicated.
C.      This Award is intended to comply with the terms of the Plan, and if there are any inconsistencies or ambiguity between the same, then the terms of the Plan shall control.
D.      This Agreement evidences an award (the “Award”) of the number of Restricted Stock Units specified in Section 2 of this Agreement, as approved by the Committee.
NOW, THEREFORE , the Company, the Partnership and the Participant agree as follows:
1.      Administration; Incorporation of the Plan . This Award shall be administered by the Committee which has the powers and authority as set forth in the Plan. The Committee will make the determinations and certifications required by this Award as promptly as reasonably practicable following the occurrence of the event or events necessitating such determinations or certifications. The provisions of the Plan are hereby incorporated by reference as if set forth herein. Should there be any conflict between the terms of this Agreement on the one hand, and the Plan on the other hand, the terms of this Agreement shall prevail.
2.      Award .
(a)      Grant of RSUs . Pursuant to, and subject to, the terms and conditions set forth herein and in the Plan, the Participant is hereby granted ___________Restricted Stock Units as of the Award Date. Each Restricted Stock Unit represents a conditional right to receive one share of Common Stock.

(b)      Vesting . The Restricted Stock Units granted hereunder will vest and become nonforfeitable with respect to one-third of the Award on each of __________, 20_____, _________, 20_____ and _________, 20_____ (each such date, a “ Vesting Date ”), provided that the Participant is actively employed by the Company in “good standing” through the

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applicable Vesting Date and is in continued compliance with the provisions of Section 7 of this Agreement. The Committee shall in its sole and absolute discretion determine the “good standing” of the Participant, and in making such determination, the Committee may consider such factors as it deems appropriate including, but not limited to, whether the Participant was placed on a performance plan or received corrective action or counseling. Unless otherwise determined by the Board or the Committee, and except as set forth in the following paragraph hereof, upon a termination of Participant’s employment with the Company for any reason prior to the third anniversary of the Award Date, all of the then unvested Restricted Stock Units granted hereunder shall be forfeited without any consideration, and the Participant shall have no further rights thereto.

Notwithstanding the foregoing, in the event of a termination of Participant’s employment with the Company prior to the third anniversary of the Award Date, Participant’s then unvested Restricted Stock Units shall be forfeited, unless such termination is in connection with a Change in Control, in which case the Participant’s then unvested Restricted Stock Units shall be treated in the manner set forth in the Plan.
(c)      Settlement . As soon as practicable following the applicable Vesting Date (but in no event later than March 15 th of the calendar year following the calendar year in which the applicable Vesting Date occurs), subject to Section 4 (pertaining to withholding of taxes), the Company shall deliver to the Participant one share of Common Stock in respect of each of the Restricted Stock Units that vested as of such Vesting Date free of any restrictions.

3.      Restrictions . Subject to any exceptions set forth in the Plan, no Restricted Stock Unit granted hereunder may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged, in any manner (including through the use of any cash-settled instrument), whether voluntarily or involuntarily and whether by operation of law or otherwise, other than by will or by the laws of descent and distribution. Any sale, exchange, transfer, assignment, pledge, hypothecation, or other disposition in violation of the provisions of this Section 3 will be null and void and any Restricted Stock Unit which is hedged in any manner will immediately be forfeited. All of the terms and conditions of the Plan and this Agreement will be binding upon any permitted successors and assigns. Except as provided in Section 5 of this Agreement, a Restricted Stock Unit shall not entitle the Participant to any incidents of ownership (including, without limitation, dividend and voting rights) in any Share until the Participant is issued the Share to which such Restricted Stock Unit relates pursuant to Section 2(c) hereof.

4.      Tax Withholding. No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal, state, local or foreign income tax purposes with respect to any Restricted Stock Units, the Participant will pay to the Company or make arrangements satisfactory to the Company regarding the payment of any United States federal, state or local or foreign taxes of any kind required by law to be withheld with respect to the Restricted Stock Units. The obligations of the Company under this Agreement shall be conditioned on compliance by the Participant with this Section 4 , and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant, including deducting such amount from the delivery of Shares issued upon settlement of the Restricted Stock Units, that gives rise to the withholding requirement.


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5.      Dividend Equivalent Rights . So long as the Award is outstanding, the Participant shall be paid dividend equivalent payments equal to the regular cash dividends paid on the shares of Common Stock covered by this Award as if such Shares had been delivered pursuant to such Award, notwithstanding that such Shares are in respect of unvested Restricted Stock Units, provided such Restricted Stock Units shall not theretofore have been forfeited pursuant to the terms of the Award. Such amounts will be paid in cash at the same time as the applicable dividends are paid on shares of Common Stock. For the avoidance of doubt, the provisions of this Section 5 shall not apply to any extraordinary dividends or distributions. The Participant will have only the rights of a general unsecured creditor of the Company in respect of such dividend equivalent payments until paid as specified herein.

6.      Tax Representations. The Participant hereby represents and warrants to the Company as follows:
(a)    The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this Award and the transactions contemplated by this Agreement. The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its employees or agents.
(b)    The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this Award or the transactions contemplated by this Agreement.
7.      Restrictive Covenants . 

(a)      Confidential Information .  During such time as the Participant is employed by the Company and thereafter, the Participant shall keep secret and retain in the strictest confidence, and shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, including without limitation, any data, information, ideas, knowledge and papers pertaining to the customers, prospective customers, prospective products or business methods of the Company, including without limitation the business methods, plans and procedures of the Company, that shall have been obtained by the Participant during the Participant’s employment by the Company or any of its affiliated companies and that shall not be or become public knowledge (other than by acts by the Participant or representatives of the Participant in violation of this Agreement).  After termination of the Participant’s employment with the Company, the Participant shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process after reasonable advance written notice to the Company, use, communicate or divulge any such information, knowledge or data, directly or indirectly, to anyone other than the Company and those designated by it.  Nothing contained in this Agreement shall prohibit the Participant from disclosing or using information (i) which is now known by or hereafter becomes available to the general public (other than by acts by the Participant or representatives of the Participant in violation of this Agreement); (ii) which became known to the Participant from a source other than Company, or any of its subsidiaries or affiliates, other than as a result of a breach (known or which should have been known to the Participant) by such source of an obligation of confidentiality owed by it to Company,

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or any of its subsidiaries or affiliates (but not if such information was known by the Participant at such time of disclosure or use to be confidential); (iii) in connection with the proper performance of Participant’s duties to the Company, (iv) which is otherwise legally required (but only if the Participant gives reasonable advance notice to the Company of such disclosure obligation to the extent legally permitted, and cooperates with the Company (at the Company’s expense), if requested, in resisting such disclosure) or (v) which is reasonably appropriate in connection with a litigation or arbitration related to Participant’s employment with the Company or this Agreement.

(b)      Non-competition . During the period commencing on the Award Date and ending one (1) year after the termination of Participant’s employment by the Company (the “ Covenant Period ”), the Participant shall not engage in, have an interest in, or otherwise be employed by or, as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, lender, or representative, associate with, or permit Participant’s name to be used in connection with the activities of, any business or organization engaged in the ownership, development, management, leasing, expansion or acquisition of indoor or outdoor shopping centers or malls (the “ Business ”) that, (i) if such business or organization is a public company, has a market capitalization of greater than $1 billion or, (ii) if such business or organization is a private company, has assets which may be reasonably valued of more than $1 billion, in (x) North America or (y) any country outside of North America in which the Company or any of its affiliates is engaged in the ownership, development, management, leasing, expansion or acquisition of indoor or outdoor shopping centers or malls, or has indicated an intent to do so or interest in doing so as evidenced by a written plan or proposal prepared by or presented to senior management of the Company prior to the date the Participant’s employment with the Company terminates; other than for or on behalf of, or at the request of, the Company or any affiliate; provided , that passive ownership of less than two percent (2%) of the outstanding stock of any publicly traded corporation (or private company through an investment in a hedge fund or private equity fund, or similar vehicle) shall not be deemed to be a violation of this Section 7(b)  solely by reason thereof.  Notwithstanding the foregoing, the provisions of this Section 7(b)  shall not be violated by the Participant being employed by, associating with or otherwise providing services to a subsidiary, division or unit of any entity where such entity has a subsidiary, division or unit (other than the subsidiary, division or unit with which the Participant is employed, associated with or otherwise provides services to) which is engaged in the Business so long as the Participant does not provide services or advice, with or without specific compensation, to the subsidiary, division or unit engaged in the Business.

(c)      Non-solicitation of Employees .  During the Covenant Period, the Participant shall not, directly or indirectly, (i) induce or attempt to induce any employee of the Company to leave the employ of the Company or in any way interfere with the relationship between the Company, on the one hand, and any employee thereof, on the other hand, (ii) hire any person who was an employee of the Company until one (1) year after such individual’s employment relationship with the Company has been terminated or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company to cease doing business with the Company, or in any way knowingly interfere with the relationship between any such customer, supplier, licensee or business relation, on the one hand, and the Company, on the other hand; provided , that solicitations incidental to general advertising

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or other general solicitations in the ordinary course not specifically targeted at such persons and employment of any person not otherwise solicited in violation hereof shall not be considered a violation of this Section 7(c) . The Participant shall not be in violation of this Section 7(c)  solely by providing a reference for a former employee of the Company.

