Washington Prime Group
Annual Report 2019

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-36252 (Washington Prime Group Inc.) 333-205859 (Washington Prime Group, L.P.) 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) 46-4323686 (Washington Prime Group Inc.) 46-4674640 (Washington Prime Group, L.P.) (I.R.S. Employer Identification No.) 180 East Broad Street Columbus Ohio 43215 (Address of principal executive offices) (614) 621-9000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Washington Prime Group Inc.: Title of each class Trading Symbols Name of each exchange on which registered Common Stock, $0.0001 par value per share 7.5% Series H Cumulative Redeemable Preferred Stock, par value $0.0001 per share 6.875% Series I Cumulative Redeemable Preferred Stock, par value $0.0001 per share WPG WPGPRH WPGPRI New York Stock Exchange New York Stock Exchange New York Stock Exchange Washington Prime Group, L.P.: None Securities registered pursuant to Section 12(g) of the Act: Washington Prime Group Inc.: None Washington Prime Group, L.P.: Units of limited partnership interest (34,506,965 units outstanding as of February 26, 2020) Indicate by check mark if the Registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act). Washington Prime Group Inc. Yes Washington Prime Group, L.P. Yes No No Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Washington Prime Group Inc. Yes Washington Prime Group, L.P. Yes No No 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 No Washington Prime Group, L.P. Yes No 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 No Washington Prime Group, L.P. Yes No Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the 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 Accelerated filer Emerging growth company Non-accelerated filer Smaller reporting company Washington Prime Group, L.P. (Check One): Large accelerated filer Accelerated filer Emerging growth company Non-accelerated filer Smaller reporting company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Washington Prime Group Inc. Washington Prime Group, L.P. Indicate by check mark whether Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Washington Prime Group, L.P. Yes Washington Prime Group Inc. Yes No No The aggregate market value of shares of common stock held by non-affiliates of Washington Prime Group Inc. was approximately $0.7 billion based on the closing sale price on the New York Stock Exchange for such stock on June 28, 2019. 1 As of February 26, 2020, Washington Prime Group Inc. had 186,884,276 shares of common stock outstanding. Washington Prime Group, L.P. has no publicly traded equity and no common stock outstanding. Portions of Washington Prime Group Inc.'s Proxy Statement in connection with its 2020 Annual Meeting of Stockholders are incorporated by reference in Part III. Documents Incorporated By Reference 2 EXPLANATORY NOTE This report combines the annual reports on Form 10-K for the fiscal year ended December 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 84.5% of the partnership interests (“OP units”) at December 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 annual reports on Form 10-K 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 Annual Report on Form 10-K for WPG Inc. and WPG L.P. includes, for each entity, separate financial statements (but combined footnotes), separate reports on disclosure controls and procedures and internal control over financial reporting, separate CEO/CFO certifications and, as appropriate and where necessary, separate applicable exhibits (combined in one Item 601 exhibit list). 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-K, they would be discussed separately herein. 3 WASHINGTON PRIME GROUP INC. AND WASHINGTON PRIME GROUP, L.P. Annual Report on Form 10-K December 31, 2019 TABLE OF CONTENTS Item No. Part I 1. 1A. 1B. 2. 3. 4. Part II 5. 6. 7. 7A. 8. 9. 9A. 9B. Part III 10. 11. 12. 13. 14. Part IV 15. 16. Signatures Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosure About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions and Director Independence Principal Accounting Fees and Services Exhibits and Financial Statement Schedules Form 10-K Summary Page No. 5 10 25 26 38 38 38 40 42 70 70 70 70 71 72 72 72 72 72 73 77 78 4 Item 1. Business General Part I 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, exclusive of net capital gains, 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. On May 28, 2014, WPG separated from Simon Property Group Inc. ("SPG") through the distribution of 100% of the outstanding units of WPG L.P. to the owners of Simon Property Group L.P. and 100% of the outstanding shares of WPG to the SPG common shareholders in a tax-free distribution. Prior to the separation, WPG Inc. and WPG L.P. were wholly owned subsidiaries of SPG and its subsidiaries. We own, develop and manage enclosed retail properties and open air properties. As of December 31, 2019, our assets consisted of material interests in 104 shopping centers in the United States, comprised of approximately 56 million square feet of managed gross leasable area ("GLA"). 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. Transactions For a description of our operational strategies and developments in our business during 2019 see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Form 10-K. Segments Our primary business is the ownership, development and management of retail real estate within the United States. 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 tenants and, in many cases, the same tenants. For the year ended December 31, 2019, Signet Jewelers, Ltd. (based on common parent ownership of tenants including, but not limited to, Body by Pagoda, Jared's, Kay Jewelers, Piercing Pagoda, Rogers Jewelers, and Zales Jewelers) and L Brands, Inc. (based on common parent ownership of tenants including Bath & Body Works, Pink, Victoria's Secret, and White Barn Candle) each accounted for approximately 2.6% of base minimum rents. Further, Signet Jewelers, Ltd., L Brands, Inc., Dick's Sporting Goods (based on common parent ownership including Dick's Sporting Goods, Field & Stream, and Golf Galaxy) and Footlocker, Inc. (based on common parent ownership including Champs Sports, Foot Action USA, Footlocker, Kids Footlocker, and Lady Footlocker), in aggregate, comprised approximately 9.1% of base minimum rents. See Item 2. "Properties" for further information on tenant mix. Other Policies The following is a discussion of our investment policies, financing policies, conflicts of interest policies and policies with respect to certain other activities. One or more of these policies may be amended or rescinded from time to time without a stockholder vote. Investment Policies We are in the business of owning, managing and operating enclosed and open air retail properties across the United States and while we emphasize these real estate investments, we may also invest in equity or debt securities of other entities engaged in real estate activities or securities of other issuers. However, any of these investments would be subject to the percentage ownership limitations and gross income tests necessary for REIT qualification of WPG Inc. under federal tax laws as well as our own internal policies concerning conflicts of interest and related party transactions. These REIT limitations mean that we cannot make an investment that would cause our real estate assets to be less than 75% of our total assets. We must also derive at least 75% of our gross income directly or indirectly from investments relating to real property or mortgages on real property, including "rents from real property," dividends from other REITs and, in certain circumstances, interest from certain types of temporary investments. In addition, we must also derive at least 95% of our gross income from such real property investments, and from dividends, interest and gains from the sale or dispositions of stock or securities or from other combinations of the foregoing. 5 Subject to REIT limitations, we may invest in the securities of other issuers in connection with acquisitions of indirect interests in real estate. Such an investment would normally be in the form of general or limited partnership or membership interests in special purpose partnerships and limited liability companies that own one or more properties. We may, in the future, acquire all or substantially all of the securities or assets of other REITs, management companies or similar entities where such investments would be consistent with our investment policies. Financing Policies Because WPG Inc.'s REIT qualification requires it to distribute at least 90% of its taxable income, exclusive of net capital gains, we regularly access the capital markets to raise the funds necessary to finance operations, acquisitions, strategic investments, development and redevelopment opportunities, and to refinance maturing debt. We must comply with customary covenants contained in our financing agreements that limit our ratio of debt to total assets or market value, as defined in such agreements. For example, WPG L.P.'s current line of credit and term loans contain covenants that restrict the total amount of debt of WPG L.P. to 60% of total assets, as defined under the related agreements, and secured debt to 40% of total assets, with slight easing of restrictions during the four trailing quarters following a portfolio acquisition. In addition, these agreements contain other covenants requiring compliance with financial ratios. Furthermore, the amount of debt that we may incur is limited as a practical matter by our desire to maintain acceptable ratings for our equity securities and debt securities of WPG L.P. If WPG Inc.'s Board of Directors determines to seek additional capital, we may raise such capital by offering equity or debt securities, creating joint ventures with existing ownership interests in properties, entering into joint venture arrangements for new development projects, or a combination of these methods. If the Board of Directors determines to raise equity capital, it may, without shareholder approval, issue additional shares of common stock or other capital stock. The Board of Directors may issue a number of shares up to the amount of our authorized capital in any manner and on such terms and for such consideration as it deems appropriate. Such securities may be senior to the outstanding classes of common stock. Such securities also may include additional classes of preferred stock, which may be convertible into common stock. Existing shareholders have no preemptive right to purchase shares in any subsequent offering of WPG Inc.'s securities. Any such offering could dilute a shareholder's investment in WPG Inc. We expect most future borrowings would be made through WPG L.P. or its subsidiaries. Borrowings may be in the form of bank borrowings, publicly and privately placed debt instruments, or purchase money obligations to the sellers of properties. Any such indebtedness may be secured or unsecured. Any such indebtedness may also have full or limited recourse to the borrower or be cross-collateralized with other debt, or may be fully or partially guaranteed by WPG L.P. Although we may borrow to fund the payment of dividends, we currently have no expectation that we will regularly do so. See "Financing and Debt" within Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Form 10-K for a discussion of our debt arrangements as of December 31, 2019. We could potentially issue additional debt securities through WPG L.P., and we may issue such debt securities which may be convertible into capital stock or be accompanied by warrants to purchase capital stock. We also may sell or securitize our lease receivables. We may also finance acquisitions through the issuance of common shares or preferred shares, the issuance of additional units of partnership interest in WPG L.P., the issuance of preferred units of WPG L.P., the issuance of other securities including unsecured notes and mortgage debt, draws on our credit facilities or sale or exchange of ownership interests in properties, including through the formation of joint venture agreements or other arrangements. WPG L.P. may also issue units to transferors of properties or other partnership interests which may permit the transferor to defer gain recognition for tax purposes. We do not have a policy limiting the number or amount of mortgages that may be placed on any particular property. Mortgage financing instruments, however, usually limit additional indebtedness on such properties. Additionally, unsecured credit facilities, unsecured note indentures and other contracts may limit our ability to borrow and contain limits on the amount of secured indebtedness we may incur. Typically, we will invest in or form special purpose entities to assist us in obtaining secured permanent financing at attractive terms. Permanent financing may be structured as a mortgage loan on a single property, or on a group of properties, and will generally require us to provide a mortgage lien on the property or properties in favor of an institutional third party, as a joint venture with a third party, or as a securitized financing. For securitized financings, we may create special purpose entities to own the properties. These special purpose entities, which are common in the real estate industry, are structured with the intention of not being consolidated in a bankruptcy proceeding involving a parent company. We will decide upon the structure of the financing based upon the best terms then available to us and whether the proposed financing is consistent with our other business objectives. For accounting purposes, we will include the outstanding securitized debt of special purpose entities owning consolidated properties as part of our consolidated indebtedness. 6 Conflicts of Interest Policies We maintain policies and have entered into agreements designed to reduce or eliminate potential conflicts of interest. We have adopted governance principles governing our affairs and those of the Board of Directors. Under WPG Inc.’s Governance Principles, directors must disclose to the rest of the Board of Directors any potential conflict of interest they may have with respect to any matter under discussion and, if appropriate, recuse themselves from Board of Director discussions of, and/or refrain from voting on, such matter. Directors shall not have a duty to communicate or present any corporate opportunity to WPG Inc. and WPG Inc. renounces any interest or expectancy in such opportunity and waives any claim against a director arising from the fact that he or she does not present the opportunity to WPG Inc. or pursues or facilitates the pursuit of the opportunity by others; provided, however, that the foregoing shall not apply in a case in which a director is presented with a corporate opportunity in writing expressly in his or her capacity as a director of WPG Inc. The same requirement applies to officers of WPG Inc. In addition, we have a Code of Business Conduct and Ethics, which applies to all of our officers, directors, and employees. At least a majority of the members of WPG Inc.'s Board of Directors, Governance and Nominating Committee, Audit Committee and Compensation Committee must qualify as independent under the listing standards for New York Stock Exchange listed companies. Any transaction between us and any officer, WPG Inc. director or any family member of any of the foregoing persons, or 5% shareholder of WPG Inc. must be approved pursuant to our related party transaction policy. Policies With Respect To Certain Other Activities We intend to make investments which are consistent with WPG Inc.'s qualification as a REIT, unless the Board of Directors determines that it is no longer in WPG Inc.'s best interests to so qualify as a REIT. The Board of Directors may make such a determination because of changing circumstances or changes in the REIT requirements. We have authority to offer shares of our capital stock or other securities in exchange for property. We also have authority to repurchase or otherwise reacquire our shares or any other securities. We may issue shares of our common stock, or cash at our option, to holders of units in future periods upon exercise of such holders' rights under the Operating Partnership agreement. Our policy prohibits us from making any loans to our directors or executive officers for any purpose. We may make loans to the joint ventures in which we participate. Additionally, we may make or buy interests in loans for real estate properties owned by others. Competition Our direct competitors include other publicly-traded retail development and operating companies, retail real estate companies, commercial property developers and other owners of retail real estate that engage in similar businesses. Within our property portfolio, we compete for retail tenants and the nature and extent of the competition we face varies from property to property. With respect to specific alternative retail property types, we have faced increased competition over the last several years from both lifestyle centers and power centers, in addition to other open air properties and enclosed retail properties. We believe the principal factors that retailers consider in making their leasing decisions include, but are not limited to, the following: • Consumer demographics; • Quality, design and location of properties; • Total number and geographic distribution of properties; • Diversity of retailers and anchor tenants; • Management and operational expertise; and • Rental rates. In addition, because our revenue potential is linked to the success of our retailers, we indirectly share exposure to the same competitive factors and market forces that our retail tenants experience in their respective markets when trying to attract individual shoppers. These dynamics include general competition from other retail properties, including outlet properties and other discount shopping properties, as well as competition with discount shopping clubs, catalog companies, direct mail, home shopping networks, and telemarketing. The changes in consumer shopping behavior to increase purchases on-line from their computers and mobile devices provide retailers with distribution options other than brick and mortar retail stores and has resulted in competitive alternatives that could have a material adverse effect on our ability to lease, develop and redevelop traditional commercial retail space and on the level of rents we can obtain. 