LOCAL

Report: Muncie Mall owner Washington Prime Group preparing for possible bankruptcy filing

Corey Ohlenkamp
Muncie Star Press

MUNCIE, Ind. — The Muncie Mall's owner, Washington Prime Group, is preparing a potential bankruptcy filing, according to a financial report from Bloomberg News, though the impact that could have on the local mall isn't immediately obvious.

Washington Prime Group owns about 100 malls throughout the U.S., including the Muncie Mall and Clay Terrace in Carmel.

The report indicated that time was running out for officials with the company to avert a default on loans after it skipped an interest payment.

None of this should come as a surprise, as the company said it would likely try to rid itself of assets like Muncie's struggling mall by defaulting on loans over time. 

In an earnings call a year ago, Louis G. Conforti, the CEO of WPG, said they wanted to dump properties like the Muncie Mall referring to the the mall and other properties in its portfolio as "by definition our crappiest assets."

Mark E. Yale, the company's CFO, said WPG would "transition" those "non-core assets" back "to the lender," meaning default on the mortgage loans secured by those shopping centers.

In the case of Muncie Mall, it serves as collateral for a $33.1 million loan to WPG from JPMBB Commercial Mortgage Securities Trust (JPMorgan, Barclays Bank).

Built in 1970, the Muncie Mall sits on 53 acres, is a 635,970-square-foot facility of which 515,970 square feet serves as collateral for the loan. Macy's owns the remainder of the mall, which was recently sold.

►50 years of Muncie Mall: A timeline of retail trends and turnover

Spiraling financial woes

Officials with WPG told Bloomberg last month that it would use a 30-day grace period to continue negotiations with its lenders. WPG also reported to investors that its rent collection rate dropped to 52% during the second quarter of 2020.

A poor earnings report also spelled disaster for the company's stock price. 

The company's stock, WPG on the New York Stock Exchange, has plummeted since the start of the year. What started as a year high of $14.90 per share on Jan. 27, 2021, dropped to trading just above $1.82 on March 8.

Two of Washington Prime’s competitors, CBL & Associates Properties and Pennsylvania Real Estate Investment Trust, filed for bankruptcy last year.

There have been a series of things working against the Muncie Mall, the most evident being the ongoing COVID-19 pandemic, which has left mall owners across the country facing financial problems.

Business closures kept shoppers away, exacerbating a problem that was already taking shape before the pandemic as brick and mortar stores tried to compete with an influx of online shopping. 

In recent years, Muncie Mall has lost all four of its anchor stores — Carson's, Sears, Macy's and most recently JCPenney — along with numerous smaller retailers before and after the pandemic closure. Last fall, the mall petitioned the Delaware County's assessor's office seeking a reduction in the mall's current assessed value of $20,684,100 based on the number of vacancies.

►Muncie Mall continues to lose stores after reopening

What happens to the mall going forward?

As of Monday, Muncie Mayor Dan Ridenour said the news wasn't unexpected, but that it wasn't as dire as it sounded.  

The mayor said that even through a bankruptcy, the mall wouldn't be closing and tenants would continue to operate out of the location. If anything, Ridenour said it might force the company to try something new with the property.

There have been efforts from his administration to make sure the area remained an economic pillar for the city. The area around the Muncie Mall is a significant tax base for the city, meaning that it needs to flourish for the city to grow revenue. 

Muncie Mall

"It’s important to us," Ridenour said. "The city of Muncie does nearly $1.25 billion in retail sales every year according to numbers I've seen." That means the city not only gains property tax from the physical stores, but in sales tax as well. 

Following the commentary from WPG executives last year about how they wanted to get rid of the property, Ridenour said that revitalization efforts by the company were not really evident.

He said WPG seemed more focused on other malls in their portfolio. 

Washington Prime Group did not respond to questions sent by The Star Press.

Corey Ohlenkamp is the city/county government reporter. Contact him via email at cohlenkamp@muncie.gannett.com or by phone at 765-213-5874. Follow him on Twitter at @Ohlenkamp.