(d)      Non-Disparagement . The Participant agrees not to make any public disparaging, negative, or defamatory comments about the Company including the Company’s business, its directors, officers, employees, parents, subsidiaries, partners, affiliates, operating divisions, representatives or agents, or any of them, whether written, oral, or electronic.  In particular, the Participant agrees to make no public statements including, but not limited to, press releases, statements to journalists, employees, prospective employers, interviews, editorials, commentaries, or speeches, that disparage or may disparage the Company’s business, are critical of the Company or its business, or would cast the Company or its business in a negative light.  In addition to the confidentiality requirements set forth in this Agreement and those imposed by law, the Participant further agrees not to provide any third party, directly or indirectly, with any documents, papers, recordings, e-mail, internet postings, or other written or recorded communications referring or relating the Company’s business, that would support, directly or indirectly, any disparaging, negative or defamatory statement, whether written or oral. This Section 7(d)  shall not be violated by (i) responding publicly to incorrect, disparaging, or derogatory public statements to the extent reasonably necessary to correct or refute such public statements or (ii) making any truthful statement to the extent (y) reasonably necessary in connection with any litigation, arbitration, or mediation or (z) required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with apparent jurisdiction to order the person to disclose or make accessible such information.  The Company agrees not to make any public statement which is disparaging or defamatory about the Participant, whether written, oral, or electronic.  The Company’s obligations under the preceding sentence shall be limited to communications by its senior corporate executives having the rank of Senior Vice President or above and any member of the Board (“ Specified Executives ”), and it is agreed and understood that any such communication by any Specified Executive (or by any executive at the behest of a Specified Executive) shall be deemed to be a breach of this Section 7(d)  by the Company.

(e)      Prior Notice Required .  The Participant hereby agrees that, prior to accepting employment with any other person or entity during the Covenant Period, the Participant will provide such prospective employer with written notice of the provisions of this Section 7 , with a copy of such notice delivered simultaneously to the General Counsel of the Company.

(f)      Return of Company Property/Passwords .  The Participant hereby expressly covenants and agrees that following termination of the Participant’s employment with the Company for any reason or at any time upon the Company’s written request, the Participant will promptly return to the Company all property of the Company in Participant’s possession or control (whether maintained at Participant’s office, home or elsewhere), including, without limitation, all Company passwords, credit cards, keys, beepers, laptop computers, cell phones and all copies of all management studies, business or strategic plans, budgets, notebooks and other printed, typed or written materials, documents, diaries, calendars and data of or relating to the Company or its personnel or affairs.  Notwithstanding the foregoing,

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the Participant shall be permitted to retain Participant’s rolodex (or similar list of personal contacts), compensation-related data, information needed for tax purposes and other personal items.

(g)      Participant Covenants Generally .

(i)      The Participant’s covenants as set forth in this Section 7 are from time to time referred to herein as the “ Participant Covenants .” If any of the Participant Covenants is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such Participant Covenant shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining Participant Covenants shall not be affected thereby; provided , however , that if any of the Participant Covenants is finally held to be invalid, illegal or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such Participant Covenant will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder.

(ii)      The Participant understands that the foregoing restrictions may limit Participant’s ability to earn a livelihood in a business similar to the business of the Company and its controlled affiliates, but the Participant nevertheless believes that Participant has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder to clearly justify such restrictions which, in any event (given Participant’s education, skills and ability), the Participant does not believe would prevent Participant from otherwise earning a living.  The Participant has carefully considered the nature and extent of the restrictions placed upon Participant by this Section 7 , and hereby acknowledges and agrees that the same are reasonable in time and territory and do not confer a benefit upon the Company disproportionate to the detriment of the Participant.
(h)      Enforcement .  Because the Participant’s services are unique and because the Participant has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Section 7 .  Therefore, in the event of a breach or threatened breach of this Section 7 , the Company or its respective successors or assigns may, in addition to other rights and remedies existing in their favor at law or in equity, apply to any court of competent jurisdiction for specific performance and/or injunctive relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security) or require the Participant to account for and pay over to the Company all compensation, profits, moneys, accruals or other benefits derived from or received as a result of any transactions constituting a breach of the covenants contained herein, if and when final judgment of a court of competent jurisdiction is so entered against the Participant.

(i)      Interpretation .  For purposes of this Section 7 , references to “the Company” shall mean the Company as hereinbefore defined and any of its controlled affiliated companies.

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8.      Amendment . No amendment of this Agreement shall materially adversely impair the rights of the Participant without the Participant’s consent, except such an amendment made to comply with applicable law (including Applicable Exchange listing standards or accounting rules) or avoid the incurrence of tax penalties under Section 409A of the Code.

9.      Successors and Assigns . This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiary, if applicable.

10.      Captions . Captions provided herein are for convenience only and shall not affect the scope, meaning, intent or interpretation of the provisions of this Agreement.

11.      Severability; Entire Agreement . If any provision of the Plan or this Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision will be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions will not be affected thereby; provided that if any of such provision is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and this Agreement contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.
12.      Governing Law; Choice of Forum . This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without reference to principles of conflict of laws. Venue for a dispute in respect of this Agreement shall be the federal courts located in Columbus, Ohio.

13.      Acceptance . The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the Restricted Stock Units subject to all of the terms and conditions of the Plan and this Agreement.

14.      Section 409A . The amounts payable under this Agreement are intended to avoid the incurrence of tax penalties under Section 409A of the Code. This Agreement shall in all respects be administered in accordance with Section 409A of the Code. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code. In no event may the Participant, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. Notwithstanding anything herein to the contrary, in the event that the Participant is a “specified employee” within the meaning of Section 409A of the Code (as determined in accordance with the methodology established by the Company as in effect on the Date of Termination), amounts that constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code that would otherwise be payable and benefits that would otherwise be provided hereunder during the six-month period immediately following the Participant’s separation from service shall instead be paid, with interest in the case of cash payments (calculated at the

7


applicable federal rate) determined as of the separation from service, or provided on the first business day after the date that is six months following the Participant’s separation from service; provided that, if the Participant dies following the Participant’s separation from service and prior to the payment of the any amounts delayed on account of Section 409A of the Code hereunder, such amounts shall be paid to the personal representative of the Participant’s estate within 30 days after the date of the Participant’s death.

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the ___ day of _________, 20__.
WASHINGTON PRIME GROUP INC.,
an Indiana corporation


By:                           
Name:    
Title:    

WASHINGTON PRIME GROUP, L.P.,
an Indiana limited partnership


By:  Washington Prime Group Inc.,
an Indiana corporation, its general partner


By:                           
Name:    
Title:    

PARTICIPANT

By:                           
Name:                         




[ Signature Page to WPG Employee RSU Award Agreement ]


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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “ Agreement ”) is made and entered into by and between WASHINGTON PRIME GROUP INC., an Indiana corporation (the “ Company ”), and JOSHUA P. LINDIMORE (the “ Executive ”), on August 6, 2018, effective as of August 3, 2018 (the “ Effective Date ”).
WHEREAS, in connection with the continued employment of the Executive with the Company as Senior Vice President, Head of Leasing as of the Effective Date, the Company and the Executive wish to enter into this Agreement under the terms and subject to the conditions set forth herein.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Term .  The Company hereby agrees to continue to employ the Executive, and the Executive hereby agrees to serve the Company and Washington Prime Group, L.P. (the “ Partnership ”), subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on December 31, 2019, unless earlier terminated pursuant to Section 3 hereof (the “ Employment Period ”, which shall include any renewals thereof); provided , that, on December 31, 2019 and each annual anniversary of such date thereafter (such date and each annual anniversary thereof, a “ Renewal Date ”), unless previously terminated in accordance with the provisions of Section 3 hereof, the Employment Period shall be automatically extended so as to terminate one year from such Renewal Date unless, at least 120 days prior to the Renewal Date, either party shall give written notice to the other that the Employment Period shall not be so extended.
2.      Terms of Employment . 
(a)      Position and Duties . 
(i)      During the Employment Period, the Executive shall serve the Company as its [Head of Leasing] and shall perform customary and appropriate duties as may be reasonably assigned to the Executive from time to time by the Chief Executive Officer of the Company (the “ CEO ”) and shall provide services to the Partnership. The Executive shall have such responsibilities, power and authority as those normally associated with such position in public companies of a similar stature.  The Executive shall report to the CEO.  The Executive shall perform his services at the principal offices of the Company in both the Columbus, Ohio and Indianapolis, Indiana metropolitan areas and shall travel for business purposes to the extent reasonably necessary or appropriate in the performance of such services.
(ii)      During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive may be entitled, the Executive agrees to devote substantially all of his attention and time during normal business hours to the business and affairs of the Company and the Partnership and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities.  During the Employment Period, it shall not be a violation of this Agreement for the Executive to serve on corporate (if approved by the Board of Directors of the Company (the “ Board ”), such approval not to be unreasonably withheld), civic or charitable boards or committees, deliver lectures, fulfill speaking engagements or teach at






