As Mall Owner Exits Bankruptcy, No One Knows What It’s Worth
As Mall Owner Exits Bankruptcy, No One Knows What It’s Worth
(Bloomberg) -- When Washington Prime Group went bust in June, the mall operator’s bankruptcy judge was almost certain the case would culminate in a spreadsheet-ridden valuation brawl.
It was a surprise, then, when U.S. Bankruptcy Judge Marvin Isgur signed off on the real estate investment trust’s Chapter 11 exit plan on Friday without any creditors sniping over future cash flows, piecemeal asset sales or competing deals. His approval means investment firm SVPGlobal will swap its debt holdings for ownership of the company, and stock holders will even see a recovery, despite no one knowing quite what Washington Prime is worth.
Columbus, Ohio-based Washington Prime has a portfolio of some 100 shopping centers across the U.S., sporting a mix of fully-enclosed malls and open-air centers. The varied bag of brick-and-mortar retail assets mixed with the uncertainty of a global pandemic created a difficult, if not impossible, task for valuation experts.
“Do you think anyone has confidence in the valuation?” Isgur asked an attorney for Washington Prime stockholders in court on Friday.
“I don’t think anybody really knows, and the market will tell us soon enough,” the attorney, Robert Stark of Brown Rudnick, said in response.
Rather than force Isgur to rule on what a reasonable valuation might be -- a process that would likely be lengthy, expensive and uncertain itself -- lawyers for Washington Prime and its stakeholders settled their differences prior to the hearing on Friday. A handful of remaining objections were resolved during the scheduled hearing time.
While ruling on Washington Prime’s plan, Isgur noted that even though no one knows what the mall owner is truly worth, the deal leaves creditors better off than the alternative: liquidation. That’s the only valuation test required by U.S. bankruptcy rules, he said.
A liquidation of the REIT may have yielded as much as $2.4 billion to distribute to creditors, according to an estimate provided in court papers. Washington Prime entered bankruptcy with a debt pile in excess of $3 billion.
“I suspect that no matter how many conversations you had, no one would ever know what the true value is,” Isgur said in the hearing.
The case is Washington Prime Group Inc., 21-31948, U.S. Bankruptcy Court for the Southern District of Texas (Houston).
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