7 Seasonality The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during our fiscal fourth quarter due to the holiday season, which generally results in higher percentage rent income in the fourth quarter. Additionally, enclosed retail properties achieve a substantial portion of their specialty (temporary retailer) rents during the holiday season. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of our fiscal year. Environmental Matters See Item 1A. "Risk Factors" for information concerning the potential effects of environmental regulations on our operations. Intellectual Property WPG L.P., by and through its affiliates, holds service marks registered with the United States ("U.S.") Patent and Trademark Office, including the terms Washington Prime Group® (expiration date January 2028), The Outlet Collection®(expiration date October 2023), Shelby’s Sugar Shop® (expiration date September 2028), and TANGIBLE®(expiration date September 2028) as well as the names of certain of our properties such as Scottsdale Quarter® (expiration date November 2029), Town Center at Aurora® (expiration date October 2026), and Polaris Fashion Place® (expiration date July 2022), and other marketing terms, phrases, and materials it uses to promote its business, services, and properties. Additionally, WPG L.P. holds U.S. Patent No. 10,540,702 issued on January 21, 2020 and expiring September 19, 2037, which is used as part of the TANGIBLE technology. Sustainability ESG (Environmental, Social and Governance) We know that ESG issues, otherwise known as corporate sustainability, are important to our stakeholders, and they are important to the Company. We believe in a strong commitment to the community and embrace opportunities to improve the lives of our guests, employees and the environment. The Board of Directors’ Sustainability Committee, as well as our internal, interdisciplinary ESG Steering Committee, work together with senior leadership to further establish sustainability as a key business driver as it relates to how we redevelop and operate our retail properties, conduct business with our guests, engage with our communities and create a productive and positive work environment for our employees. The Company will continue to work diligently to find ways to manage our properties' carbon footprint and identify environmentally-friendly alternatives that reduce waste, maximize energy efficiency and improve recycling efforts. Some examples of the Company’s focus on environmental sustainability investments in its properties include energy efficient Light Emitting Diode ("LED") lighting projects, which has led to reductions in the Company's annual electric consumption, charging stations for electric cars, solar energy panels, and many more innovations. As it relates to new projects, we are focused on the area of energy reduction and leveraging sustainability to achieve cost efficiencies in our operations. We are working with local and state municipalities to expand the Property Assessed Clean Energy (PACE) model promulgated by the U.S. Department of Energy to help finance energy efficiency projects at its retail properties. In addition, the Company is working with a third party to implement operational and technology improvements at the property level. This initiative includes technical communications, WiFi design and implementation, as well as analytics and reporting in order to make informed future energy management decisions. We continue to explore ways to innovate even more so in the future. We believe a commitment to incorporating sustainable practices into many of the areas of our business will add long term value to our portfolio of retail town centers. Employees At December 31, 2019, we had 851 employees, of which 97 were part-time. Headquarters Our corporate headquarters are located at 180 East Broad Street, Columbus, Ohio 43215, and our telephone number is (614) 621-9000. We have an additional corporate office located at 111 Monument Circle, Indianapolis, Indiana 46204. 8 Available Information WPG Inc. and WPG L.P. file this Annual Report on Form 10-K and other periodic reports and statements electronically with the Securities Exchange Commission ("SEC"). The SEC maintains an Internet site that contains reports, statements and proxy and information statements, and other information provided by issuers at www.sec.gov. WPG Inc.'s and WPG L.P.'s reports and statements, including amendments, are also available free of charge on its website, www.washingtonprime.com, as soon as reasonably practicable after such documents are filed with the SEC. The information contained on our website is not incorporated by reference into this report and such information should not be considered a part of this report. 9  Item 1A. Risk Factors The following risk factors, among others, could materially affect our business, financial condition, operating results, cash flows, fiscal outlook and business reputation. These risk factors may describe situations beyond our control and you should carefully consider them. Additional risks and uncertainties not presently known to us or that are currently not believed to be material could also affect our actual results. We may update these risk factors in our future periodic reports, other filings, and public announcements. Risks Related to Our Business and Operations We might not be able to renew leases or relet space at existing properties, or lease newly developed properties. When leases for our existing properties expire, the premises might not be relet or the terms of reletting, including the cost of tenant allowances and concessions and the size of the space, might be less favorable than the current lease terms, due to strong competition or otherwise. Also, we might not be able to lease new properties to an appropriate mix of tenants or for rents that are consistent with our projections. To the extent that our leasing plans are not achieved, our business, results of operations and financial condition could be materially adversely affected and our operational and strategic objectives may not be achieved readily or at all. Our lease agreements with our tenants typically provide a fixed rate for certain cost reimbursement charges; if our operating expenses increase or we are otherwise unable to collect sufficient cost reimbursement payments from our tenants, our business, results of operations and financial condition might be materially adversely affected. Energy costs, repairs, maintenance and capital improvements to common areas of our properties, janitorial services, administrative, property and liability insurance costs and security costs are typically allocable to our properties' tenants. Our lease agreements typically provide that the tenant is liable for a portion of such common area maintenance charges (which we refer to as "CAM") and other operating expenses. The majority of our current leases require the tenant to pay a fixed periodic amount to reimburse a portion of our CAM and other operating expenses. In these cases, a tenant will pay either (a) a specified rent amount that includes the fixed CAM and operating expense reimbursement amount, or (b) a fixed expense reimbursement amount separate from the rent payment. Generally, both types of CAM and operating expense reimbursement payments are subject to annual increases regardless of the actual amount of CAM and other operating expenses. As a result, any adjustments in tenant payments do not depend on whether operating expenses increase or decrease, causing us to be responsible for any excess amounts. In the event that our operating expenses increase, CAM and tenant reimbursements that we receive might not allow us to recover a substantial portion of these operating costs. Additionally, the computation of cost reimbursements from tenants for CAM, insurance and real estate taxes is complex and involves numerous judgments, including interpretation of lease terms and other tenant lease provisions, including those in leases that we assume in connection with property acquisitions. Unforeseen or underestimated expenses might cause us to collect less than our actual expenses. The amounts we calculate and bill could also be disputed by tenants or become the subject of a tenant audit or even litigation. There can be no assurance that we will collect all or substantially all of this amount. Some of our properties depend on anchor stores or major tenants to attract shoppers and could be materially adversely affected by the loss of, or a store closure by, one or more of these anchor stores or major tenants. Our open air and enclosed retail properties are typically anchored by department stores and other large nationally or regionally recognized tenants. The value of some of our properties could be adversely affected materially, if these department stores or major tenants fail to comply with their contractual obligations, seek concessions in order to continue operations, or cease their operations. For example, among department stores and other large stores, corporate merger or consolidation activity typically results in the closure of duplicate or geographically overlapping store locations. Adverse economic and fiscal pressure on the businesses of our department stores and major tenants could have an adverse impact upon our own results. Certain department stores, including The Bon-Ton Stores, Inc. which liquidated in 2018, Sears Holdings Corporation, and other national retailers have experienced, and might continue to experience, depending on consumer confidence levels or overall economic conditions, considerable decreases in customer traffic in their retail stores, increased competition from alternative retail options, such as those accessible via the Internet and other mediums, and other forms of pressure on their business models. Pressure on these department stores and national retailers could impact their ability to maintain their stores, meet their obligations both to us and to their external lenders and suppliers, withstand takeover attempts by investors or rivals or avoid bankruptcy and/or liquidation, all of which could result in impairment or closures of their stores. Other of our tenants might be entitled to modify the economic or other terms of their existing leases in the event of such closures (through co-tenancy clauses), which could decrease rents and/or operating expense reimbursements or entitle such retailers to close their stores. The leases of some anchors might permit the anchor to transfer its lease, including any attendant approval rights, to another retailer. 10 The transfer to a new anchor could cause customer traffic in the property to decrease or to be composed of different types of customers, which could reduce the income generated by that property and adversely impact development or re-development prospects for such property. A transfer of a lease to a new anchor also could allow other tenants to make reduced rental payments or to terminate their leases at the property, which could adversely affect our results of operations. Additionally, department store or major tenant closures might result in decreased customer traffic, which could lead to decreased sales at our properties and adversely impact our ability to successfully execute our leasing strategy and objectives. If the sales of stores operating in our properties decline significantly due to the closing of anchor stores or other national retailers, adverse economic conditions, or other reasons, tenants might be unable to pay their minimum rents or pay landlord recovery charges, which would likely negatively impact our financial results. In the event of any default by a tenant, whether a department store, national or regional retailer or otherwise, we might not be able to fully recover and/or experience delays and costs in enforcing our rights as landlord to recover amounts due to us under the terms of our agreements with such parties. We face risks associated with the acquisition, development, re-development and expansion of properties, including risks of higher than projected costs, inability to obtain financing, inability to obtain required consents or approvals and inability to attract tenants at anticipated rates. In the event we seek to acquire and develop new properties and expand and redevelop existing properties, we might not be successful in identifying or pursuing acquisition, development or re-development/expansion opportunities. Additionally, newly acquired properties, developed, re-developed or expanded properties might not perform as well as expected. Other related risks we face include, without limitation, the following: • Construction and other development costs of a project could be higher than projected, potentially making the project unfeasible or unprofitable; • We might not be able to obtain financing or to refinance loans on favorable terms, if at all; • We might be unable to obtain zoning, occupancy or other governmental approvals, or the approvals obtained may not be adequate; • Occupancy rates and rents might not meet our projections and as a result the project could be unprofitable; and • In some cases, we might need the consent of third parties, such as anchor tenants, mortgage lenders and joint venture partners to conduct acquisition, development, re-development or expansion activities, and those consents may be withheld, take an unexpected amount of time to be obtained, or be subject to the satisfaction of certain conditions. If a project is unsuccessful, either because it is not meeting our expectations when operational or was not completed according to the project planning, we could lose our investment in the project or have to incur an impairment charge relating to the asset or development which could then adversely impact our financial results. Furthermore, if we guarantee the property's financing, our loss could exceed our investment in the project. Our assets may be subject to impairment charges that may materially affect our financial results. We evaluate our real estate assets and other assets for impairment indicators whenever events or changes in circumstances indicate that recoverability of our investment in the asset is not reasonably assured. Furthermore, this evaluation is conducted no less frequently than quarterly, irrespective of changes in circumstances. Our determination of whether a particular held-for-use asset is impaired is based upon the undiscounted projected cash flows used for the impairment analysis and our determination of the asset's estimated fair value, that in turn are based upon our plans for the respective asset and our views of market and economic conditions. With respect to assets held-for-sale, our determination of whether such an asset is impaired is based upon market and economic conditions. If we determine that an impairment has occurred, then we would be required under Generally Accepted Accounting Principles in the United States ("GAAP") to make an adjustment to the net carrying value of the asset, which could have a material adverse effect on our results of operations in the accounting period in which the adjustment is made. Furthermore, changes in estimated future cash flows due to a change in our plans, policies, or views of market and economic conditions could result in the recognition of additional impairment losses for already impaired assets, which, under the applicable accounting guidance, could be substantial. See the "Impairment" section within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of recent impairments. Our ability to change the composition of our real estate portfolio is limited because real estate investments are relatively illiquid. Our properties represent a substantial portion of our total consolidated assets, and these investments are relatively illiquid. As a result, our ability to sell one or more of our properties or investments in real estate in response to any changes in economic or other conditions is limited. If we want to sell a property, we cannot be certain that we will be able to dispose of it in the desired time period or that the sale price of a property will exceed the cost of our investment in that property, which may then have an adverse impact on our financial results. 