educational institutions and manage personal investments, so long as such activities do not materially interfere with the performance of the Executive’s responsibilities in accordance with this Agreement and the Executive complies with applicable provisions of the Company’s code of business conduct and ethics which are in effect from time to time and which have been provided to the Executive in writing.
(b)      Compensation . 
(i)      Base Salary .  During the Employment Period, the Executive shall receive an annual base salary at the rate of $354,040 (the “ Annual Base Salary ”), subject to applicable income tax and other legally required withholding and any deductions that the Executive voluntarily authorizes in writing.  The Executive’s Annual Base Salary shall be reviewed at least annually by the Compensation Committee of the Board (the “ Committee ”) pursuant to its normal performance review policies for senior executives.  The Committee may, but shall not be required to, increase the Annual Base Salary at any time for any reason.  The term “ Annual Base Salary ” as utilized in this Agreement shall refer to the Annual Base Salary as it may be so increased from time to time.  The Annual Base Salary shall not be reduced at any time, including after any such increase, and any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement.
(ii)      Annual Bonus . In addition to the Annual Base Salary, the Executive shall be eligible to be awarded, for each fiscal year of the Company during the Employment Period, an annual bonus (the “ Annual Bonus ”) pursuant to the terms of the Company’s annual incentive plan, as in effect from time to time.  The Executive’s target Annual Bonus shall be 75% of the Annual Base Salary (the “ Target Bonus ”).  The actual Annual Bonus may range from 0% to 112.5% of the rate of the Target Bonus, based upon the level of achievement of performance goals established by the Committee (which performance goals shall be consistent with those applicable to the Company’s senior executives generally) and communicated to the Executive not later than the 90th day of the applicable fiscal year.  Each Annual Bonus shall be paid in cash on the date on which annual bonuses are paid to senior executives of the Company generally, but not later than two and a half months after the end of the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus pursuant to an arrangement that meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”).
(iii)      Equity Awards . Following the Effective Date, the Company shall consider granting performance stock units (“ PSUs ”) and restricted stock units (“ RSUs ”) or other such cash or equity-based long term incentives as deemed appropriate by the Committee, to the Executive, subject to the approval of the Committee, taking into account competitive market compensation opportunities, the Executive’s performance and other factors the Committee deems appropriate. All such grants shall be subject to substantially the same terms and conditions, other than amount and vesting dates, as pertain to the annual equity awards to be granted to other executives of the Company, with such changes therein as the Committee deems appropriate.
(iv)      Welfare Benefits .  The Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in, and shall receive benefits under, welfare


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benefit plans, practices, policies and programs provided by the Company to the same extent as provided generally to senior executives of the Company. 
(v)      Fringe Benefits .  During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company in effect for other senior executives of the Company.  The Company reserves the right to amend or cancel any such plan, practice, policy or program in its sole discretion, subject to the terms of such plan, practice, policy or program and applicable law; provided, that no such amendment or cancellation shall be more adverse to the Executive than to other senior executives of the Company.
(vi)      Vacation .  During the Employment Period, the Executive shall be entitled to receive no less than four weeks paid vacation per year.
(vii)      Indemnification .  During and following the Employment Period, the Company shall fully indemnify the Executive for any liability to the fullest extent permitted under applicable state law.  In addition, the Company agrees to continue and maintain, at the Company’s sole expense, a directors’ and officers’ liability insurance policy covering the Executive both during and, while potential liability exists, after the Employment Period that is no less favorable than the policy covering other active directors and senior officers of the Company from time to time.
(viii)      Expenses .  During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all business expenses incurred by the Executive in accordance with the Company’s business expense reimbursement policies or as approved by the Board or Audit Committee.
(ix)      Other Benefits .  During the Employment Period, the Executive shall be entitled to participate in all executive and employee benefit plans and programs of the Company on the same basis as provided generally to other senior executives of the Company.  The Company reserves the right to amend or cancel any such plan or program in its sole discretion, subject to the terms of such plan or program and applicable law.
(x)      Prior Agreements . The Employee Restricted Stock Unit Award Agreement among the Executive, the Company and the Partnership dated as of February 20, 2018 and each Employee Restricted Stock Unit Award Agreement among the Executive the Company and the Partnership dated as of February 21, 2017 (the “ RSU Agreements ”) are amended as follows: (i) the phrase “Section 7 of this Agreement” in the first paragraph of Section 2(b) of the RSU Agreements is hereby replaced with the phrase “Section 8 of the Employment Agreement”; (ii) the second paragraph of Section 2(b) of the RSU Agreements are each hereby amended to read “Notwithstanding the foregoing, in the event of a termination of Participant’s employment with the Company prior to the third anniversary of the Award Date, Participant’s then unvested Restricted Stock Units shall be forfeited or vest in accordance with the applicable provisions of the Employment Agreement, and in the event of a Change in Control, Participant’s then unvested Restricted Stock Units shall be treated in the manner set forth in Section 5 of the Employment Agreement”; and (iii) Section 7 in each of the RSU Agreements is hereby superseded by Section 8 of this Agreement. The Employee Performance Stock Unit Award Agreement among the Executive, the Company and the Partnership dated as of February 20, 2018 and the Employee Performance Stock Unit Award


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Agreement among the Executive the Company and the Partnership dated as of February 21, 2017 (the “ PSU Agreements ”) are hereby amended as follows: (i) the phrase “Section 7 of this Agreement” in the first paragraph of Section 2(b) of the PSU Agreements is hereby replaced with the phrase “Section 8 of the Employment Agreement by and between the Executive and the Company dated as of August 6, 2018 (‘Employment Agreement’)”; (ii) the second paragraph of Section 2(b) of the PSU Agreements are each hereby amended to read “Notwithstanding the foregoing, in the event of a termination of Participant’s employment with the Company prior to the Vesting Date, Participant’s then unvested Performance Stock Units shall be forfeited or vest in accordance with the applicable provisions of the Employment Agreement, and in the event of a Change in Control, Participant’s then unvested Performance Stock Units shall be treated in the manner set forth in Section 5 of the Employment Agreement”; (iii) Section 7 in each of the PSU Agreements is hereby superseded by Section 8 of this Agreement; and (iv) the phrase “Section 7 of the Agreement” in Section A(4) of Exhibit X of the PSU Agreements is hereby replaced with the phrase “Section 8 of the Employment Agreement.”
3.      Termination of Employment .
(a)      Death or Disability .  The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period.  If the Disability (as defined below) of the Executive has occurred during the Employment Period, the Company may provide the Executive with written notice in accordance with Section 11(b)  of this Agreement of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “ Disability Effective Date ”), provided that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, “ Disability ” shall mean the “permanent and total disability” of the Executive as defined in Section 22(e)(3) of the Code, or any successor provision thereto.
(b)      With or Without Cause .  The Company may terminate the Executive’s employment during the Employment Period either with or without Cause.  For purposes of this Agreement, “ Cause ” shall mean:
(i)      The Executive’s willful failure to perform or substantially perform the Executive’s material duties with the Company;
(ii)      Illegal conduct or gross misconduct by the Executive that, in either case, is willful and demonstrably and materially injurious to the Company’s business, financial condition or reputation, or, in the good faith determination of the Board, is potentially materially injurious to the Company’s business, financial condition or reputation; or
(iii)      A material breach by the Executive of the Executive’s obligations under this Agreement, including without limitation, a material breach of the restrictive covenants and confidentiality provisions set forth in Section 8 of this Agreement; or


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(iv)      The Executive’s conviction of, or entry of a plea of guilty or nolo contendere with respect to, a felony crime or a crime involving moral turpitude, fraud, forgery, embezzlement or similar conduct;
provided , however , that the actions in (i), (ii) and (iii) above will not be considered Cause unless the Executive has failed to cure such actions within 30 days of receiving written notice specifying, with particularity, the events allegedly giving rise to Cause; and, further provided , that such actions will not be considered Cause unless the Company provides such written notice within 90 days of any executive officer of the Company (excluding the Executive, if applicable at the time of such notice) having knowledge of the relevant action.  Further, no act or failure to act by the Executive will be deemed “willful” unless done or omitted to be done not in good faith or without reasonable belief that such action or omission was in the Company’s best interests, and any act or omission by the Executive pursuant to authority given pursuant to a resolution duly adopted by the Board or on the advice of counsel for the Company will be deemed made in good faith and in the best interests of the Company.
(c)      Good Reason; Voluntary Termination .  The Executive’s employment may be terminated by the Executive for Good Reason or without Good Reason.  “ Good Reason ” means the occurrence of any one of the following events without the prior written consent of Executive:
(i)      A material reduction in the Executive’s Annual Base Salary or a material diminution of the Executive’s duties or responsibilities, authorities, powers or functions (including ceasing to be the Company’s Senior Vice President, Head of Leasing or including assignment of duties inconsistent with the Senior Vice President, Head of Leasing position); or
(ii)      a relocation that would result in the Executive's principal location of employment being moved 35 miles or more away from the Executive’s principal place of employment as of the date hereof and, as a result, the Executive’s commute increasing by 35 miles or more; or
(iii)      Any material breach of this Agreement by the Company; or
(iv)      The Company’s issuance to the Executive of a notice of non-renewal under Section 1 hereof;
provided , however , that the actions in (i) through (iii) above will not be considered Good Reason unless the Executive shall describe the basis for the occurrence of the Good Reason event in reasonable detail in a Notice of Termination (as defined below) provided to the Company in writing within 60 days of the Executive’s knowledge of the actions giving rise to the Good Reason, and the Company has failed to cure such actions within 30 days of receiving such Notice of Termination (and if the Company does effect a cure within that period, such Notice of Termination shall be ineffective) and, provided , further that the action in (iv) above will not be considered Good Reason unless the Executive shall serve in accordance with the terms of this Agreement through the end of the then-applicable Employment Period.  Unless the Executive gives the Company a Notice of Termination (as defined below) for Good Reason within 120 days of the initial existence of any


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event which, after any applicable notice and the lapse of any applicable 30-day grace period, would constitute Good Reason, such event will cease to be an event constituting Good Reason.
(d)      Notice of Termination .  Any termination of employment by the Company or the Executive shall be communicated by a Notice of Termination (as defined below) to the other party hereto given in accordance with Section 11(b)  of this Agreement.  For purposes of this Agreement, a “ Notice of Termination ” shall mean a written notice that (i) indicates the termination provision in this Agreement relied upon and (ii) specifies the Date of Termination (as defined below) if other than the date of receipt of such notice.  The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the Company or the Executive, respectively, hereunder or preclude the Company or the Executive, respectively, from asserting such fact or circumstance in enforcing the Company’s or the Executive’s rights hereunder.
(e)      Date of Termination .  “ Date of Termination ” shall mean (i) if the Executive’s employment is terminated by the Company (x) for Cause or (y) for any reason other than for Cause, or due to the Executive’s death or Disability, the date of receipt of the Notice of Termination or any later date specified therein (which date shall not be more than thirty (30) days after the giving of such notice), (ii) if the Executive’s employment is terminated by reason of death or by the Company for Disability, the date of death of the Executive or the Disability Effective Date, as the case may be, (iii) if the Executive’s employment is terminated by the Executive for Good Reason under Section 3(c)(i), Section 3(c)(ii) or Section 3(c)(iii) or without Good Reason, thirty (30) days from the date of the Company’s receipt of the Notice of Termination, or such later date as is mutually agreed by the Company and the Executive (subject to the Company’s right, if applicable, to cure the Good Reason event), or (iv) if the Executive’s employment is terminated pursuant to Section 3(c)(iv) as a result of the Company’s issuance to him of a notice of non-renewal, the Date of Termination shall be the last day of the applicable Employment Period or such later date as is mutually agreed by the Company and the Executive. Notwithstanding the foregoing, in no event shall the Date of Termination occur until the Executive experiences a “separation from service” within the meaning of Section 409A of the Code and, notwithstanding anything contained herein to the contrary, the date on which such separation from service takes place shall be the “Date of Termination.”
4.      Obligations of the Company upon Termination .
(a)      By the Company for Any Reason Other Than for Cause, Death or Disability, or By the Executive for Good Reason . Subject to Section 5 , if, during the Employment Period, (x) the Company shall terminate the Executive’s employment for any reason other than (i) for Cause, or (ii) due to the Executive’s death or Disability or (y) the Executive shall terminate employment for Good Reason, the Company shall pay and provide to the Executive the following amounts and benefits:
(i)      a lump sum cash payment within 30 days after the Date of Termination equal to the aggregate of the following amounts: (1) the Executive’s Annual Base Salary and vacation pay through the Date of Termination, (2) the Executive’s accrued Annual Bonus for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs (other than any


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portion of such Annual Bonus that was previously deferred, which portion shall instead be paid in accordance with the applicable deferral election) if such bonus has not been paid as of the Date of Termination, and (3) the Executive’s business expenses that have not been reimbursed by the Company as of the Date of Termination that were incurred by the Executive prior to the Date of Termination in accordance with the applicable Company policy, in the case of each of clauses (1) through (3), to the extent not previously paid (the sum of the amounts described in clauses (1) through (3)  shall be hereinafter referred to as the “ Accrued Obligations ”); and
(ii)      subject to the Executive’s continued compliance with the provisions of Section 8 of this Agreement and the Executive’s delivery (and non-revocation) of an executed release of claims against the Company and its officers, directors, employees and affiliates in substantially the form attached hereto as Exhibit A (the “ Release ”), which Release must be executed and delivered to the Company and the period in which it may be revoked must expire not later than thirty 30 days after the Date of Termination (the “ Release Deadline ”):
(A)      an amount equal to two times the sum of (i) the Executive’s Annual Base Salary and (ii) the Executive’s Target Bonus as in effect for the fiscal year of the Company in which the Date of Termination occurs, which amount shall be paid in equal installments made in accordance with the Company’s normal payroll practices, beginning on the first regularly scheduled payday following the Date of Termination and ending on the first payday following the one year anniversary of the Date of Termination; provided that, if any installment payment(s) would occur prior to the Release Deadline, such installment payment(s) shall be delayed until the first payday following the Release Deadline and payments made on such payday shall include all amounts that would otherwise have been paid to the Executive prior to the Release Deadline in addition to any installment otherwise payable on such date;
(B)      to the extent permitted by the Company’s group health insurance carrier and as would not cause the Company to incur tax or other penalties, the Company shall pay to Executive an after-tax amount equal to the monthly amount of the COBRA (as defined below) continuation coverage premium under the Company’s group medical plans as in effect from time to time, for eighteen (18) months following the Date of Termination, in accordance with the Company’s normal payroll practices; provided that, if any installment payment(s) would occur prior to the Release Deadline, such installment payment(s) shall be delayed until the first payday following the Release Deadline and payments made on such payday shall include all amounts that would otherwise have been paid to the Executive prior to the Release Deadline in addition to any installment otherwise payable on such date.  The receipt of such health care benefits shall be conditioned upon the Executive making a timely election to receive coverage provided to former employees under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”) and Section 4980B of the Code and continuing such coverage for so long as it may be available, and thereafter continuing to pay an amount equal to the monthly COBRA premium as in effect at the Company from time to time in respect of the applicable level of coverage.  If Executive allows such coverage to lapse by not paying the applicable amount, such coverage may not thereafter be reinstated (the benefits provided pursuant to this Section 4(a)(ii)(B) , the “ Post-Employment Health Care Benefits ”);


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(C)      upon the first business day following the Release Deadline, full accelerated vesting of any outstanding (i) normal annual time-based equity awards, including RSUs, granted in 2017, 2018 or 2019, and (ii) unless otherwise specified in an individual award agreement, any other time-based equity awards granted to the Executive after the Effective Date then outstanding and not otherwise vested, and waiver of any service-based vesting conditions on any other outstanding equity-based or long-term performance awards (the “ Time-Based Award Vesting Benefits ”);
(D)      with respect to any outstanding PSUs or other performance-based awards, including any outstanding PSUs granted in 2017, 2018 and 2019, such awards shall be (i) vested based on actual performance over the applicable performance period without regard to any applicable service vesting condition, and (ii)(x) if such award is a short term deferral (within the meaning of Section 409A of the Code), then settled no earlier than the first business day following the Release Deadline and no later than the end of the applicable short term deferral period or (y) if such award constitutes deferred compensation (within the meaning of Section 409A of the Code), then settled at the time and in the form specified in the applicable award agreement (the “ Performance Award Vesting Benefits ”), unless otherwise specified in an individual award agreement with respect to (I) an annual performance-based award granted after 2019 or (II) a special one-time performance-based award;
(E)      a pro rata portion of Executive’s Annual Bonus for the year in which the Date of Termination occurs, based on (i) the portion of such year the Executive was employed hereunder and (ii) actual performance for such period (which shall be paid as soon as possible following the end of the performance period but no earlier than the first business day following the Release Deadline and no later than two and a half months following the end of the Company’s fiscal year in which the Date of Termination occurs) (the “ Pro-Rata Bonus ”); and
(iii)      to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or that the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies through the Date of Termination (such other amounts and benefits shall be hereinafter referred to as the “ Other Benefits ”), such amounts or benefits to be paid or provided at the time and in the form provided in the applicable plan or policy.
Notwithstanding the foregoing provisions of this Section 4(a) , in the event that the Executive is a “specified employee” (within the meaning of Section 409A of the Code and with such classification to be determined in accordance with the methodology established by the applicable employer) (a “ Specified Employee ”), amounts and benefits (other than the Accrued Obligations) that are deferred compensation (within the meaning of Section 409A of the Code) that would otherwise be payable or provided under Section 4(a)  during the six-month period immediately following the Date of Termination shall instead be paid, with interest on any delayed payments at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code (“ Interest ”), on the first business day after the earlier of (i) the date of the Executive’s death and (ii) the date that is six months following the Date of Termination (the “ 409A Payment Date ”).  For the avoidance of doubt, the parties hereto