11 Clauses in leases with certain tenants of our development or redevelopment properties may include inducements, such as reduced rent and tenant allowance payments, which can reduce our rents and Funds From Operations ("FFO"). As a result, these development or redevelopment properties are more likely to achieve lower returns during their stabilization periods than our previous development or redevelopment properties. The leases for a number of the tenants that have opened stores at properties we have developed or redeveloped have reduced rent from co-tenancy clauses that allow those tenants to pay reduced rent until occupancy at the respective property reaches certain thresholds and/or certain named co-tenants open stores at the respective property. Additionally, some tenants may have rent abatement clauses that delay rent commencement for a prolonged period of time after initial occupancy. The effect of these clauses reduces our rents and FFO while they are applicable. We expect to continue to offer co-tenancy and rent abatement clauses in the future to attract tenants to our development and redevelopment properties. As a result, our current and future development and redevelopment properties are more likely to achieve lower returns during their stabilization periods than other projects of this nature historically have, which may adversely impact our investment in such developments, as well as our financial condition and results of operations. Additionally, the prevalence and volume of such properties is likely to increase in our development and redevelopment pipeline at an unpredictable rate in light of the recent proliferation of bankruptcy filings and closures by retailers occupying "big box," anchor or other traditionally large spaces which can have an adverse impact on our financial condition and results of operations. We face a wide range of competition that could affect our ability to operate profitably. Our properties compete with other retail properties and other forms of retail, such as catalogs and e-commerce websites. Competition could also come from other open air properties, outlet centers, lifestyle centers, and enclosed retail properties, and both existing and future development projects. The presence of competitive alternatives might adversely impact the success of our existing properties, our ability to lease space and the rental rates we can obtain. We also compete with other retail property developers to acquire prime development sites. Additionally, we compete with other retail property companies for tenants and qualified management. If we are unable to successfully compete, our business, results of operations and financial condition could be materially adversely affected. The increase in and prevalence of digital and mobile technology usage has increased the speed of the transition of a percentage of market share from shopping at physical locations to web-based purchases. If we are unsuccessful in adapting our business to changing consumer spending habits and methods by which consumers shop retail, our results of operations and financial condition could be materially adversely affected. Additionally, our investments in ventures aimed at finding innovative and unique uses within shopping centers and retail generally may be unsuccessful and incur expenses, losses, and use resources to a degree that adversely impacts our financial results without a corresponding positive financial return or operational benefit. If we lose our key management personnel, we might not be able to successfully manage our business and achieve our objectives. Our management team has substantial experience in owning, operating, acquiring, and developing enclosed retail properties and other open air properties. A large part of our success depends on the leadership and performance of our executive management team and we cannot guarantee that they will remain with us. If we unexpectedly lose the services of these individuals, we might not be able to successfully manage our business or achieve our business objectives. Additionally, we continue to actively recruit management and other professional talent within the real estate and retail industries necessary to manage our properties to optimal performance. If we are not able to successfully recruit such personnel or cannot do so readily, this may adversely impact our ability to manage our business, achieve our financial goals, or meet our strategic and operational objectives. We have limited control with respect to some properties that are partially owned or managed by third parties, which could adversely affect our ability to sell or refinance or otherwise take actions concerning these properties that would be in the best interests of WPG Inc.'s shareholders. We may continue to co-invest with third parties through partnerships, joint ventures, or other entities, including without limitation by acquiring controlling or non-controlling interests in, or sharing responsibility for, managing the affairs of a property, partnership, joint venture or other entity. At December 31, 2019, we do not have sole decision-making authority regarding 13 unconsolidated properties that we currently hold through joint ventures with third parties. Additionally, we might not be in a position to exercise sole decision-making authority regarding any future properties that we hold in a partnership or joint venture. Investments in partnerships, joint ventures or other entities could, under certain circumstances, involve risks that would not be present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt, suffer a deterioration in their financial condition, or fail to fund their share of required capital contributions. Partners or co-venturers could have economic or other business interests or goals that are inconsistent with our own business interests or goals, and could be in a position to take actions contrary to our policies or objectives. 12 Such investments also have the potential risk of creating impasses on decisions, such as a sale or financing, because neither we nor our partner or co-venturer would have full control over the partnership or joint venture. Disputes between us and partners or co-venturers might result in litigation or arbitration that could increase our expenses and prevent our officers and/or directors from focusing their time and efforts on our business. Consequently, actions by, or disputes with, partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk. Additionally, we risk the possibility of being liable for the actions of our third-party partners or co-venturers. Our revenues are dependent on the level of revenues realized by our tenants, and a decline in their revenues could materially and adversely affect our business, results of operations and financial condition. We are subject to various risks that affect the retail environment generally, including levels of consumer spending, seasonality, changes in economic conditions, unemployment rates, an increase in the use of the Internet by retailers and consumers, and natural disasters. Additionally, levels of consumer spending could be adversely affected by, for example, increases in consumer savings rates, increases in tax rates, reduced levels of income growth, interest rate increases, and other declines in consumer net worth and a strengthening of the U.S. dollar as compared to non-U.S. currencies. As a result of these and other economic and market-based factors, our tenants might be unable to pay their existing minimum rents or pay landlord recovery charges due. Because substantially all of our income is derived from rentals of commercial real property, our income and cash flow would be adversely affected if a significant number of tenants are unable to meet their obligations or their revenues decline, especially if they were tenants with a significant number of locations within our portfolio. Additionally, a decrease in retail demand could make it difficult for us to renew or re-lease our properties at lease rates equal to or above historical rates. Store closures and/or bankruptcy filings by tenants could occur during the course of our operations. We continually seek to re-lease vacant spaces resulting from tenant terminations. Large scale store closings or the bankruptcy of a tenant, particularly an anchor tenant, might make it more difficult to lease the remainder of a particular property or properties. Furthermore, certain of our tenants, including anchor tenants, hold the right under their lease(s) to terminate their lease(s) or reduce their rental rate if certain occupancy conditions are not met, if certain anchor tenants close, if certain sales levels (sales kick-out provisions) or profit margins are not achieved, or if an exclusive use provision is violated, which all could be triggered in the event of one or more tenant bankruptcies. Future tenant bankruptcies, especially by anchor tenants, could adversely affect our properties or impact our ability to successfully execute our re-leasing strategy as well as adversely impact our ability to achieve our operational and strategic objectives. Economic and market conditions could negatively impact our business, results of operations and financial condition. The market in which we operate is affected by a number of factors that are largely beyond our control but could nevertheless have a significant negative impact on us. These factors include, but are not limited to: • Fluctuations or frequent variances in interest rates and credit spreads; • The availability of credit, including the price, terms and conditions under which it can be obtained; • A decrease in consumer spending or sentiment, including as a result of increases in savings rates and tax increases, and any effect that this might have on retail activity; • The actual and perceived state of the real estate market, market for dividend-paying stocks and public capital markets in general; and • Unemployment rates, both nationwide and within the primary markets in which we operate. In addition, increased inflation might have a pronounced negative impact on the interest expense we pay in connection with our outstanding indebtedness and our general and administrative expenses, as these costs could increase at a rate higher than our rents. Inflation might adversely affect tenant leases with stated rent increases, which could be lower than the increase in inflation at any given time. Inflation could also have an adverse effect on consumer spending which could impact our tenants' sales and, in turn, our own results of operations. Conversely, deflation might result in a decline in general price levels, often caused by a decrease in the supply of money or credit. The predominant effects of deflation are high unemployment, credit contraction and weakened consumer demand. Restricted lending practices might impact our ability to obtain financing for our properties and might also negatively impact our tenants' ability to obtain credit. Decreases in consumer demand can have a direct impact on our tenants and the rents we receive. A slow-growing economy hinders consumer spending, which could decrease the level of discretionary income available for shopping at our properties. Weak income growth could weigh down consumer spending, which could be further affected if the overall economy suffers a setback. 13 An increase in market interest rates could increase our interest costs on existing and future debt and could adversely affect WPG Inc.'s common share price. An environment of rising interest rates could lead holders of our common shares to seek higher yields through other investments, which could adversely affect the market price of our common shares. One of the factors that may influence the price of our common shares in public markets is the annual distribution rate we pay as compared with the yields on alternative investments. Additionally, increases in market interest rates could result in increased borrowing costs for us, which may adversely affect our cash flow and the amounts available for distributions to our shareholders. We have significant indebtedness, which could adversely affect our business, including decreasing our business flexibility and increasing our interest expense. The consolidated indebtedness of our business as of December 31, 2019 was approximately $3.1 billion. We have and will continue to incur various costs and expenses associated with our transactions and executing our operational and fiscal strategy. Any future increased levels of indebtedness could also reduce access to capital and increase borrowing costs generally, thereby reducing funds available for working capital, capital expenditures, tenant improvements, acquisitions and other general corporate purposes and may create competitive disadvantages for us relative to other companies with lower debt levels. If we do not achieve our operational and growth goals or if the financial performance of the Company does not meet current expectations, then our ability to service our indebtedness may be adversely impacted. Lastly, if interest rates increase, the cost of capital and expenses of debt service requirements relating to our variable rate debt, which constitutes 11.9% of our consolidated indebtedness as of December 31, 2019, would increase which could adversely affect our cash flows. We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined. As of December 31, 2019, we had approximately $372.0 million (excluding debt issuance costs of $6.2 million) of our aggregate consolidated indebtedness that was indexed to the London Interbank Offered Rate (“LIBOR”). In addition, as of December 31, 2019, we had approximately $641.3 million of consolidated indebtedness swapped to LIBOR plus a fixed spread. 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. We may not be able to generate sufficient cash to service and repay all of our debt and may be forced to take other actions to satisfy our obligations under our debt, which may not be successful. Our ability to make scheduled payments on, or to refinance, our debt will depend on our financial condition, liquidity and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us both to fund our business purposes and to pay the principal of, or premium, if any, and interest on our debt. If our cash flows and capital resources are insufficient to service and repay our debt and fund other cash requirements, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to sell assets or operations, seek additional capital or restructure or refinance our debt. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet all of our debt obligations. Our unsecured revolving credit facility (the "Revolver") and senior unsecured term loan (the "Term Loan" and collectively with the Revolver, the "Facility") restrict (i) our ability to dispose of assets and (ii) our ability to incur debt. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt obligations then due. In addition, we conduct our operations through our subsidiaries. Our subsidiaries may not be able to, or may not be permitted to, make cash available to us to enable us to make payments in respect of our debt. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual prohibitions or other restrictions may limit our ability to obtain cash from our subsidiaries. In the event that our subsidiaries do not make sufficient cash available to us, we may be unable to make required principal, premium, if any, and interest payments on our debt. 14 Our inability to obtain sufficient cash flows from our subsidiaries, whether as a result of their performance or otherwise, to satisfy our debt, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position, condition, liquidity and results of operations. If we fail to make required payments in respect of our debt, (i) we will be in default thereunder and, as a result, the related debt holders and lenders, and potentially other debt holders and lenders, could declare all outstanding principal and interest to be due and payable, (ii) the lenders under the Revolver could terminate their commitments to loan money to us, (iii) our secured lenders could foreclose against the assets securing the related debt, (iv) could result in cross defaults on other financing obligations or defaults in other transactional arrangements we have; and (v) we could be forced into bankruptcy or liquidation. Despite current and anticipated debt levels, we may still be able to incur substantially more debt. We may be able to incur substantial additional debt in the future. Although the Facility and the WPG L.P. notes restrict the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions and the additional debt incurred in compliance with these restrictions could be substantial. If new debt is added to our current debt levels, the related risks that we now face would increase. We depend on external financings for our growth and ongoing debt service requirements. We depend on external financings, principally debt financings, to fund our acquisitions, development and other capital expenditures and to ensure that we can meet our debt service requirements. Our long-term ability to grow through acquisitions or development, which is an important component of our strategy, will be limited if we cannot obtain additional debt financing. Our access to financings depends on our credit ratings, the willingness of banks to lend to us and conditions in the capital markets. Market conditions might make it difficult to obtain debt financing, and we cannot be certain that we will be able to obtain additional debt financing or that we will be able to obtain such financing on acceptable terms. The agreements that govern our indebtedness contain various covenants that impose restrictions on us and certain of our subsidiaries that might affect our or their ability to operate. We have a variety of debt, including the unsecured Facility, the unsecured WPG L.P. notes, and secured property-level debt. The agreements that govern such indebtedness contain various affirmative and negative covenants that could, subject to certain significant exceptions, restrict our ability and certain of our subsidiaries to, among other things, have liens on property, incur additional indebtedness, make loans, advances or other investments, make non-ordinary course asset sales, and/or merge or consolidate with any other entity or sell or convey certain assets to any one person or entity. Additionally, some of the agreements that govern the debt financing contain financial covenants that require us to maintain certain financial ratios. Our ability and the ability of our subsidiaries to comply with these provisions might be affected by events beyond our control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations. If we cannot obtain additional capital, our growth might be limited. In order to qualify and maintain our qualification as a REIT each year, we are required to distribute at least 90% of our REIT taxable income, excluding net capital gains, to our shareholders. As a result, our retained earnings available to fund acquisitions, development, innovation or other capital expenditures are nominal, and we rely upon the availability of additional debt or equity capital to fund these activities. Our long-term ability to grow through acquisitions, development, innovation or strategic partnerships which is an important component of our strategy, will be limited if we cannot obtain additional debt financing or equity capital. Market conditions might make it difficult to obtain debt financing or raise equity capital, and we cannot be certain that we will be able to obtain additional debt or equity financing or that we will be able to obtain such capital on favorable terms. We may enter into hedging interest rate protection arrangements that might not effectively limit our interest rate risk. We may seek to selectively manage any exposure that we might have to interest rate risk through interest rate protection agreements geared toward effectively fixing or capping a portion of our variable-rate debt. Additionally, we may refinance fixed- rate debt at times when we believe rates and terms are appropriate. Any such efforts to manage these exposures might not be successful. Our potential use of interest rate hedging arrangements to manage risk associated with interest rate volatility might expose us to additional risks, including the risk that a counterparty to a hedging arrangement fails to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that hedging activities will have the desired beneficial impact on our results of operations or financial condition. Termination of these hedging agreements typically involves costs, such as transaction fees or breakage costs. 15 As owners of real estate, we might face liabilities or other significant costs related to environmental issues. Federal, state and local laws and regulations relating to the protection of the environment might require us, as a current or previous owner or operator of real property, to investigate and clean up hazardous or toxic substances or petroleum product releases at a property or at impacted neighboring properties. These laws and regulations might require us to abate or remove asbestos containing materials in the event of damage, demolition or renovation, reconstruction or expansion of a property and also govern emissions of and exposure to asbestos fibers in the air. These laws and regulations also govern the installation, maintenance and removal of underground storage tanks used to store waste oils or other petroleum products. Many of our properties contain, or at one time contained, asbestos containing materials or underground storage tanks (primarily related to auto service center establishments or emergency electrical generation equipment). The costs of investigation, removal or remediation of hazardous or toxic substances could be substantial and could adversely affect our results of operations or financial condition. The presence of contamination, or the failure to remediate contamination, might also adversely affect our ability to sell, lease or redevelop a property or to borrow using a property as collateral. In addition, under various federal, state or local laws, ordinances and regulations, a current or previous owner or operator of real estate might be held liable to third parties for bodily injury or property damage incurred by the parties in connection with the contamination. These laws often impose liability without regard to whether the owner or operator knew of, or otherwise caused, the release of the hazardous or toxic substances. The presence of contamination at any of our properties, or the failure to remediate contamination discovered at such properties, could result in significant costs to us and/or materially adversely affect our ability to sell or lease such properties or to borrow using such properties as collateral. For example, federal, state and local laws require abatement or removal of asbestos-containing materials in the event of demolition or certain renovations or remodeling, the cost of which might be substantial for certain re-developments. These regulations also govern emissions of, and exposure to, asbestos fibers in the air, which might necessitate implementation of site- specific maintenance practices. Certain laws also impose liability for the release of asbestos-containing materials into the air, and third parties might seek recovery from owners or operators of real property for personal injury or property damage associated with asbestos-containing materials. Asbestos-containing building materials are present at some of our properties and might be present at others. To minimize the risk of on-site asbestos being improperly disturbed, we have developed and implemented asbestos operations and maintenance programs to manage asbestos-containing materials and suspected asbestos-containing materials in accordance with applicable legal requirements, however we cannot be certain that our programs eliminate all risk of asbestos being improperly disturbed. Any liability, and the associated costs thereof, we might face for environmental matters could adversely impact our ability to operate our business and our financial condition. Lastly, in connection with certain mortgages on our properties, our affiliate, Washington Prime Property, L.P., singly, or together with WPG L.P. and certain other affiliates, have executed environmental indemnification agreements to indemnify the respective lenders for those loans against losses or costs to remediate damage to the mortgaged property caused by the presence or release of hazardous materials. We are subject to various regulatory requirements, and any changes in such requirements could have a material adverse effect on our business, results of operations and financial condition. The laws, regulations and policies governing our business, or the regulatory or enforcement environment at the national level or in any of the states in which we operate, might change at any time and could have a material adverse effect on our business. We are unable to predict how any future legislative or regulatory proposals or programs will be administered or implemented, or whether any additional or similar changes to statutes or regulations, including the interpretation or implementation thereof, will occur in the future. Additionally, changes in tax laws might have a significant impact on our operating results. For more information regarding the impact of changing tax laws on our operating results, please refer to the risk factors section titled "Risks Related to WPG Inc.'s Status as a REIT." Also, we may be required to expend significant sums of money to comply with the Americans with Disabilities Act of 1990, as amended (“ADA”), and other federal, state, and local laws in order for our properties and facilities (including those in and a part of cyberspace) to meet requirements related to access and use by physically challenged persons. Additionally, unanticipated costs and expenses may be incurred in connection with defending lawsuits relating to ADA compliance not covered by our liability insurance. Our inability to remain in compliance with regulatory requirements could have a material adverse effect on our operations and on our reputation generally. We are unable to give any assurances that applicable laws or regulations will not be amended or construed differently, or that new laws and regulations will not be adopted, either of which could have a material adverse effect on our business, financial condition or results of operations. 16 Some of our potential losses might not be covered by insurance. We maintain insurance coverage with financially-sound insurers for property, third-party liability, terrorism, workers compensation, and rental loss insurance on all of our properties. However, certain catastrophic perils are subject to large deductibles that may cause an adverse impact on our operating results. Additionally, there are some types of losses, including lease and other contract claims, that are not insured. If an uninsured loss or a loss in excess of insured limits occurs, or a loss for which there is a large deductible occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue it could generate. We currently maintain insurance coverage for acts of terrorism by foreign or domestic agents. The U.S. government provides reinsurance coverage to insurance companies following a declared terrorism event under the Terrorism Risk Insurance Program Reauthorization Act of 2019, which is a modified extension of the original Terrorism Risk Insurance Extension Act ("TRIA") of 2002. TRIA was designed to force insurance carriers to provide optional terrorism coverage solutions to all insureds that receive an issued insurance policy in the U.S., in which the insurance carriers would be supplied reinsurance support from the U.S. government under the act of declared terrorism events that cause or create in excess of $100 million in damages or losses. The U.S. government could terminate its reinsurance of terrorism, thus increasing the risk of uninsured losses for such acts. Our tenants, vendors and joint venture partners in retail and otherwise are subject to similar risks. We face possible risks associated with climate change. We understand that climate change presents serious challenges at local, regional and global levels. Significant risks arise from both physical impacts and the transition to a low carbon future. Over time, physical impacts, including adverse weather events and rising sea levels, could result in volatile or decreased demand for retail space at certain properties or, in extreme cases, our inability to operate the properties at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) insurance on favorable terms and increasing the cost of energy at our properties. Moreover, compliance with new laws or regulations related to climate change may require us to make improvements to our existing properties or increase taxes and fees assessed on us or our properties. At the same time there are potential business opportunities from the transition to a low carbon economy and we are currently undertaking a robust climate change risk assessment process, based on the recommendations of the 2017 Task Force on Climate-related Financial Disclosures (TCFD) Report, to ensure we are mitigating the threats and capitalizing on the opportunities. At this time, there can be no assurance that climate change will not have a material adverse effect on us. Some of our properties are subject to potential natural or other disasters. A number of our properties are located in Florida, California, Texas, and Hawaii or in other areas with a higher risk of natural disasters such as earthquakes, fires, floods, tornadoes, hurricanes, or tsunamis. The occurrence of natural disasters can adversely impact operations, redevelopment, or development at our centers and projects, increase investment costs to repair or replace damaged properties, increase future property insurance costs, and negatively impact the tenant demand for lease space. Additionally, some of our properties are located in coastal regions, and would therefore be affected by any future increases in sea levels. If insurance is unavailable to us or is unavailable on acceptable terms, or our insurance is not adequate to cover losses from these events, our financial condition and results of operations could be adversely affected. Our due diligence review of acquisition opportunities or other transactions might not identify all pertinent risks, which could materially affect our business, financial condition, liquidity and results of operations. Although we intend to conduct due diligence with respect to each acquisition opportunity or other transaction that we pursue, it is possible that our due diligence processes will not or did not uncover all relevant facts, particularly with respect to any assets we acquire from unaffiliated third parties. In some cases, we might be given limited access to information about the investment and will rely on information provided by the target of the investment. Additionally, if opportunities are scarce, the process for selecting bidders is competitive, or the time frame in which we are required to complete diligence is short, our ability to conduct a due diligence investigation might be limited, and we would be required to make investment decisions based upon a less thorough diligence process than would otherwise be the case. Accordingly, investments and other transactions that initially appear to be viable may prove to not be so over time, due to the limitations of the due diligence process or other factors. 