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acknowledge that the severance payments and benefits described in this Agreement are intended, to the fullest extent possible, to be exempt from the operation of Section 409A of the Code and not “deferred compensation” within the meaning of Section 409A.
Further, for avoidance of doubt, if the Executive does not deliver to the Company an executed Release by the Release Deadline then the Company shall have no obligation to make any payment or provide any benefit under Section 4(a)(ii) of this Agreement.
(b)      Death .  If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than payment or provision of (i) the Accrued Obligations, (ii) the Other Benefits, and (iii) subject to the delivery of an executed Release from the Executive’s legal representatives prior to the Release Deadline, the Time-Based Award Vesting Benefits, the Performance Award Vesting Benefits, the Post-Employment Health Care Benefits and the Pro Rata Bonus.  The term “Other Benefits,” as utilized in this Section 4(b)  shall include death benefits as in effect on the date of the Executive’s death with respect to senior executives of the Company. All payments and benefits enumerated in (i)-(iii) of this sub-section shall be paid at the same time and in the same form described in Section 4(a) .
(c)      Disability .  If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than payment or provision of (i) the Accrued Obligations, (ii) the Other Benefits, and (iii) subject to the Executive’s delivery of an executed Release prior to the Release Deadline, the Time-Based Award Vesting Benefits, the Performance Award Vesting Benefits, the Post-Employment Health Care Benefits and the Pro Rata Bonus. The term “Other Benefits,” as utilized in this Section 4(c) , shall include short-term and long-term disability benefits as in effect on the date of the Executive’s Disability with respect to senior executives of the Company. All payments and benefits enumerated in (i)-(iii) of this sub-section shall be paid at the same time and in the same form described in Section 4(a) with respect to such payments and benefits.
(d)      By the Company for Cause; By the Executive Without Good Reason .  If the Executive’s employment shall be terminated (x) by the Company for Cause or (y) by the Executive without Good Reason, which may include a termination of employment resulting from the Executive giving a notice to the Company of his non-renewal in accordance with Section 1 (without in any way limiting the right of the Executive to terminate his employment for Good Reason in accordance with the terms of this Agreement), and, in each of (x) and (y) of this Section 4(d) , except as otherwise provided herein, this Agreement shall terminate without further obligations to the Executive other than the obligation to provide the Executive with (i) the Accrued Obligations and (ii) the Other Benefits; provided , however , that if the Executive’s employment shall be terminated by the Company for Cause, the term “ Accrued Obligations ” shall not be deemed to include the Executive’s unpaid Annual Bonus for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs.  All payments and benefits enumerated in (i)-(ii) of this sub-section shall be paid at the same time and in the same form described in Section 4(a) .


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5.      Change in Control .
(a)      Notwithstanding anything contained herein to the contrary or in Section 11 of the Washington Prime Group, L.P. 2014 Stock Incentive Plan (the “ 2014 Plan ”), in the event of a Change in Control (as defined below):
(i)      with respect to any performance-based equity awards outstanding as of the date of the Change in Control, (A) the performance period shall be deemed to have ended on the date of the Change in Control and the attainment of the performance goals shall be calculated by reference to performance as of the date of the Change in Control, as determined by the Committee in good faith in its sole discretion and (B) the number of performance-based equity awards earned pursuant to clause (A) shall be converted to time-vesting RSUs which shall vest as follows: (i) if the surviving or successor entity in the Change in Control does not continue, assume or replace such RSUs with a substitute grant with the same intrinsic value (“ Substitute Stock ”), such RSUs will vest on the date of the Change in Control; or (ii) if the surviving or successor entity in the Change in Control continues, assumes or replaces such shares of stock with Substitute Stock, then such shares of Substitute Stock shall vest on the earlier of (x) the last day of the original performance period (as set forth in the applicable award agreement between the Executive and the Company) if the Executive provides continuous service to the Company, the surviving or successor entity, or one of their respective affiliates until the last day of such performance period or (y) the date that Executive’s service to the Company, the surviving or successor entity, or one of their respective affiliates is terminated, to the extent provided in Section 4(a) , Section 4(b) , Section 4(c) , or Section 5(b) hereof; and
(ii)      time-based equity awards outstanding as of the date of the Change in Control shall vest as follows: (i) if the surviving or successor entity in the Change in Control does not continue, assume or replace such RSUs with Substitute Stock, such RSUs will vest on the date of the Change in Control; or (ii) if the surviving or successor entity in the Change in Control continues, assumes or replaces such shares of stock with Substitute Stock, then such shares of Substitute Stock shall vest on the earlier of (x) the original vesting date or dates (as set forth in the applicable award agreement between the Executive and the Company) if the Executive provides continuous service to the Company, the surviving or successor entity, or one of their respective affiliates through such vesting date or (y) the date that Executive’s service to the Company, the surviving or successor entity, or one of their respective affiliates is terminated, to the extent provided in Section 4(a) , Section 4(b) , Section 4(c) , or Section 5(b) hereof.
For avoidance of doubt, Substitute Stock can only have the same intrinsic value if it is in the form of publicly registered stock that is readily traded on a major stock exchange.
“ Change in Control ” shall have the meaning given to that term in the 2014 Plan; provided, however, to the extent the impact of a Change in Control on a payment would subject the Executive to additional taxes under Section 409A of the Code, a Change in Control for purposes of such payment will mean both a Change in Control and a “change in the ownership of a corporation,” “change in the effective control of a corporation,” or a “change in the ownership of a substantial portion of a corporation’s assets” within the meaning of Section 409A of the Code and the regulations promulgated thereunder as applied to the Company.


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(b)      In the event that during the Employment Period, (x) the Company shall terminate the Executive’s employment for any reason other than (i) for Cause, or (ii) due to the Executive’s death or Disability or (y) the Executive shall terminate employment for Good Reason, in either case upon or within two (2) years after a Change in Control, then the Company shall pay and provide to the Executive, as applicable, in lieu of the payments and benefits described in Section 4 , the following:
(i)      the Accrued Obligations, which shall be paid within 30 days after the Date of Termination;
(ii)      the Other Benefits, which shall be paid or provided at the time and in the form provided in the applicable plan or policy;
(iii)      subject to the Executive’s continued compliance with the provisions of Section 8 of this Agreement and the Executive’s delivery of a Release by the Release Deadline:
(A)      a lump sum payment equal to the sum of two (2) times the sum of (i) the Executive’s Annual Base Salary and (ii) the Executive’s Target Bonus as in effect for the fiscal year in which the Date of Termination occurs, which shall be paid on first regularly scheduled payday following the Release Deadline;
(B)      the Post-Employment Health Care Benefits, which shall be provided at the time and in the form described in Section 4(a) ;
(C)      upon the first business day following the Release Deadline, full vesting of any outstanding RSUs (including PSUs converted into RSUs in connection with the Change in Control) or other service-based equity or equity-based awards;
(D)      for any outstanding performance periods, any PSUs or other performance-based awards shall be (A) vested based on actual performance over the applicable performance period without regard to any applicable service vesting condition, and (B) (i) if such award is a short term deferral (within the meaning of Section 409A of the Code), then settled no earlier than the first business day following the Release Deadline and no later than the end of the applicable short term deferral period or (ii) if such award constitutes deferred compensation (within the meaning of Section 409A of the Code), then settled at the time and in the form specified in the applicable award agreement, unless otherwise specified in an individual award agreement with respect to (i) an annual performance-based award granted after 2019 or (ii) a special one-time performance-based award; and
(E)      a pro rata portion of Executive’s Target Bonus for the year in which the termination of employment occurs, based on the portion of such year the Executive was employed hereunder, which shall be paid on first regularly scheduled payday following the Release Deadline.
Notwithstanding the foregoing provisions of this Section 5(b) , in the event that the Executive is a Specified Employee, amounts and benefits that are deferred compensation (within the meaning of Section 409A of the Code) that would otherwise be payable or provided under this Section 5 (other than the Accrued Obligations) during the six-month period immediately following the Date of Termination shall instead be paid, with Interest, on the 409A Payment Date.  For the avoidance of doubt, the parties hereto acknowledge that the payments and benefits described in this Section 5


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are intended, to the fullest extent possible, to be exempt from the operation of Section 409A of the Code and not “deferred compensation” within the meaning of Section 409A.
6.      Non-exclusivity of Rights .  Except as specifically provided, nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive qualifies pursuant to its terms, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies.  Amounts that are vested benefits or that the Executive is otherwise entitled to receive pursuant to the terms of any plan, program, policy or practice of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, program, policy or practice or contract or agreement except as explicitly modified by this Agreement.
7.      No Mitigation .  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced or otherwise subject to offset in any manner, regardless of whether the Executive obtains other employment.
8.      Restrictive Covenants . 
(a)      Confidential Information .  During the Employment Period and thereafter, the Executive shall keep secret and retain in the strictest confidence, and shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, including without limitation, any data, information, ideas, knowledge and papers pertaining to the customers, prospective customers, prospective products or business methods of the Company, including without limitation the business methods, plans and procedures of the Company, that shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies and that shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement).  After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process after reasonable advance written notice to the Company, use, communicate or divulge any such information, knowledge or data, directly or indirectly, to anyone other than the Company and those designated by it.  Nothing contained in this Agreement shall prohibit the Executive from disclosing or using information (i) which is now known by or hereafter becomes available to the general public (other than by acts by the Executive or representatives of the Executive in violation of this Agreement); (ii) which became known to the Executive from a source other than Company, or any of its subsidiaries or affiliates, other than as a result of a breach (known or which should have been known to the Executive) by such source of an obligation of confidentiality owed by it to Company, or any of its subsidiaries or affiliates (but not if such information was known by the Executive at such time of disclosure or use to be confidential); (iii) in connection with the proper performance of his duties hereunder, (iv) which is otherwise legally required (but only if the Executive gives reasonable advance notice to the Company of such disclosure obligation to the extent legally permitted, and cooperates with the Company (at the Company’s expense), if requested, in resisting such disclosure)


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or (v) which is reasonably appropriate in connection with a litigation or arbitration related to this Agreement or any award agreement contemplated hereby.
(b)      Non-competition . During the period commencing on the Effective Date and ending six months after the Date of Termination, the Executive shall not engage in, have an interest in, or otherwise be employed by or, as an owner, operator, partner, member, manager, employee, officer, director, consultant, advisor, lender, or representative, associate with, or permit his name to be used in connection with the activities of, any business or organization engaged in the ownership, development, management, leasing, expansion or acquisition of indoor or outdoor shopping centers or malls (the “ Business ”) that, (i) if such business or organization is a public company, has a market capitalization of greater than $1 billion or, (ii) if such business or organization is a private company, has assets which may be reasonably valued of more than $1 billion, in (x) North America or (y) any country outside of North America in which the Company or any of its affiliates is engaged in the ownership, development, management, leasing, expansion or acquisition of indoor or outdoor shopping centers or malls, or has indicated an intent to do so or interest in doing so as evidenced by a written plan or proposal prepared by or presented to senior management of the Company prior to the Date of Termination; other than for or on behalf of, or at the request of, the Company or any affiliate; provided , that passive ownership of less than two percent (2%) of the outstanding stock of any publicly traded corporation (or private company through an investment in a hedge fund or private equity fund, or similar vehicle) shall not be deemed to be a violation of this Section 8(b)  solely by reason thereof.  Notwithstanding the foregoing, the provisions of this Section 8(b)  shall not be violated by the Executive being employed by, associating with or otherwise providing services to a subsidiary, division or unit of any entity where such entity has a subsidiary, division or unit (other than the subsidiary, division or unit with which the Executive is employed, associated with or otherwise provides services to) which is engaged in the Business so long as the Executive does not provide services or advice, with or without specific compensation, to the subsidiary, division or unit engaged in the Business. This Section 8(b) shall supersede the terms of any non-competition or similar provision in any other agreement (oral or written) between the Executive and the Company.
(c)      Non-solicitation of Employees .  During the period commencing on the Effective Date and ending on the first anniversary of the Date of Termination (the “Covenant Period”), the Executive shall not, directly or indirectly, (i) induce or attempt to induce any employee of the Company to leave the employ of the Company or in any way interfere with the relationship between the Company, on the one hand, and any employee thereof, on the other hand, (ii) hire any person who was an employee of the Company until six (6) months after such individual’s employment relationship with the Company has been terminated or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company to cease doing business with the Company, or in any way knowingly interfere with the relationship between any such customer, supplier, licensee or business relation, on the one hand, and the Company, on the other hand; provided , that solicitations incidental to general advertising or other general solicitations in the ordinary course not specifically targeted at such persons and employment of any person not otherwise solicited in violation hereof shall not be considered a violation of this Section 8(c) . The Executive shall not be in violation of this Section 8(c)  solely by providing a reference for a former employee of the Company. This Section 8(c) shall supersede the terms of any non-solicitation or similar provision in any other agreement (oral or written) between the Executive and the Company.


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(d)      Non-Disparagement . The Executive agrees not to make any public disparaging, negative, or defamatory comments about the Company including the Company’s business, its directors, officers, employees, parents, subsidiaries, partners, affiliates, operating divisions, representatives or agents, or any of them, whether written, oral, or electronic.  In particular, the Executive agrees to make no public statements including, but not limited to, press releases, statements to journalists, employees, prospective employers, interviews, editorials, commentaries, or speeches, that disparage or may disparage the Company’s business, are critical of the Company or its business, or would cast the Company or its business in a negative light.  In addition to the confidentiality requirements set forth in this Agreement and those imposed by law, the Executive further agrees not to provide any third party, directly or indirectly, with any documents, papers, recordings, e-mail, internet postings, or other written or recorded communications referring or relating the Company’s business, that would support, directly or indirectly, any disparaging, negative or defamatory statement, whether written or oral. This Section 8(d)  shall not be violated by (i) responding publicly to incorrect, disparaging, or derogatory public statements to the extent reasonably necessary to correct or refute such public statements or (ii) making any truthful statement to the extent (y) reasonably necessary in connection with any litigation, arbitration, or mediation or (z) required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with apparent jurisdiction to order the person to disclose or make accessible such information.  The Company agrees not to make any public statement which is disparaging or defamatory about the Executive, whether written, oral, or electronic.  The Company’s obligations under the preceding sentence shall be limited to communications by its senior corporate executives having the rank of Senior Vice President or above and any member of the Board (“ Specified Executives ”), and it is agreed and understood that any such communication by any Specified Executive (or by any executive at the behest of a Specified Executive) shall be deemed to be a breach of this Section 8(d)  by the Company.
(e)      Prior Notice Required .  The Executive hereby agrees that, prior to accepting employment with any other person or entity during the Covenant Period, the Executive will provide such prospective employer with written notice of the provisions of this Agreement, with a copy of such notice delivered simultaneously to the General Counsel of the Company.
(f)      Return of Company Property/Passwords .  The Executive hereby expressly covenants and agrees that following termination of the Executive’s employment with the Company for any reason or at any time upon the Company’s written request, the Executive will promptly return to the Company all property of the Company in his possession or control (whether maintained at his office, home or elsewhere), including, without limitation, all Company passwords, credit cards, keys, beepers, laptop computers, cell phones and all copies of all management studies, business or strategic plans, budgets, notebooks and other printed, typed or written materials, documents, diaries, calendars and data of or relating to the Company or its personnel or affairs.  Notwithstanding the foregoing, the Executive shall be permitted to retain his rolodex (or similar list of personal contacts), compensation-related data, information needed for tax purposes and other personal items.
(g)      Executive Covenants Generally .


14




(i)      The Executive’s covenants as set forth in this Section 8 are from time to time referred to herein as the “ Executive Covenants .” If any of the Executive Covenants is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such Executive Covenant shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining Executive Covenants shall not be affected thereby; provided , however , that if any of the Executive Covenants is finally held to be invalid, illegal or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such Executive Covenant will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder.
(ii)      The Executive understands that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the business of the Company and its controlled affiliates, but the Executive nevertheless believes that he has received and will receive sufficient consideration and other benefits as an employee of the Company and as otherwise provided hereunder to clearly justify such restrictions which, in any event (given his education, skills and ability), the Executive does not believe would prevent his from otherwise earning a living.  The Executive has carefully considered the nature and extent of the restrictions placed upon him by this Section 8 , and hereby acknowledges and agrees that the same are reasonable in time and territory and do not confer a benefit upon the Company disproportionate to the detriment of the Executive.
(h)      Enforcement .  Because the Executive’s services are unique and because the Executive has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Section 8 .  Therefore, in the event of a breach or threatened breach of this Section 8 , the Company or its respective successors or assigns may, in addition to other rights and remedies existing in their favor at law or in equity, apply to any court of competent jurisdiction for specific performance and/or injunctive relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security) or require the Executive to account for and pay over to the Company all compensation, profits, moneys, accruals or other benefits derived from or received as a result of any transactions constituting a breach of the covenants contained herein, if and when final judgment of a court of competent jurisdiction is so entered against the Executive.
(i)      Interpretation .  For purposes of this Section 8 , references to “the Company” shall mean the Company as hereinbefore defined and any of its controlled affiliated companies.
9.      280G Protection .
(a)      Notwithstanding anything to the contrary in this Agreement, in the event that the Executive shall become entitled to payment and/or benefits provided by this Agreement or any other amounts in the “nature of compensation” (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, by any person whose actions result in a change of ownership or effective control covered by Section 280G(b)(2) of the Code or any person affiliated with the Company or such person) as a result of such change in ownership or effective control (collectively the “ Company Payments ”), and such Company Payments will be subject to the tax (the “ Excise Tax ”) imposed by Section 4999 of the Code (and any similar tax that may hereafter be imposed by any taxing authority) the Company shall pay to the Executive the