17 We cannot assure you that we will be able to continue paying distributions at the current rate. We had a policy to pay a quarterly cash distribution at an annualized rate of $1.00 per common share/unit through 2019 and have announced our updated policy to pay at an annualized rate of $0.50 per common share/unit for 2020. However, going forward holders of our common shares/units may not receive the same quarterly distributions for various reasons, including the following: • We may not have enough cash to pay such distributions due to changes in our cash requirements, indebtedness, capital spending plans, cash flows or financial position; • Decisions on whether, when and in what amounts to make any future distributions will remain at all times entirely at the discretion of WPG Inc.'s Board of Directors, which reserves the right to change dividend practices at any time and for any reason; • We may desire to retain cash to maintain or improve our credit ratings or to address costs related to implementing our growth strategy or executing on our operational strategy; and • The ability of our subsidiaries to make distributions to us may be subject to restrictions imposed by law, regulation or the terms of any current or future indebtedness that these subsidiaries may incur. Our shareholders/unitholders have no contractual or other legal right to distributions that have not been declared. Refer to discussion in Part II, Item 5 "Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities - Distribution Information" for further information on our distribution policy. Risks associated with the implementation of new information systems or upgrades to existing systems may interfere with our operations or ability to maintain adequate records. We are continuing to implement new information systems and upgrades to existing systems as part of our growing business and problems with the design as well as the security or implementation of these new or upgraded systems could interfere with our operations or ability to maintain adequate and secure records. The occurrence of cyber incidents, a deficiency in our cyber security, or a data breach could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources. More specifically, a cyber-incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupting data, or stealing confidential information. We rely upon information technology networks and systems, some of which are managed by third-parties, to process, transmit, and store electronic information, some of which may be confidential and/or proprietary, and to manage or support a variety of business processes and activities. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. Primary risks that could directly result from the occurrence of a cyber-incident include, but are not limited to, operational interruption, damage to our relationship with our tenants and other business partners, and private data exposure (including personally identifiable information, or proprietary and confidential information, of ours and our employees, as well as third parties). Any such incidents could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, and reduce the benefits of our advanced technologies. We carry cyber liability insurance; however a loss could exceed the limits of the policy. We have implemented processes, procedures and controls to help mitigate these risks, such as providing security awareness training with simulated spam, phishing and social engineering attacks for associates. We perform mock incident and mock disasters to test the adequacy of our internal incident response plan and that our associates are properly prepared. We leverage a third party security firm to perform risk assessments. However, these measures, our increased awareness of a risk of a cyber-incident, and our insurance coverage, do not guarantee that our financial results will not be negatively impacted by such an incident. Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and WPG Inc.'s share price. As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act and the Dodd-Frank Act and are required to prepare our financial statements according to the rules and regulations required by the Securities and Exchange Commission (the "SEC"). Additionally, the Exchange Act requires that we file annual, quarterly and current reports. Our failure to prepare and disclose this information in a timely manner or to otherwise comply with applicable law could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing. 18 In addition, the Sarbanes-Oxley Act requires that we, among other things, establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We cannot assure you that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective. If we are not able to maintain or document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting in future reports, when such certifications will be required. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis, or may cause our company to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in our company and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm report a material weakness in our internal control over financial reporting or if the firm resigns in light of such a weakness. This could materially adversely affect our company by, for example, leading to a decline in WPG Inc.'s share price and impairing our ability to raise additional capital. Risks Related to the Separation from SPG Potential indemnification liabilities to SPG pursuant to certain separation agreements could materially adversely affect our operations. Certain separation agreements with SPG provide for, among other things, the principal corporate transactions required to effect the separation, certain conditions to the separation and distribution and provisions governing our relationship with SPG with respect to and following the separation and distribution. Among other things, the separation agreements provide for indemnification obligations designed to make us financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the separation and distribution, as well as those obligations of SPG that we will assume pursuant to the separation agreements. If we are required to indemnify SPG under the circumstances set forth in these agreements, we may be subject to substantial liabilities. In connection with our separation from SPG, SPG will indemnify us for certain pre-distribution liabilities and liabilities related to SPG assets. However, there can be no assurance that these indemnities will be sufficient to insure us against the full amount of such liabilities, or that SPG's ability to satisfy its indemnification obligation will not be impaired in the future. Pursuant to certain separation agreements, SPG has agreed to indemnify us for certain liabilities. However, third parties could seek to hold us responsible for any of the liabilities that SPG agrees to retain, and there can be no assurance that SPG will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from SPG any amounts for which we are held liable, such indemnification may be insufficient to fully offset the financial impact of such liabilities and/or we may be temporarily required to bear these losses while seeking recovery from SPG. Risks Related to WPG Inc.'s Status as a REIT If WPG Inc. fails to remain qualified as a REIT, it will be subject to U.S. federal income tax as a regular corporation and could face substantial tax liability, which would substantially reduce funds available for distribution to its shareholders and result in other negative consequences. If WPG Inc. were to fail to qualify as a REIT in any taxable year, it would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on its taxable income at regular corporate rates, and distributions to its shareholders would not be deductible by WPG Inc. in computing its taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to WPG Inc.'s shareholders, which in turn could have an adverse effect on the value of, and trading prices for, WPG Inc.'s common shares. Unless WPG Inc. is deemed to be entitled to relief under certain provisions of the Code, it would also be disqualified from taxation as a REIT for the four taxable years following the year during which it initially ceased to qualify as a REIT. Furthermore, the New York Stock Exchange ("NYSE") requires, as a condition to the listing of WPG Inc.'s common shares, that WPG Inc. maintain its REIT status. Consequently, if WPG Inc. fails to maintain its REIT status, its common shares could promptly be delisted from the NYSE, which would decrease the trading activity of such common shares, making the sale of such common shares difficult. 19 Dividends paid by REITs do not qualify for the reduced tax rates available for some dividends. Dividends paid by certain non-REIT corporations to their shareholders that are individuals, trusts and estates are generally taxed at reduced tax rates. Dividends payable by REITs, however, generally are not eligible for the reduced rates. The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including WPG Inc.'s common shares. Qualifying as a REIT involves highly technical and complex provisions of the Code. Qualifying as a REIT involves the application of highly technical and complex provisions of the Code for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize WPG Inc.'s REIT qualification. WPG Inc.'s qualification as a REIT will depend on WPG Inc.'s satisfaction of certain asset, income, organizational, distribution, shareholder ownership and other requirements on a continuing basis. Compliance with these requirements must be carefully monitored on a continuing basis, and there can be no assurance that WPG Inc.'s personnel responsible for doing so will be able to successfully monitor WPG Inc.'s compliance, despite clauses in the property management agreements requiring such monitoring. Additionally, WPG Inc.'s ability to satisfy the requirements to qualify to be taxed as a REIT might depend, in part, on the actions of third parties over which we have either no control or only limited influence. Monitoring REIT qualification for both WPG Inc. as well as the separate individual REITs within joint venture arrangements adds compliance complexity. REIT compliance is required to be tested for WPG Inc. as well as any subsidiary REIT within our structure. Each REIT’s compliance is tested and determined separately. Therefore the subsidiary REITs have a lower materiality threshold. If one of the subsidiary REITs failed to be REIT compliant it may impact the REIT status of WPG Inc. Legislative, administrative, regulatory or other actions affecting REITs, including positions taken by the IRS, could have a negative effect on WPG Inc. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process, and by the IRS and the U.S. Department of the Treasury (the "Treasury"). Although we are not aware of any provision of the Tax Cuts and Jobs Act, the tax reform legislation enacted in 2017, or any pending or subsequent tax legislation that would adversely affect our ability to operate as a REIT, changes to the tax laws or interpretations thereof by the IRS and the Treasury, with or without retroactive application, could materially and adversely affect WPG Inc.'s investors or WPG Inc. WPG Inc. cannot predict how changes in the tax laws might affect its investors or WPG Inc. New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect WPG Inc.'s ability to qualify to be taxed as a REIT and/ or the U.S. federal income tax consequences to WPG Inc.'s investors and WPG Inc. of such qualification. Legislative or regulatory action could adversely affect stockholders. Future changes to tax laws may adversely affect the taxation of the REIT, its subsidiaries or its stockholders. These changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. These potential changes could generally result in REITs having fewer tax advantages, and may lead REITs to determine that it would be more advantageous to elect to be taxed, for federal income tax purposes, as a corporation. Not all states automatically conform to changes in the Code. Some states use the legislative process to decide whether it is in their best interests to conform or not to various provisions of the Code. This could increase the complexity of our compliance efforts, increase compliance costs, and may subject us to additional taxes and audit risk. WPG Inc.'s REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan. In order for WPG Inc. to qualify to be taxed as a REIT, and assuming that certain other requirements are also satisfied, it generally must distribute at least 90% of its REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, to its shareholders each year, so that U.S. federal corporate income tax does not apply to earnings that it distributes. To the extent that WPG Inc. satisfies this distribution requirement and qualifies for taxation as a REIT, but distributes less than 100% of its REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, it will be subject to U.S. federal corporate income tax on its undistributed net taxable income. Additionally, WPG Inc. will be subject to a 4% nondeductible excise tax if the actual amount that it distributes to its shareholders in a calendar year is less than a minimum amount specified under U.S. federal income tax laws. WPG Inc. intends to make distributions to its shareholders to comply with the REIT requirements of the Code. 20 From time to time, WPG Inc. might generate taxable income greater than its cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves, or required debt or amortization payments. If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, or make taxable distributions of WPG Inc.'s capital stock or debt securities to make distributions sufficient to enable WPG Inc. to pay out enough of its taxable income to satisfy the REIT distribution requirement and avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Further, amounts distributed will not be available to fund the growth of our business. Thus, compliance with WPG Inc.'s REIT requirements may hinder our ability to grow, which could adversely affect our liquidity and our ability to execute our business plan. Even if WPG Inc. remains qualified as a REIT, it could face other tax liabilities that reduce its cash flows. Even if WPG Inc. remains qualified for taxation as a REIT, it could be subject to certain U.S. federal, state and local taxes on its income and assets, including taxes on any undistributed income and state or local income, property and transfer taxes. For example, in order to meet the REIT qualification requirements, WPG Inc. may hold some of its assets or conduct certain of its activities through one or more taxable REIT subsidiaries ("TRSs") or other subsidiary corporations that will be subject to federal, state and local corporate-level income taxes as regular C corporations. Additionally, WPG Inc. might incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm's-length basis. Any of these taxes would decrease cash available for distribution to WPG Inc.'s shareholders. Complying with WPG Inc.'s REIT requirements might cause us to forego otherwise attractive acquisition opportunities, liquidate otherwise attractive investments, or never pursue viable and profitable business or commercial ventures. To qualify to be taxed as a REIT for U.S. federal income tax purposes, WPG Inc. must ensure that, at the end of each calendar quarter, at least 75% of the value of its assets consist of cash, cash items, government securities and "real estate assets" (as defined in the Code), including certain mortgage loans and securities. The remainder of WPG Inc.'s investments (other than government securities, qualified real estate assets and securities issued by a TRS) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. Additionally, in general, no more than 5% of the value of WPG Inc.'s total assets (other than government securities, qualified real estate assets and securities issued by a TRS) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by securities of one or more TRSs. If WPG Inc. fails to comply with these requirements at the end of any calendar quarter, it must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing its REIT qualification and suffering adverse tax consequences. As a result, we might be required to liquidate, forego otherwise attractive investments, or never pursue viable and profitable business or commercial ventures. These actions could have the effect of reducing WPG Inc.'s income and amounts available for distribution to its shareholders. In addition to the asset tests set forth above, to qualify to be taxed as a REIT, WPG Inc. must continually satisfy tests concerning, among other things, the sources of its income, the amounts it distributes to its shareholders and the ownership of its shares. We might be unable to pursue investments or business or commercial ventures that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements of WPG Inc. for qualifying as a REIT. Thus, compliance with WPG Inc.'s REIT requirements may hinder our ability to make certain attractive investments or pursue viable and profitable business or commercial ventures. Complying with WPG Inc.'s REIT requirements might limit our ability to hedge effectively and may cause WPG Inc. to incur tax liabilities. The REIT provisions of the Code to which WPG Inc. must adhere substantially limit our ability to hedge our assets and liabilities. Income from certain potential hedging transactions that we may enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets or from transactions to manage risk of currency fluctuations with respect to any item of income or gain that satisfy WPG Inc.'s REIT gross income tests (including gain from the termination of such a transaction) does not constitute "gross income" for purposes of the 75% or 95% gross income tests that apply to REITs, provided that certain identification requirements are met. To the extent that we enter into other types of hedging transactions or fail to properly identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of both of WPG Inc.'s gross income tests. As a result of these rules, we might be required to limit our use of advantageous hedging techniques or implement those hedges