15




greater of the following, whichever gives the Executive the highest net after-tax amount (after taking into account federal, state, local and social security taxes at the maximum marginal rates) (x) the Company Payments or (y) one dollar less than the amount of the Company Payments that would subject the Executive to the Excise Tax. In the event that the Company Payments are required to be reduced pursuant to the foregoing sentence, then the Company Payments shall be reduced as mutually agreed between the Company and the Executive or, in the event the parties cannot agree, in the following order (1) any lump sum severance based on Base Salary or Annual Bonus, (2) any other cash amounts payable to the Executive, (3) any benefits valued as parachute payments; (4) acceleration of vesting of any securities in respect of performance-based awards; and (5) acceleration of vesting of any securities in respect of time-based awards.
(b)      For purposes of determining whether any of the Company Payments will be subject to the Excise Tax and the amount of such Excise Tax, (x) the Company Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Code Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company’s independent certified public accountants appointed prior to any change in ownership (as defined under Section 280G(b)(2) of the Code) or tax counsel selected by such accountants or such other nationally recognized public accounting firm reasonably selected by the Company (it being acknowledged that the selection of a “Big Four” accounting firm shall be deemed reasonable) (the “ Accountants ”) such Company Payments (in whole or in part) either expressly do not constitute “parachute payments,” represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the “base amount” or are otherwise not subject to the Excise Tax, and (y) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants. All determinations hereunder shall be made by the Accountants which shall provide detailed supporting calculations both to the Company and the Executive at such time as it is requested by the Company or the Executive. If the Accountants determine that payments under this Agreement and/or any award agreement between the Company and the Executive must be reduced pursuant to this paragraph, they shall furnish the Executive with a written opinion or memoranda to such effect. The determination of the Accountants shall be final and binding upon the Company and the Executive.
(c)      In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, the Executive shall permit the Company to control issues related to the Excise Tax (at its expense), provided that such issues do not potentially materially adversely affect the Executive, but the Executive shall control any other issues. In the event the issues are interrelated, the Executive and the Company shall in good faith cooperate so as not to jeopardize resolution of either issue, but if the parties cannot agree the Executive shall make the final determination with regard to the issues. In the event of any conference with any taxing authority regarding the Excise Tax or associated income taxes, the Executive shall permit the representative of the Company to accompany the Executive, and the Executive and the Executive’s representative shall cooperate with the Company and its representative.
10.      Successors . 
(a)      This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.


16




(b)      This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c)      The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.  As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.
11.      Miscellaneous .
(a)      This Agreement shall be governed by and construed in accordance with the laws of the State of Indiana, without reference to principles of conflict of laws.  Venue for a dispute in respect of this Agreement shall be the federal courts located in Columbus, Ohio.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.  This Agreement shall supersede and replace any other agreement between the parties with respect to the subject matter hereof in effect immediately prior to the execution of this Agreement, and the Executive shall not be entitled to any severance pay or benefits under any other severance plan, program or policy of the Company and the affiliated companies. Notwithstanding anything to the contrary contained in this Agreement or otherwise, none of the execution of this Agreement, the consummation of the events contemplated by this Agreement, nor any other event, action or occurrence prior to the Effective Date shall constitute Good Reason or a termination without Cause or any other termination of employment for purposes of this Agreement, the Prior Agreement or any other agreement.
(b)      All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
 
At the most recent address on file at the Company.
 
 
 
If to the Company:
 
Washington Prime Group Inc.
180 East Broad Street
Columbus, Ohio 43215

 
 
Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.


17




(c)      The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(d)      The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e)      The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f)      Any provision of this Agreement that by its terms continues after the expiration of the Employment Period or the termination of the Executive’s employment shall survive in accordance with its terms.
(g)      This Agreement is intended to comply with the requirements of Section 409A of the Code or an exemption or exclusion therefrom and shall in all respects be administered in accordance with Section 409A of the Code.  The Company and the Executive mutually intend to structure the payments and benefits described in this Agreement, and the Executive’s other compensation, to be exempt from or to comply with the requirements of Section 409A of the Code to the fullest extent applicable.  Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Agreement.  If the Executive dies following the Date of Termination and prior to the payment of any amounts delayed on account of Section 409A of the Code, such amounts shall be paid to the personal representative of the Executive’s estate within 30 days after the date of the Executive’s death.
All reimbursements and in-kind benefits provided under this Agreement that constitute deferred compensation within the meaning of Section 409A shall be made or provided in accordance with the requirements of Section 409A of the Code, including, without limitation, that (i) in no event shall reimbursements by the Company under this Agreement be made later than the end of the calendar year next following the calendar year in which the applicable fees and expenses were incurred, provided , that the Executive shall have submitted an invoice for such fees and expenses at least 10 days before the end of the calendar year next following the calendar year in which such fees and expenses were incurred; (ii) the amount of in-kind benefits the Company is obligated to pay or provide in any given calendar year shall not affect the in-kind benefits that the Company is obligated to pay or provide in any other calendar year; (iii) the Executive’s right to have the Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in no event shall the Company’s obligations to make such reimbursements or to provide such in-kind benefits apply later than the Executive’s remaining lifetime (or if longer, through the 20th anniversary of the Effective Date).  Prior to a Change in Control, but within the time period permitted by the applicable Treasury Regulations, the Company may, in consultation with the Executive, modify this Agreement, in the least restrictive manner necessary and without any diminution in the value of the payments to the Executive, in order to cause the provisions of this Agreement to comply with the requirements of Section 409A of the Code, so as to avoid the


18




imposition of taxes and penalties on the Executive pursuant to Section 409A of the Code. For purposes of this Agreement, the term “ Section 409 A of the Code” shall include the implementing regulations thereunder.
12.      Clawback .  All payments made to the Executive pursuant to this Agreement shall be subject to clawback by the Company to the extent required by applicable law or the policies of the Company as in effect from time to time.


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IN WITNESS WHEREOF , the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
 
 
JOSHUA P. LINDIMORE
 
 
 
/s/ Joshua P. Lindimore
 
 
 
WASHINGTON PRIME GROUP INC.
 
 
 
By:
/s/ Robert P. Demchak
 
 
Name: Robert P. Demchak
 
 
Title: Executive Vice President, General Counsel and Corporate Secretary




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EXHIBIT A

Form of General Release and Waiver

THIS GENERAL RELEASE AND WAIVER (this “ Release ”) is entered into effective as of _________________, 20__, by Joshua P. Lindimore (the “ Executive ”) in favor of Washington Prime Group Inc. (the “ Company ”). Reference is made to the Employment Agreement between the Executive and the Company dated as of [_________], 2018, as may be amended from time to time (the “ Employment Agreement ”). Defined terms used herein but not defined herein shall have the meanings set forth thereto in the Employment Agreement.
1.         Confirmation of Termination .  The Executive’s employment with the Company is terminated as of the Date of Termination as defined in the Employment Agreement.
2.         Resignation .  Effective as of the Date of Termination, the Executive hereby resigns as an officer and, if applicable, director of the Company and any of its affiliates and subsidiaries, as well as from any such positions held with any other entities at the direction or request of the Company or any of its affiliates.  The Executive agrees to promptly execute and deliver such other documents as the Company shall reasonably request to evidence such resignations.  In addition, the Executive hereby agrees and acknowledges that the Date of Termination shall be date of his termination from all other offices, positions, trusteeships, committee memberships and fiduciary capacities held with, or on behalf of, the Company or any of its affiliates and subsidiaries.
3.         Termination Benefits .  Assuming that the Executive executes this Release and does not revoke it within the time specified in Section 10 below, then, subject to Section 9 below, the Executive will be entitled to the payments and benefits (subject to taxes and all applicable withholding requirements) payable pursuant to the Employment Agreement and the distribution with respect to the equity awards distributable pursuant to the Employment Agreement (collectively, the “ Termination Benefits ”).  Notwithstanding anything herein to the contrary, the Accrued Obligations (as defined in the Employment Agreement) shall not be subject to Executive’s execution of this Release.  The Executive acknowledges and agrees that the Termination Benefits exceed any payment, benefit, or other thing of value to which the Executive might otherwise be entitled under any policy, plan or procedure of the Company and/or any agreement between the Executive and the Company.
4.         General Release and Waiver .  In consideration of the Termination Benefits, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Executive for himself and for his heirs, executors, administrators, trustees, legal representatives and assigns (collectively, the “ Releasors ”), hereby releases, remises, and acquits the Company and its affiliates and all of their respective past, present and future parent entities, subsidiaries, divisions, affiliates and related business entities, any of their successors and assigns, assets, employee benefit plans or funds, and any of their respective past and/or present directors, officers, fiduciaries, agents, trustees, administrators, managers, supervisors, shareholders, investors, employees, legal representatives, agents, counsel and assigns, whether acting on behalf of the Company or its affiliates or, in their individual capacities (collectively, the “ Releasees ” and each a “ Releasee ”) from any and