through a total return swap. This could increase the cost of our hedging activities because the total return swap may be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. Additionally, losses in the total return swap will generally not provide any tax benefit, except that such losses could theoretically be carried back or forward against WPG Inc.'s past or future taxable income in the total return swap. 21 The share ownership limit imposed by the Code for REITs, and WPG Inc.'s amended and restated articles of incorporation, may inhibit market activity in WPG Inc.'s shares and restrict our business combination opportunities. In order for WPG Inc. to maintain its qualification as a REIT under the Code, not more than 50% in value of its outstanding shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year after its first taxable year. WPG Inc.'s amended and restated articles of incorporation, with certain exceptions, authorize its Board of Directors to take the actions that are necessary and desirable to preserve its qualification as a REIT. Unless exempted by WPG Inc.'s Board of Directors, no person may own more than 8%, or 18% in the case of certain family members and other related persons of Mr. David Simon, the current Chairman and CEO of SPG and former member of our Board of Directors, of any class of WPG Inc.'s capital stock or any combination thereof, determined by the number of shares outstanding, voting power or value (as determined by WPG Inc.'s Board of Directors), whichever produces the smallest holding of capital stock under the three methods, computed with regard to all outstanding shares of capital stock and, to the extent provided by the Code, all shares of WPG Inc.'s capital stock issuable under outstanding options and exchange rights that have not been exercised. WPG Inc.'s Board of Directors may grant an exemption in its sole discretion, subject to such conditions, representations and undertakings as it may determine in its sole discretion. These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for WPG Inc.'s common shares or otherwise be in the best interest of WPG Inc.'s shareholders. Risks Related to Our Common and Preferred Shares/Units We cannot guarantee the timing, amount, or payment of distributions on our shares/units. Although we expect to pay regular cash distributions, the timing, declaration, amount and payment of future distributions to shareholders will fall within the discretion of our Board of Directors. Our Board of Directors' decisions regarding the payment of distributions will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, limitations under our financing arrangements, industry practice, legal requirements, regulatory constraints, and other factors that it deems relevant. Our ability to pay distributions will depend on our ongoing ability to generate cash from operations and access capital markets. We cannot guarantee that we will pay a distribution in the future or continue to pay any distribution at a particular rate. The market value or trading price of our preferred and Common Shares could decrease based upon uncertainty in the marketplace and market perception. The market price of our common and preferred shares may fluctuate widely as a result of a number of factors, many of which are outside our control or influence. Additionally, the stock market is subject to fluctuations in share prices and trading volumes that affect the market prices of the shares of many companies. These broad market fluctuations have adversely affected and may continue to adversely affect the market price of our common and preferred shares. Among the factors that could adversely affect the market price of our common and preferred shares are: • • • • • • • • • • • actual or anticipated quarterly fluctuations in our operating results and financial condition; changes in our FFO, revenue, or earnings estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs; negative speculation or information in the media or investment community; any changes in our distribution or dividend policy; any sale or disposal of properties within our portfolio; any future issuances of equity securities; increases in leverage, mortgage debt financing, or outstanding borrowings; strategic actions by our Company or our competitors, such as acquisitions, joint ventures, or restructurings; general market conditions and, in particular, developments related to market conditions for the real estate industry or retail sector; proposed or adopted regulatory or legislative changes or developments; or anticipated or pending investigations, proceedings, or litigation that involves or affect us. 22 WPG Inc. is subject to the continued listing standards of the NYSE, which has several criteria for listing, including maintaining minimum trading prices. If the WPG Inc. common stock is delisted because it trades below $1.00 for an extended period of time, or otherwise, there could be a negative effect on our business that could significantly impact our financial condition, our operating results and our ability to service our debt obligations. Although the per share price of our common stock has remained above $1.00 despite recent volatility, in the event the per share trading price of our common stock closes below $1.00 for thirty (30) consecutive days, our common stock could be delisted from the NYSE if not cured in adequate time which could necessitate extraordinary measures by us in order to accomplish. The threat of delisting our common stock could have adverse effects by, among other things: • • • • • reducing the liquidity and market price of our common stock; eliminating the open market trading of our common stock; reducing the number of investors willing to hold or acquire our common stock; reducing our ability to retain, attract and motivate the members of our board of directors, executive officers and employees through the use of equity-based compensation and equity incentives; and reducing our ability to service our debt obligations. WPG Inc.'s cash available for distribution to shareholders might be insufficient to pay distributions at any particular levels or in amounts sufficient in order for WPG Inc. to maintain its REIT qualification, which could require us to borrow funds in order to make such distributions. As a REIT, WPG Inc. is required to distribute at least 90% of its REIT taxable income each year, excluding net capital gains, to its shareholders. WPG Inc. intends to make regular quarterly distributions whereby it expects to distribute at least 100% of its REIT taxable income to its shareholders out of assets legally available thereof. Based on the amount of its REIT taxable income for the year ended December 31, 2019, WPG Inc.'s annual dividend of $1.00 per share satisfied this requirement. However, WPG Inc.'s ability to make distributions could be adversely affected by various factors, many of which are not within its control (refer to discussion in Part II, Item 5 "Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities - Distribution Information" for further information). For example, in the event of downturns in its financial condition or operating results, economic conditions or otherwise, WPG Inc. might be unable to declare or pay distributions to its shareholders to the extent required to maintain its REIT qualification. WPG Inc. might be required either to fund distributions from borrowings under the Revolver or to reduce its distributions. If we borrow to fund WPG Inc.'s distributions, our interest costs could increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been. In addition, some of WPG Inc.'s distributions may include a return of capital. To the extent that WPG Inc. makes distributions in excess of its current and accumulated earnings and profits (as determined for U.S. federal income tax purposes), such distributions would generally be considered a return of capital for U.S. federal income tax purposes to the extent of the holder's adjusted tax basis in its shares. A return of capital is not taxable, but it has the effect of reducing the holder's adjusted tax basis in its investment. To the extent that distributions exceed the adjusted tax basis of a holder's shares, the distributions will be treated as gain from the sale or exchange of such shares. Your percentage of ownership in WPG Inc. may be diluted in the future. In the future, your percentage ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise. WPG Inc. also regularly grants or redeems compensatory equity awards to directors, executive officers and certain employees who are eligible to receive such awards. Such awards, which are derivatives of our common shares, will ultimately, if they vest, have a dilutive effect on WPG Inc.'s earnings per share, which could adversely affect the market price of WPG Inc.'s common shares. In addition, WPG Inc.'s amended and restated articles of incorporation authorize WPG Inc. to issue, without the approval of its shareholders, one or more additional classes or series of preferred shares having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common shares respecting dividends and distributions, as WPG Inc.'s Board of Directors generally may determine. The terms of one or more such classes or series of preferred shares could dilute the voting power or reduce the value of WPG Inc.'s common shares. For example, WPG Inc. could grant the holders of preferred shares the right to elect some number of WPG Inc. directors in all events or on the occurrence of specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred shares could affect the residual value of the common shares. 23 Certain provisions in WPG Inc.'s amended and restated articles of incorporation and bylaws, and provisions of Indiana law, might prevent or delay an acquisition of our company, which could decrease the trading price of WPG Inc.'s common shares. WPG Inc.'s amended and restated articles of incorporation and bylaws contain, and Indiana law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with WPG Inc.'s Board of Directors rather than to attempt a hostile takeover. These provisions include, among others: • The inability of WPG Inc.'s shareholders to call a special meeting; • Restrictions on the ability of WPG Inc.'s shareholders to act by written consent without a meeting; • Advance notice requirements and other limitations on the ability of shareholders to present proposals or nominate directors for election at shareholder meetings; • The right of WPG Inc.'s Board of Directors to issue preferred shares without shareholder approval; • Limitations on the ability of WPG Inc.'s shareholders to remove directors; • The ability of WPG Inc.'s directors, and not shareholders, to fill vacancies on WPG Inc.'s Board of Directors; • Restrictions on the number of shares of capital stock that individual shareholders may own; • Limitations on the exercise of voting rights in respect of any "control shares" acquired in a control share acquisition, which WPG Inc. has currently opted out of in WPG Inc.'s amended and restated bylaws but which could apply to WPG Inc. in the future; and • Restrictions on an "interested shareholder" to engage in certain business combinations with WPG Inc. for a five-year period following the date the interested shareholder became such. We believe these provisions will protect WPG Inc.'s shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with WPG Inc.'s Board of Directors and by providing WPG Inc.'s Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make the company immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that WPG Inc.'s Board of Directors determines is not in the best interests of WPG Inc. and its shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors. Several of the agreements that we entered into with SPG in connection with the separation require SPG's consent to any assignment by us of our rights and obligations under the agreements, but these agreements generally expired within two years of May 28, 2014, except for certain agreements that continue for longer terms. These agreements include certain separation agreements and tax matters agreements. The consent and termination rights set forth in these agreements might discourage, delay or prevent a strategic transaction that you may consider favorable. In addition, an acquisition or further issuance of WPG Inc.'s common shares could trigger the application of Section 355(e) of the Code. Under the tax related agreement(s) we had with SPG following the separation, we would be required to indemnify SPG for any resulting taxes and related amounts, and this indemnity obligation might discourage, delay or prevent a strategic transaction that you may consider favorable. Certain provisions in WPG L.P.'s amended and restated limited partnership agreement may limit our ability to execute transactions that our shareholders may consider favorable. WPG L.P.'s amended and restated limited partnership agreement, as amended (the "Partnership Agreement") provides that we must obtain the approval of a majority of the units of limited partnership interest held by limited partners in order to merge or consolidate WPG L.P. or voluntarily sell or otherwise transfer all or substantially all of the assets of WPG L.P. In addition, during all periods in which Melvin Simon, Herbert Simon and David Simon and members of their immediate families (and including their lineal descendants, trusts established for their benefit and entities controlled by them), collectively, hold at least 10% of the partnership units in WPG L.P., the Partnership Agreement requires that WPG L.P. obtain the consent of the Simons holding more than 50% of the partnership units then held by the Simons prior to, among other things, selling, exchanging, transferring or otherwise disposing of all or substantially all of the assets of WPG L.P. David Simon (or such other person as may be designated by the holders of more than 50% of the partnership units held by the Simons) has been granted authority by those limited partners who are Simons to grant and withhold consent on behalf of the Simons whenever such consent of the Simons is required. Because WPG L.P.'s assets comprise substantially all of our assets, these restrictions could limit our ability to sell or transfer all or substantially all of our assets, or impact the manner in which we do so, even if some of our shareholders believe that doing so would be in our and their best interests. 