21




all claims, known or unknown, which the Releasors have or may have against any Releasee arising on or prior to the date of this Release and any and all liability which any such Releasee may have to the Executive, whether denominated claims, demands, causes of action, obligations, damages or liabilities arising from any and all bases, however denominated, including but not limited to (a) any claim under the Age Discrimination in Employment Act of 1967 (including, without limitation, the Older Workers Benefit Protection Act), the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Civil Rights Act of 1964, the Civil Rights Act of 1991, Section 1981 of the Civil Rights Act of 1866, the Equal Pay Act, the Immigration Reform and Control Act of 1986, the Employee Retirement Income Security Act of 1974, (excluding claims for accrued, vested benefits under any employee benefit or pension plan of the Company, subject to the terms and conditions of such plan and applicable law), the Sarbanes-Oxley Act of 2002, all as amended; (b) any claims under any state statutory or decisional law pertaining to wage payment, wrongful discharge, discrimination, retaliation, breach of contract, breach of public policy, misrepresentation, fraud or defamation, (c) any and all claims under the Indiana Civil Rights Act and the Indiana wage payment provisions, each as amended; (d) any claim under any other Federal, state, or local law and any workers’ compensation or disability claims under any such laws; and (e) any claim for attorneys’ fees, costs, disbursements and/or the like.  This Release includes, without limitation, (i) any and all claims arising from or relating to the Executive’s employment relationship with Company and his service relationship as an officer or director of the Company, or as a result of the termination of such relationships and (ii) any and all matters, transactions or things occurring prior to the Employee’s execution of this Release.  The Executive further agrees that the Executive will not file or permit to be filed on the Executive’s behalf any such claim.  Notwithstanding the preceding sentence or any other provision of this Release, this Release is not intended to interfere with the Executive’s right to file a charge with the Equal Employment Opportunity Commission (“ EEOC ”) in connection with any claim he believes he may have against any Releasee.  However, by executing this Release, the Executive hereby waives the right to recover in any proceeding the Executive may bring before the EEOC or any state human rights commission or in any proceeding brought by the EEOC or any state human rights commission on the Executive’s behalf.  This Release is for any relief, no matter how denominated, including, but not limited to, injunctive relief, wages, back pay, front pay, compensatory damages, or punitive damages.  This Release shall not apply to (i) the Company’s obligations pursuant to the Employment Agreement; (ii) the Executive’s rights to indemnification from the Company or rights to be covered under any applicable insurance policy with respect to any liability the Executive incurred or might incur as an employee, officer or director of the Company; or (iii) any right the Executive may have to obtain contribution as permitted by law in the event of entry of judgment against the Executive as a result of any act or failure to act for which the Executive, on the one hand, and Company or any other Releasee, on the other hand, are jointly liable.
5.         Continuing Covenants .  The Executive acknowledges and agrees that he remains subject to the provisions of Section 8 (Restrictive Covenants) of the Employment Agreement which shall remain in full force and effect for the periods set forth therein.
6.         No Admission; No Claims; No Knowledge of Illegal Action .  This Release does not constitute an admission of liability or wrongdoing of any kind by the Company or any other Releasee.  This Release is not intended, and shall not be construed, as an admission that any


22




Releasee has violated any federal, state or local law (statutory or decisional), ordinance or regulation, breached any contract or committed any wrong whatsoever against any Releasor. The Executive confirms that no claim, charge or complaint against the Company or any other Releasee brought by him exists before any federal, state, or local court or administrative agency. The Executive represents and warrants that he has no knowledge of any undisclosed improper or illegal actions or omissions by the Company, nor does he know of any undisclosed basis on which any third party or governmental entity could reasonably assert such a claim.  This expressly includes any and all conduct that potentially could give rise to claims under the Sarbanes-Oxley Act of 2002.
7.         Heirs and Assigns .  The terms of this Release shall be binding upon and inure to the benefit of the parties named herein and their respective successors and permitted assigns.
8.         Miscellaneous .  This Release will be construed and enforced in accordance with the laws of the State of Indiana without regard to the principles of conflicts of law.  If any provision of this Release is held by a court of competent jurisdiction to be illegal, void or unenforceable, such provision shall have no effect; however, the remaining provisions will be enforced to the maximum extent possible.  The parties acknowledge and agree that, except as otherwise set forth herein, this Release constitutes the complete understanding between the parties with regard to the matters set forth herein and, except as otherwise set forth herein, supersede any and all agreements, understandings, and discussions, whether written or oral, between the parties.  No other promises or agreements are binding unless in writing and signed by each of the parties after the Release Effective Date (as defined below).  Should any provision of this Release require interpretation or construction, it is agreed by the parties that the entity interpreting or constructing this Release shall not apply a presumption against one party by reason of the rule of construction that a document is to be construed more strictly against the party who prepared the document.
9.         Additional Acknowledgments, Covenants and Agreements by Executive . Executive further acknowledges, covenants, and agrees that:
a.    Except as otherwise provided in Section 4(a) of the Employment Agreement, Executive has received all compensation and benefits Executive was or will be entitled to by virtue of Executive’s employment with the Company;
b.    Executive has been encouraged to seek legal counsel before signing this Release, Executive was given 21 days within which to consider this Release before Executive signed it, and in executing this Release, Executive does not rely upon and has not relied upon any representation or statement with regard to the subject matter, basis or effect of this Release, other than those specifically stated in this Release;    
c.    Executive has returned or will immediately return to the Company all keys, files, records, documents, information, data, equipment, lists, computer programs and/or data, property, materials, or other items relating in any way to the business and/or operations of the Company;
d.    Executive shall not defame, or otherwise disparage, the Company or any of its present or former partners, officers, directors, shareholders, agents, independent contractors,


23




employees, representatives, or attorneys, in their representative as well as their individual capacities, or any of the Company’s parents, subsidiaries, affiliates, predecessors, successors or assigns;
e.    Executive has read and understands this Release, and that Executive executes it voluntarily and of Executive’s own free will; and
f.    Executive’s execution of this Release is in consideration of something of value to which Executive would not otherwise be entitled.
10.       Effective Time of Release .  This Release shall not become effective until it has been fully executed by both parties, but no earlier than the eighth (8 th ) day after Executive signs it. During the seven-day period immediately following the date of Executive’s execution of this Release, Executive shall be entitled to revoke it by putting the revocation in writing and delivering to the Company, by hand delivery or certified mail, return receipt requested, within seven (7) calendar days of the date on which Executive signs the Release. If Executive delivers the revocation by mail, it must be postmarked within seven (7) calendar days of the date Executive executes the Release. If this release is not revoked during such seven (7) calendar day period, then such seventh day shall be the effective day of the Release (the “ Release Effective Date ”). If the last day of the Revocation Period falls on a Saturday, Sunday or holiday, the last day of the Revocation Period will be deemed to be the next business day. If the Executive does not execute this Release or exercises his right to revoke hereunder, he shall forfeit his right to receive any of the Termination Benefits, and to the extent such Termination Benefits have already been provided, the Executive agrees that he will immediately reimburse the Company for the amounts of such payment.
                IN WITNESS WHEREOF, the Executive has duly executed this Release as of the date first set forth above.

EXECUTIVE:

                                                                                   
Name:   Joshua P. Lindimore



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EXHIBIT 31.1

CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Louis G. Conforti, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Washington Prime Group Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
April 25, 2019
 
/s/ Louis G. Conforti
 
 
 
Louis G. Conforti
Chief Executive Officer and Director





EXHIBIT 31.2

CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Mark E. Yale, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Washington Prime Group Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
April 25, 2019
 
/s/ Mark E. Yale
 
 
 
Mark E. Yale
Executive Vice President and Chief Financial Officer





EXHIBIT 31.3

CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Louis G. Conforti, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Washington Prime Group, L.P.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
April 25, 2019
 
/s/ Louis G. Conforti
 
 
 
Louis G. Conforti
Chief Executive Officer and Director of Washington Prime Group Inc., general partner of Washington Prime Group, L.P.





EXHIBIT 31.4

CERTIFICATION PURSUANT TO
RULE 13a-14(a)/15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Mark E. Yale, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Washington Prime Group, L.P.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
April 25, 2019
 
/s/ Mark E. Yale
 
 
 
Mark E. Yale
Executive Vice President and Chief Financial Officer of Washington Prime Group Inc., general partner of Washington Prime Group, L.P.




EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT of 2002

In connection with the Quarterly Report of Washington Prime Group Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:
April 25, 2019
 
/s/ Louis G. Conforti
 
 
 
Louis G. Conforti
Chief Executive Officer and Director
Date:
April 25, 2019
 
/s/ Mark E. Yale
 
 
 
Mark E. Yale
Executive Vice President and Chief Financial Officer





EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT of 2002

In connection with the Quarterly Report of Washington Prime Group, L.P. (the “Partnership”) on Form 10-Q for the period ended March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

Date:
April 25, 2019
 
/s/ Louis G. Conforti
 
 
 
Louis G. Conforti
Chief Executive Officer and Director of Washington Prime Group Inc., general partner of Washington Prime Group, L.P.
Date:
April 25, 2019
 
/s/ Mark E. Yale
 
 
 
Mark E. Yale
Executive Vice President and Chief Financial Officer of Washington Prime Group Inc., general partner of Washington Prime Group, L.P.