24 WPG Inc.'s significant shareholders may exert influence over our company that may be adverse to our best interests and those of WPG Inc.'s other shareholders. A substantial portion of WPG Inc.'s outstanding common shares are held by a relatively small group of shareholders. This concentration of ownership may make some transactions more difficult or impossible without the support of some or all of these shareholders. For example, the concentration of ownership currently held by the significant shareholders, even if they are not acting in a coordinated manner, could allow them to influence our policies and strategy and could delay, defer or prevent a change of control or impede a merger, takeover or other business combination that may otherwise be favorable to us and our other shareholders. Additionally, the interests of any of WPG Inc.'s significant shareholders, or any of their respective affiliates, could conflict with or differ from the interests of WPG Inc.'s other shareholders or the other significant shareholders. A significant shareholder or affiliate thereof may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. Item 1B. Unresolved Staff Comments None. 25 Item 2. Properties As of December 31, 2019, our portfolio of properties consisted of material interests in 104 properties totaling approximately 56 million square feet of managed GLA. We also own parcels of land which can be used for either new development or the expansion of existing properties. While most of these properties are wholly owned by us, several are less than wholly owned and are held through joint ventures and other arrangements with third parties, which is common in the real estate industry. As of December 31, 2019, our properties had an ending occupancy rate of 92.3% (based on the measures described in note (2) to the table that follows). Our properties are leased to a variety of tenants across the retail spectrum including anchor stores, big-box tenants, national inline tenants, sit-down restaurants, movie theaters, and regional and local retailers. As of December 31, 2019, selected anchors and tenants include Macy's, Inc., Dillard's, Inc., J.C. Penney Co., Inc., Target Corporation, Kohl's Corporation, Dick's Sporting Goods, Best Buy Co., Inc., Bed Bath & Beyond Inc. and TJX Companies, Inc. With respect to all tenants in our portfolio, no single tenant was responsible for more than 2.7% of our total base minimum rental revenues for the year ended December 31, 2019. Further, no single property accounted for more than 5.7%, of our total base minimum rental revenues for the year ended December 31, 2019. Finally, as of December 31, 2019, no more than 14.5% of our total gross annual base minimum rental revenues was derived from leases that expire in any single calendar year. Capitalized terms not defined in this Item 2 shall have the definition ascribed to these terms in Item 1 of this Form 10-K. The following table summarizes certain data for our portfolio of properties as of December 31, 2019: Property Information As of December 31, 2019 Property Name State Enclosed Retail Properties City (Major Metropolitan Area) Ownership Interest (Expiration if Lease) Financial Interest (1) Year Acquired or Built Occupancy (%)(2) Total Center SF Anchors 100.0% Built 1972 88.0% 670,742 Belk(10), Books-A- Anderson Mall SC Anderson Arbor Hills MI Ann Arbor Arboretum, The TX Austin Ashland Town Center KY Ashland Bowie Town Center MD Bowie (Wash, D.C.) Fee Fee Fee Fee Fee 51.0% 51.0% 100.0% Acquired 2015 Acquired 1998 Acquired 2015 100.0% Built 2001 95.1% Boynton Beach Mall FL Boynton Beach (Miami) Fee 100.0% Brunswick Square NJ East Brunswick (New York) Fee 100.0% Charlottesville Fashion Square VA Charlottesville Chautauqua Mall NY Lakewood Chesapeake Square Theater Clay Terrace VA IN Chesapeake (VA Beach) Carmel (Indianapolis) Ground Lease (2076) Fee Fee Fee 100.0% 100.0% 100.0% 100.0% Acquired 1996 Acquired 1996 Acquired 1997 Acquired 1996 Acquired 1996 Acquired 2014 Million, Dillard's(10), JCPenney 100.0% 86,939 N/A 83.0% 195,338 Barnes & Noble, Cheesecake Factory, Pottery Barn 94.7% 434,525 Belk, Belk Home Store, JCPenney(10), T.J. Maxx 571,243 Barnes & Noble, Best Buy(10), L.A. Fitness, Macy's(10), Off Broadway Shoes 869,936 Cinemark Theatres, Dillard's, JCPenney, Macy's(10), You Fit Health Clubs 87.9% 93.9% 764,564 Barnes & Noble, JCPenney(10), Macy's(10), Starplex Luxury Cinema 76.5% 578,206 Belk(4), JCPenney(10) 82.0% 435,415 JCPenney, Office Max 100.0% 42,248 Cinemark Theatres 91.7% 577,614 Dick's Sporting Goods, DSW, Pier 1, St. Vincent's Sports Performance, Whole Foods Cottonwood Mall NM Albuquerque Fee 100.0% Built 1996 93.0% 1,048,428 Conn's Electronic & Appliance(10), Dillard's(10), HiLife Furniture, Hobby Lobby, JCPenney(10), Mor Furniture For Less, Regal Cinema 26 Property Name Dayton Mall State OH City (Major Metropolitan Area) Ownership Interest (Expiration if Lease) Financial Interest (1) Dayton Fee 100.0% Edison Mall FL Fort Myers Grand Central Mall WV Parkersburg Great Lakes Mall OH Mentor (Cleveland) Ground Lease (2049) Fee Ground Lease (2049) Indian Mound Mall OH Newark Fee 100.0% Acquired 2015 80.0% Year Acquired or Built Acquired 2015 Acquired 1997 Acquired 2015 Occupancy (%)(2) Total Center SF Anchors 90.2% 1,447,659 Dick's Sporting Goods, DSW, JCPenney, Macy's(10), Ross Dress for Less 90.0% 1,049,982 Books-A-Million, Dillard's(10), JCPenney, Macy's(4), Sears(5)(8) 89.1% 646,741 Belk, Big Lots, Dunham's Sports, JCPenney, Regal Cinemas 90.3% 1,245,010 Atlas Cinema Stadium 100.0% (12) 100.0% 100.0% (12) Acquired 1996 16, Barnes & Noble, Dick's Sporting Goods, Dillard's(10), Hobby Lobby, JCPenney, Macy's(10), Round One 556,779 Altitude Trampoline Park, AMC Theaters, Big Sandy Superstore(10), Dick's Sporting Goods, JCPenney, Sears(5) 100.0% (12) Built 1971 98.4% 1,051,952 AMC Theatres, Burlington Coat Factory, Dillard's(10), Fitness Connection, La Vida Fashion and Home Décor(10), Macy's(10), Shoppers World, Sky Zone 100.0% (12) Built 1983 88.3% 583,037 Dick's Sporting Goods, Macy's Irving Mall TX Irving (Dallas) Ground Lease (2049) Jefferson Valley Mall NY Yorktown Heights (New York) Ground Lease (2049) Lima Mall OH Lima Lincolnwood Town Center Lindale Mall IL IA Lincolnwood (Chicago) Cedar Rapids Longview Mall TX Longview Fee Fee Fee Fee 100.0% 100.0% 100.0% 100.0% 51.0% 100.0% Acquired 1996 Built 1990 Acquired 1998 Built 1978 Acquired 2015 Acquired 2015 Acquired 2015 Acquired 2002 Malibu Lumber Yard Mall at Fairfield Commons, The Mall at Johnson City, The CA Malibu OH Beavercreek Ground Lease (2047) Fee TN Johnson City Fee 51.0% Maplewood Mall MN St. Paul (Minneapolis) Fee 100.0% Markland Mall IN Kokomo Melbourne Square FL Melbourne Mesa Mall CO Grand Junction Morgantown Mall WV Morgantown Muncie Mall IN Muncie Fee Fee Fee Fee Fee 100.0% Built 1968 Acquired 1996 Acquired 1998 Acquired 2015 Built 1970 100.0% 100.0% 100.0% 100.0% 27 95.0% 745,042 JCPenney, Macy's(10) 79.4% 422,997 Kohl's, The RoomPlace 89.9% 713,708 Hy-Vee, Von Maur 90.6% 646,518 Dick's Sporting Goods, Dillard's(10), JCPenney(10), L'Patricia(10), Stage(10) 50.7% 31,514 N/A 93.0% 1,037,943 Dick's Sporting Goods, JCPenney, Macy's(10), Round One 96.6% 567,892 Belk for Her, Belk Home Store, Dick's Sporting Goods, JCPenney, Sears(5)(10) 83.9% 903,985 Barnes & Noble, JCPenney(10), Kohl's(10), Macy's(10) 97.6% 87.2% 390,022 Aldi, PetSmart, Ross Dress for Less, Target 716,993 Dick's Sporting Goods, Dillard's(9), JCPenney, L.A. Fitness, Macy's(10) 89.3% 803,762 Cabela's(10), JCPenney(10), Jo-Ann Fabrics, Target(10) 79.2% 555,350 AMC Theaters, 79.8% 637,795 JCPenney JCPenney, Macy's(5) (10) Property Name New Towne Mall State OH City (Major Metropolitan Area) New Philadelphia Ownership Interest (Expiration if Lease) Financial Interest (1) Fee 100.0% Northtown Mall MN Blaine Fee 100.0% Year Acquired or Built Acquired 2015 Acquired 2015 Occupancy (%)(2) 84.5% Total Center SF Anchors 505,029 Dick's Sporting Goods, Jo-Ann Fabrics, Kohl's, Marshalls, Route 250 Health and Performance 90.2% 644,535 Becker Furniture, Best 100.0% Built 1983 92.4% 669,759 Northwoods Mall IL Peoria Oak Court Mall TN Memphis Oklahoma City Properties OK Oklahoma City Orange Park Mall FL Orange Park (Jacksonville) Fee Fee Fee Fee 100.0% 51.0% (7) 100.0% Outlet Collection® | Seattle, The WA Auburn (Seattle) Fee 100.0% Paddock Mall Pearlridge Center FL HI Ocala Aiea Polaris Fashion Place® OH Columbus Fee 100.0% 51.0% Fee and Ground Lease (2043, 2058) Fee 51.0% Acquired 2015 Port Charlotte Town Center FL Port Charlotte Fee 100.0% (6) Acquired 1996 Acquired 1997 Acquired 2015 Acquired 1994 Acquired 2015 Acquired 1996 Acquired 2015 Buy, Burlington Coat Factory, Hobby Lobby, Home Depot(10), L.A. Fitness, Sky Zone JCPenney(10), Round One, Sears(5)(10), The RoomPlace 92.1% 847,427 Dillard's(4), Macy's(10) 93.8% 316,873 Trader Joe's, Whole Foods 99.5% 952,346 AMC Theatres, Belk(10), Dick's Sporting Goods, Dillard's(10), JCPenney, Sears(10) 92.3% 924,304 Bed Bath & Beyond, Burlington Coat Factory, Dave & Busters, Nordstrom Rack 94.5% 555,310 Belk, JCPenney, Macy's(10) 96.2% 1,302,419 Bed, Bath, and Beyond, Longs Drug Store, Macy's, Pearlridge Mall Theaters, Ross Dress for Less, Sears, T.J. Maxx 94.9% 1,372,972 Barnes & Noble, Dick's Sporting Goods, JCPenney(10), Macy's(10), Saks Fifth Avenue(10), Von Maur(10) 91.0% 777,532 Bealls(10), Dillard's(10), DSW, JCPenney, Macy's(10), Recreational Warehouse, Regal Cinema Rolling Oaks Mall TX San Antonio Scottsdale Quarter® AZ Scottsdale Fee Fee 100.0% Built 1988 96.0% 883,096 Dillard's(10), 51.0% Acquired 2015 JCPenney(10), Macy's(10), Sears(10) 86.4% 736,931 Apogee Physicians, H&M, iPic Theaters(5), JDA Software, Restoration Hardware, Starwood Hotels Seminole Towne Center FL Sanford (Orlando) Fee —% (6) Built 1995 94.5% 1,109,751 Athletic Apex, Southern Hills Mall IA Sioux City Fee 100.0% Southern Park Mall OH Youngstown Southgate Mall MT Missoula Sunland Park Mall TX El Paso Town Center at Aurora® CO Aurora (Denver) Fee Fee Fee Fee 100.0% 100.0% Burlington Coat Factory, Dick's Sporting Goods, Dillard's(10), JCPenney(10), Macy's(5) Acquired 1998 Acquired 1996 Acquired 2018 86.2% 774,024 AMC Theaters, Barnes & Noble, Hy-Vee, JCPenney(10), Scheel's All Sports 74.9% 1,168,834 Cinemark Theatres, JCPenney, Macy's 89.9% 578,283 AMC Theater, Dillard's(4), JCPenney(5)(10), Lucky's Market(5) 100.0% Built 1988 65.7% 918,475 Cinemark, Dillard's(9), 100.0% Acquired 1998 28 Starr Western Wear 94.4% 1,081,541 Century Theatres, Dillard's(10), JCPenney(10), Macy's(10) Property Name State City (Major Metropolitan Area) Ownership Interest (Expiration if Lease) Financial Interest (1) KS Leawood Fee 51.0% Town Center Crossing & Plaza Waterford Lakes Town Center Year Acquired or Built Acquired 2015 Occupancy (%)(2) Total Center SF Anchors 92.6% 670,622 Arhaus, Barnes & Noble, Crate & Barrel, Macy's(10), Restoration Hardware FL Orlando Fee 100.0% Built 1999 97.6% 967,212 Ashley Furniture Home Store (10), Barnes & Noble, Bed Bath & Beyond, Best Buy, Jo- Ann Fabrics, L.A. Fitness(10), Office Max, Regal Cinemas, Ross Dress for Less, Target(10), T.J. Maxx Weberstown Mall CA Stockton Westminster Mall CA Westminster (Los Angeles) Fee Fee 100.0% 100.0% WestShore Plaza FL Tampa Fee 100.0% Acquired 2015 Acquired 1998 Acquired 2015 99.5% 846,915 Barnes & Noble, Dillard's(10), JCPenney(10), Sears(10) 85.8% 1,216,695 Chuze Fitness, DSW, JCPenney(10), John's Incredible Pizza, Macy's(10), Sky Zone, Target(10) 91.0% 1,093,693 AMC Theatres, Dick's Sporting Goods, JCPenney, Macy's(10) Total Enclosed Retail Properties Portfolio Square Footage (3) 41,944,457 Open Air Properties Bloomingdale Court IL Bloomingdale (Chicago) Fee 100.0% Built 1987 96.2% 675,988 Best Buy, Dick's Sporting Goods, Jo-Ann Fabrics, Office Max, Picture Show, Ross Dress for Less, T.J. Maxx N More, Walmart Supercenter(10) Bowie Town Center Strip MD Bowie (Wash, D.C.) Canyon View Marketplace CO Grand Junction Chesapeake Center VA Chesapeake (Virginia Beach) Concord Mills Marketplace NC Countryside Plaza IL Concord (Charlotte) Countryside (Chicago) Dare Centre NC Kill Devil Hills DeKalb Plaza Empire East Fairfax Court Fairfield Town Center PA SD VA King of Prussia (Philadelphia) Sioux Falls Fairfax (Wash, D.C.) TX Houston Forest Plaza IL Rockford Fee Fee Fee Fee Fee Ground Lease (2058) Fee Fee Fee Fee Fee 100.0% Built 2001 100.0% 106,636 Safeway(10) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (11) 100.0% 100.0% Acquired 2015 Acquired 1996 Acquired 2007 Built 1977 Acquired 2004 Acquired 2003 Acquired 1998 Acquired 2014 100.0% 199,815 City Market(10), Kohl's(10) 93.0% 279,581 Dollar Tree(10), 100.0% 100.0% PetSmart, Value City Furniture 240,720 At Home, BJ's Wholesale Club 403,455 Best Buy, Dollar Tree, Floor & Decor, Home Depot(10), Jo-Ann Fabrics, PetSmart, The Tile Shop 100.0% 168,613 Belk(10), Food Lion 93.5% 101,915 ACME Grocery(10), Bob's Discount Furniture 100.0% 301,438 Bed Bath & Beyond, Kohl's, Target(10) 86.6% 239,483 Burlington Coat Factory, Pier 1, XSport Fitness 100.0% Built 2014 100.0% 364,469 Academy Sports(10), HEB(10), Marshalls, Party City 100.0% Built 1985 83.3% 433,816 Bed Bath & Beyond, Gaitway Plaza FL Ocala Fee 99.5% (6) Kohl's, Marshalls, Michaels, Office Max, Petco Acquired 2014 99.6% 197,435 Bed Bath & Beyond, Michael's, Office Depot, Ross Dress for Less, T.J. Maxx 29 Discount Furniture, Golf Galaxy, Jo-Ann Fabrics, Petco, Tuesday Morning, Value City Furniture(10) 386,198 Bed, Bath, & Beyond, Best Buy, Jumpstreet, Office Max, PetSmart, Ross Dress for Less, T.J. Maxx, Total Wine & More(10) 233,878 Hobby Lobby(10), Jo- Ann Fabrics, Kohl's, T.J. Maxx Nordstrom Rack, Staples, Target(10), T.J. Maxx 'n More 90,527 Bed Bath & Beyond, Best Buy Property Name State City (Major Metropolitan Area) Ownership Interest (Expiration if Lease) Financial Interest (1) Gateway Centers TX Austin Fee 51.0% Year Acquired or Built Acquired 2004 Occupancy (%)(2) Total Center SF Anchors 97.8% 513,571 Best Buy, Crate & Barrel, Nordstrom Rack, Off 5th Saks 5th Ave, Regal Cinema, REI(10), Whole Foods, The Container Store, The Tile Shop Greenwood Plus IN Henderson Square PA Greenwood (Indianapolis) King of Prussia (Philadelphia) Keystone Shoppes IN Indianapolis Lake Plaza Lake View Plaza IL IL Waukegan (Chicago) Orland Park (Chicago) Fee Fee Fee Fee Fee 100.0% Built 1979 100.0% 152,123 Best Buy, Kohl's 100.0% 100.0% Acquired 2003 Acquired 1997 100.0% 107,368 Avalon Carpet & Tile Shop, Giant 100.0% 36,457 N/A 100.0% Built 1986 95.0% 215,590 N/A 100.0% Built 1986 94.3% 364,548 Best Buy, Bob's Lakeline Plaza TX Cedar Park (Austin) Fee 100.0% Built 1998 99.2% Lima Center OH Lima Lincoln Crossing IL O'Fallon (St. Louis) MacGregor Village NC Cary Mall of Georgia Crossing GA Buford (Atlanta) Fee Fee Fee Fee 100.0% Acquired 1996 99.4% 100.0% Built 1990 100.0% 303,526 Academy Sports, 100.0% 100.0% Acquired 2004 Built 1999 PetSmart, Walmart(10) 86.0% 139,802 Sports HQ 95.1% 440,774 Best Buy, Hobby Lobby, Markland Plaza IN Kokomo Fee 100.0% Built 1974 100.0% Martinsville Plaza VA Martinsville Matteson Plaza Muncie Towne Plaza North Ridge Shopping Center IL IN Matteson (Chicago) Muncie NC Raleigh Northwood Plaza Palms Crossing IN TX Fort Wayne McAllen Plaza at Buckland Hills, The CT Manchester Ground Lease (2026) Fee Fee Fee Fee Fee Fee 100.0% 100.0% 51.0% 100.0% Richardson Square TX Richardson (Dallas) Fee 100.0% Rockaway (New York) Fee 100.0% Rockaway Commons Rockaway Town Plaza NJ NJ 100.0% Built 1967 99.3% 102,105 Ollie's Bargain Outlet, Rose's 100.0% (11) Built 1988 51.1% 273,836 Beauty Trends, Shoppers World(10) 100.0% Built 1998 86.1% 171,621 AMC Theatres(10), Acquired 2004 Built 1974 Built 2007 Acquired 2014 Acquired 1996 Acquired 1998 Kohl's, T.J. Maxx 98.5% 171,492 Ace Hardware, Harris- Teeter Grocery, O2 Fitness Club 87.1% 97.5% 204,956 Target(10) 389,618 Barnes & Noble, Bealls, Best Buy, DSW, Hobby Lobby 100.0% 309,415 Big Lots, Jo-Ann Fabrics, K&G Men's Company, Marshall's, Michael's(10), PetSmart(10), Total Wine & More, Trader Joe's 100.0% 516,100 Lowe's Home Improvement, Ross Dress for Less, Super Target(10) 100.0% 229,929 Best Buy, Buy Buy Baby, Christmas Tree Shops, DSW, Michael's, Nordstrom Rack Dick's Sporting Goods(10), PetSmart, Target(10) Rockaway (New York) Fee 100.0% Built 2004 100.0% 306,440 30 Property Name State Royal Eagle Plaza FL City (Major Metropolitan Area) Coral Springs (Miami) Ownership Interest (Expiration if Lease) Financial Interest (1) Fee 100.0% Year Acquired or Built Acquired 2014 Occupancy (%)(2) 93.0% Shops at Arbor Walk, The TX Austin Ground Lease (2056) 51.0% Built 2006 100.0% Shops at North East Mall, The TX Hurst (Dallas) Fee 100.0% Built 1999 98.1% Total Center SF Anchors 178,714 Hobby Lobby, Lucky's Market(5) 309,009 DSW, Home Depot, Jo- Ann Fabrics, Marshalls, PGA Tour Superstore, Spec's Wine, Spirits and Fine Foods 365,169 Barnes & Noble, Bed Bath & Beyond, Best Buy, DSW, Michaels, PetSmart, T.J. Maxx St. Charles Towne Plaza MD Waldorf (Wash, D.C.) Tippecanoe Plaza University Center University Town Plaza IN IN FL Lafayette Mishawaka Pensacola Village Park Plaza IN Carmel (Indianapolis) Washington Plaza IN Indianapolis West Town Corners FL Altamonte Springs (Orlando) Westland Park Plaza FL Orange Park (Jacksonville) White Oaks Plaza IL Springfield Fee Fee Fee Fee Fee Fee Fee Fee Fee 100.0% Built 1987 93.6% 388,325 Ashley Furniture, Big 100.0% Built 1974 100.0% 90,522 Barnes & Noble, Best Lots, Citi Trends, Dollar Tree, K & G Menswear, Shoppers Food Warehouse, Value City Furniture(10) Acquired 1996 Redeveloped 2013 100.0% 100.0% 100.0% Acquired 2014 99.5% Buy 96.8% 150,441 Best Buy(10), Michael's, Ross Dress for Less 100.0% 557,538 Academy Sports, Burlington Coat Factory, JCPenney(10) 512,348 Bed Bath & Beyond, Hobby Lobby, Kohl's, Marsh Supermarket(10), Regal Cinemas, Walmart Supercenter(10) 100.0% 98.1% (6) Acquired 1996 Acquired 2014 89.4% 50,107 Jo-Ann Fabrics 96.8% 379,220 American Signature Furniture(10), PetSmart, T.J. Maxx, Walmart(10), Winn-Dixie Marketplace 163,259 Beall's, Burlington Coat Factory, Guitar Center, L.A. Fitness 100.0% (6) Acquired 2014 85.9% 100.0% Built 1986 98.9% 385,414 Big Lots, County Market(10), HomeGoods, Kohl's, T.J. Maxx Whitehall Mall PA Whitehall Fee 100.0% Acquired 2014 98.7% 603,475 Bed Bath & Beyond, Buy Buy Baby, Gold's Gym, Kohl's, Michael's, Raymour & Flanigan Furniture, Sears(5) Wolf Ranch TX Georgetown (Austin) Total Open Air Portfolio Square Footage(3) Total Portfolio Square Footage(3) Fee 100.0% Built 2005 99.5% 632,102 Best Buy, DSW, Gold's Gym, Kohl's(10), Michael's, Office Depot, PetSmart, Ross Dress for Less, Target(10), T.J. Maxx 14,138,881 56,083,338 31 ____________________________________________________________________ (1) Direct and indirect interests in some joint venture properties are subject to preferences on distributions and/or capital allocation in favor of other partners. (2) Enclosed Retail Properties—Executed leases for all Company-owned GLA in enclosed retail property stores, excluding majors and anchors. Open Air Properties—Executed leases for all Company-owned retail GLA (or total center GLA). (3) Includes office space in the properties, including the following properties with more than 20,000 square feet of office space: Clay Terrace—80,033 sq. ft.; Oak Court Mall—123,891 sq. ft.; Royal Eagle Plaza—25,207 sq. ft.; Pearlridge Center—182,821 sq. ft.; Scottsdale Quarter—297,473 sq. ft. (4) Indicates tenant has multiple locations at this property and one of these spaces is owned by others. (5) Indicates anchor has announced its intent to close this location in 2020. (6) Our interest does not reflect our legal ownership percentage due to capital preferences. (7) Includes the following properties: Classen Curve, Nichols Hills Plaza and The Triangle @ Classen Curve. (8) Sears store owned by Seritage Growth Properties. (9) Indicates tenant has multiple locations at this property and both of these spaces are owned by others. (10) Indicates anchor space is owned by others. (11) Subsequent to December 31, 2019, property was sold to an unaffiliated real estate investor. (12) This property is subject to a 99-year ground lease under the Perennial sale and leaseback transaction, as discussed in Part II, Item 7 "Financing and Debt" and Note 6 of the Notes to the Consolidated Financial Statements presented in Part IV, Item 15. Date shown represents the repurchase option, which can be exercised at the Company's discretion, in year 30. 32 Lease Expirations(1) The following table summarizes lease expiration data for our properties as of December 31, 2019: Year Inline Stores and Freestanding Month To Month Leases 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 and Thereafter Specialty Leasing Agreements w/ terms in excess of 11 months Anchors Month To Month Leases 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 and Thereafter Number of Leases Expiring Square Feet Average Base Minimum Rent Per Square Foot Percentage of Gross Annual Rental Revenues(2) 153 656 802 703 561 422 270 239 218 151 136 52 779 2 22 45 37 49 30 43 14 16 12 13 16 389,777 2,000,575 2,587,982 2,285,101 1,958,344 1,470,980 1,236,711 1,277,213 987,611 681,379 667,179 408,395 1,856,335 284,166 1,007,334 2,314,929 1,751,334 2,315,945 1,519,652 2,176,022 489,027 809,398 418,776 714,550 784,700 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 26.00 26.35 25.75 26.31 27.59 28.02 26.79 28.17 28.10 26.81 28.31 21.59 12.13 1.27 6.62 7.32 8.88 9.79 8.08 9.34 11.08 9.31 14.59 8.14 11.53 1.7% 8.9% 11.5% 10.4% 9.4% 7.3% 5.9% 6.0% 4.6% 3.2% 3.3% 1.6% 4.0% 0.1% 1.2% 3.0% 2.7% 3.9% 2.2% 3.6% 0.8% 1.2% 1.1% 1.0% 1.4% _______________________________________________________________________________ (1) Does not consider the impact of renewal options that may be contained in leases and only considers Company-owned GLA managed at December 31, 2019. (2) Gross annual rental revenues represents 2019 consolidated and joint venture combined base rental revenue for the portfolio. 33 Mortgage Financing on Properties The following table sets forth certain information regarding the mortgages and unsecured indebtedness encumbering our properties and the properties held in our joint venture arrangements, and our unsecured corporate debt as of December 31, 2019: Summary of Mortgage and Other Indebtedness As of December 31, 2019 (in thousands) Maturity Date (1) Interest Rate Principal Balance Our Share of Principal Balance F = Fixed V = Variable Floating 12/1/2022 4.61 % $ 17,307 $ Property Name Consolidated Indebtedness: Secured Indebtedness Anderson Mall Ashland Town Center Brunswick Square Canyon View Marketplace Charlottesville Fashion Square Concord Mills Marketplace Cottonwood Mall Dayton Mall Forest Plaza Grand Central Mall Lakeline Plaza Lincolnwood Town Center Mall of Georgia Crossing Muncie Mall Muncie Towne Plaza North Ridge Shopping Center Oak Court Mall Port Charlotte Town Center Southgate Mall Town Center at Aurora® Waterford Lakes Town Center Weberstown Mall Westminster Mall White Oaks Plaza Unsecured Indebtedness Credit Facility Senior Notes due 2024 The Exchange Notes Term Loan (unhedged portion) Term Loan (hedged portion) December 2015 Term Loan Other indebtedness 35,954 69,737 5,120 45,146 16,000 95,283 79,092 30,250 38,748 49,710 47,524 21,680 33,132 10,550 11,500 36,260 41,207 35,000 51,250 17,307 35,954 69,737 5,120 45,146 16,000 95,283 79,092 30,250 38,748 49,710 47,524 21,680 33,132 10,550 11,500 36,260 41,207 35,000 51,250 178,526 178,526 65,000 76,776 26,490 207,000 720,900 250,000 100,000 250,000 340,000 65,000 76,776 26,490 207,000 720,900 250,000 100,000 250,000 340,000 F F F F F F F F F F F F F F F F F F F F F V F F V F F V F F (2) (3) (4) (3) (4) (4) (5) 4.90 % 4.80 % 5.47 % 4.54 % 4.82 % 4.82 % 4.57 % 3.67 % 6.05 % 3.67 % 4.26 % 4.28 % 4.19 % 3.67 % 3.41 % 4.76 % 5.30 % 4.48 % 4.92 % 4.86 % 4.06 % 4.65 % 3.67 % 3.56 % 6.45 % 3.85 % 3.86 % 4.86 % 4.06 % 7/6/2021 3/1/2024 11/6/2023 4/1/2024 11/1/2023 4/6/2024 9/1/2022 10/1/2029 7/6/2020 10/1/2029 4/1/2021 10/6/2022 4/1/2021 10/1/2029 12/1/2022 4/1/2021 11/1/2020 9/27/2023 4/1/2021 5/6/2029 6/8/2021 4/1/2024 10/1/2029 12/30/2022 8/15/2024 4/1/2020 12/30/2022 12/30/2022 1/10/2023 10/10/2049 4.6 yrs. 34 Total Indebtedness at Face Value 99,162 8.56 % 4.97% 3,084,304 99,162 3,084,304 Property Name Premium on Fixed-Rate Indebtedness Bond Discounts Debt Issuance Costs, net Total Consolidated Indebtedness 4.6 yrs. Unconsolidated Secured Indebtedness: Arbor Hills Arboretum, The Gateway Centers Mall at Johnson City, The Oklahoma City Properties Loan One Loan Two Palms Crossing Pearlridge Center Loan One Loan Two Polaris Fashion Place® Loan One Loan Two Scottsdale Quarter® Loan One Loan Two Seminole Towne Center Shops at Arbor Walk, The Town Center Crossing & Plaza Loan One Loan Two Other joint venture mortgage debt Total Indebtedness at Face Value Premium on Fixed-Rate Indebtedness Debt Issuance Costs, net Total Unconsolidated Indebtedness Total Mortgage and Other Indebtedness Maturity Date (1) Interest Rate Principal Balance Our Share of Principal Balance 3,463 (7,864) (18,341) 3,061,562 12,339 30,294 57,375 24,529 26,917 6,465 17,022 3,463 (7,864) (18,341) 5.01% 3,061,562 4.27 % 4.13 % 4.03 % 6.76 % 3.90 % 4.26 % 5.49 % 24,195 59,400 112,500 48,097 52,779 12,676 33,377 1/1/2026 6/1/2027 6/1/2027 5/6/2025 6/1/2027 1/1/2023 8/1/2021 6/1/2025 5/1/2025 3.53 % 4.07 % 225,000 42,722 114,750 21,788 3/1/2025 3/1/2025 3.90 % 4.46 % 225,000 15,500 114,750 7,905 6/1/2025 4/1/2027 5/6/2021 8/1/2021 2/1/2027 2/1/2027 7/1/2032 5.7 yrs. 5.7 yrs. 4.8 yrs. 3.53 % 4.36 % 5.97 % 5.49 % 4.25 % 5.00 % 165,000 55,000 52,514 37,722 32,818 66,381 4.70 % 18,265 4.13% 1,278,946 7,793 (4,432) 4.12% 1,282,307 84,150 28,050 — (2) 19,238 16,737 33,854 1,912 618,075 3,974 (2,206) 619,843 4.86% $4,343,869 $ 3,681,405 F = Fixed V = Variable Floating F F F F F V F F F F F F F F F F F F _______________________________________________________________________________ (1) Maturity date assumes full exercise of extension options. (2) Our share does not reflect our legal ownership percentage due to capital preferences. (3) Mortgage note payable is full recourse. (4) Interest rate fixed via swap agreements as of December 31, 2019. (5) Represents the carrying value of the financial liability due under the Perennial sale and leaseback transaction, as discussed in Part II, Item 7 "Financing and Debt" and Note 6 of the Notes to the Consolidated Financial Statements presented in Part IV, Item 15. Date shown represents the repurchase option, which can be exercised at the Company's discretion, in year 30. 35 The following table lists the 68 unencumbered properties in our portfolio as of December 31, 2019: Unencumbered Properties As of December 31, 2019 Financial Interest Enclosed Retail Properties: Bowie Town Center Boynton Beach Mall Chautauqua Mall Clay Terrace Edison Mall(1) Great Lakes Mall(1) Indian Mound Mall Irving Mall(1) Jefferson Valley Mall(1) Lima Mall Lindale Mall Longview Mall Malibu Lumber Yard(2) Mall at Fairfield Commons, The Maplewood Mall Markland Mall Melbourne Square Mesa Mall Morgantown Mall New Towne Mall Northtown Mall Northwoods Mall Orange Park Mall Outlet Collection® | Seattle, The Paddock Mall Rolling Oaks Mall Southern Hills Mall Southern Park Mall Sunland Park Mall WestShore Plaza Open Air Properties: Bloomingdale Court Bowie Town Center Strip Chesapeake Center Countryside Plaza Dare Centre DeKalb Plaza(4) Empire East Fairfax Court Fairfield Town Center Gaitway Plaza(3) Greenwood Plus 36 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 51.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 99.5% 100.0% Henderson Square Keystone Shoppes Lake Plaza Lake View Plaza Lima Center Lincoln Crossing MacGregor Village Markland Plaza Martinsville Plaza Matteson Plaza(4) Northwood Plaza Plaza at Buckland Hills, The Richardson Square Rockaway Commons Rockaway Town Plaza Royal Eagle Plaza Shops at North East Mall, The St. Charles Towne Plaza Tippecanoe Plaza University Center University Town Plaza Village Park Plaza Washington Plaza West Town Corners(3) Westland Park Plaza(3) Whitehall Mall Wolf Ranch Financial Interest 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 98.1% 100.0% 100.0% 100.0% _______________________________________________________________________________ (1) This property is subject the Perennial sale and leaseback transaction, as discussed in Part II, Item 7 "Financing and Debt" and Note 6 of the Notes to the Consolidated Financial Statements presented in Part IV, Item 15. (2) This property is part of the O'Connor Joint Venture II, as discussed in Part II, Item 7 and Note 5 of the Notes to the Consolidated Financial Statements presented in Part IV, Item 15. (3) We receive substantially all the economic benefit of the property due to a capital preference. (4) Subsequent to December 31, 2019, property was sold to an unaffiliated real estate investor. 37 Item 3. 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 of our exposure can be reasonably estimated. Item 4. Mine Safety Disclosures Not applicable. Part II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities WPG Inc. Market Information WPG Inc.'s common shares are traded on the NYSE under the symbol "WPG." The following table sets forth, for the periods indicated, the dividends declared per common share: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Distribution Declared Per Common Share 2019 2018 $ $ $ $ 0.25 0.25 0.25 0.25 $ $ $ $ 0.25 0.25 0.25 0.25 Stockholder Information As of February 26, 2020, there were 1,286 holders of record of WPG Inc.'s common shares. Distribution Information WPG Inc. must pay a minimum amount of dividends to maintain its status as a REIT. WPG Inc.'s future dividends and future distributions of WPG L.P. will be determined by WPG Inc.'s Board of Directors based on actual results of operations, cash available for dividends and limited partner distributions, cash reserves as deemed necessary for capital and operating expenditures, and the amount required to maintain WPG Inc.'s status as a REIT. We recently announced a policy to pay a quarterly cash distribution at an annualized rate of $0.50 per common share/unit, commencing in the first quarter of 2020. The reduction of $0.50 per common share/unit from our previous dividend policy is expected to provide the Company with improved cash flow in excess of $110.0 million in 2020 alone, which will primarily be used to fund our ongoing redevelopment efforts as we continue to transform our core portfolio. Common share/unit distributions paid during each of 2019 and 2018 aggregated $1.00 per share/unit. WPG Inc. 7.5% Series H Cumulative Redeemable Preferred Stock ("Series H Preferred Shares") and 6.875% Series I Cumulative Redeemable Preferred Stock ("Series I Preferred Shares") that were issued on January 15, 2015 each pay cumulative dividends, and therefore WPG Inc. is obligated to pay the dividends for these shares in each fiscal period in which the shares remain outstanding. Further, WPG L.P. issued 7.3% Series I-1 Preferred Units (the "Series I-1 Preferred Units") which pay cumulative distributions, and therefore we are obligated to pay the distributions for these units in each fiscal period in which the units remain outstanding. The aggregate preferred obligation is approximately $14.3 million per year. 38 WPG L.P. Market Information There is no established public trading market for WPG L.P.'s operating partnership units, including the preferred units, the transfers of which are restricted by the terms of WPG L.P.'s limited partnership agreement. The following table sets forth, for the periods indicated, WPG L.P.'s distributions declared per common unit: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Distribution Declared Per Common Unit 2019 2018 $ $ $ $ 0.25 0.25 0.25 0.25 $ $ $ $ 0.25 0.25 0.25 0.25 Unitholder Information As of February 26, 2020, there were 228 holders of record of WPG L.P.'s common units. Distribution Information Included in WPG Inc.'s "Distribution Information" discussion above. Operating Partnership Units and Recent Sales of Unregistered Securities On January 15, 2015, WPG L.P. issued 1,621,695 common units of limited partnership interest and 130,592 WPG L.P. Series I-1 Preferred Units to third parties. Additionally, long-term incentive units ("LTIP") of limited partnership interest have been previously issued to executives of the Company from our equity incentive compensation plan in connection with our equity compensation awards. See Note 8 - "Equity" in the Notes to Consolidated Financial Statements. Holders of common units of limited partnership interest receive distributions per unit in the same manner as distributions on a per common share basis to WPG Inc.'s common shareholders of beneficial interest. Common shares to be issued upon redemption of common units of limited partnership interest would be issued in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"). Issuances Under Equity Compensation Plans (WPG Inc. and WPG L.P.) For information regarding the securities authorized for issuance under our equity compensation plans, see Item 12 of this report. 39 Item 6. Selected Financial Data The following tables set forth selected financial data for WPG Inc. and WPG L.P. The selected financial data should be read in conjunction with the financial statements and notes thereto and with "Management's Discussion and Analysis of Financial Condition and Results of Operations". Other financial data we believe is important in understanding trends in our business is also included in the tables. The amounts in the below tables are in thousands, except per share amounts. Operating Data: Total revenue(1) Depreciation and amortization Spin-off, merger and transaction costs Other operating expenses(1) Impairment loss Interest expense, net Income and other taxes (Loss) income from unconsolidated entities Gain on extinguishment of debt, net Gain (loss) upon acquisition of controlling interests and on sale of interests in properties, net Net income (loss) WPG Inc.: Net income (loss) Net loss (income) attributable to noncontrolling interests Preferred share dividends Net (loss) income attributable to common shareholders (Loss) earnings per common share, basic and diluted WPG L.P.: Net income (loss) Net income attributable to noncontrolling interests Preferred unit distributions Net (loss) income attributable to common unitholders (Loss) earnings per common unit, basic and diluted Cash Flow Data: Operating activities Investing activities Financing activities Other Financial Data: FFO(2) For the Year Ended December 31, 2019 2018 2017 2016 2015 $ 661,484 (271,320) — (298,004) (35,256) (153,382) (1,296) (1,499) 63,660 $ 717,479 (257,796) — (284,047) — (141,987) (1,532) 541 $ 753,054 (258,740) — (282,583) (66,925) (126,541) (3,417) 1,395 51,395 90,579 $ 838,967 (281,150) (29,607) (321,338) (21,879) (136,225) (2,232) (1,745) 34,612 $ 919,334 (332,469) (31,653) (373,498) (147,979) (139,923) (849) (1,247) — 38,373 24,602 124,771 2,760 $ 108,655 $ 231,593 2,760 1,514 (14,032) (9,758) $ (0.05) $ $ 108,655 (15,051) (14,032) 79,572 $ 231,593 (34,530) (14,032) $ 183,031 0.42 $ 0.98 $ $ $ $ $ 2,760 (45) (14,272) $ (11,557) $ (0.05) $ $ $ 108,655 (76) (14,272) 94,307 $ 231,593 (68) (14,272) $ 217,253 0.42 $ 0.98 (1,987) 77,416 4,162 $ (104,122) 77,416 (10,285) (14,032) 53,099 0.29 $ (104,122) 18,825 (15,989) $ (101,286) (0.55) $ 77,416 (11) (14,272) 63,133 0.29 $ (104,122) (286) (16,218) $ (120,626) (0.55) $ $ $ $ $ $ $ $ $ 287,245 $ 310,882 $ 288,987 $ 209,305 $ (115,118) $ (179,828) $ $ (124,485) $ (689,932) $ (79,796) $ (116,534) $ (436,793) $ (231,148) $ 403,102 $ 324,631 93,850 $ 325,392 $ 386,819 $ 452,128 $ 398,091 $ 375,271 Distributions per common share/unit $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Balance Sheet Data: As of December 31, Cash and cash equivalents Total assets Mortgages and other debt 2019 2018 2017 2016 2015 $ 41,421 $ 42,542 $ 52,019 $ 59,353 $ 116,253 $4,250,979 $4,361,288 $4,451,407 $5,107,466 $5,459,609 $3,061,562 $2,937,477 $2,897,609 $3,506,404 $3,648,601 Redeemable noncontrolling interests $ 3,265 $ 3,265 $ 3,265 $ 10,660 $ 6,132 Cumulative redeemable preferred stock $ 202,576 $ 202,576 $ 202,576 $ 202,576 $ 202,576 Total equity $ 906,575 $1,148,271 $1,267,122 $1,262,811 $1,407,373 40 (1) In 2019, we adopted the new lease accounting guidance which requires a lessor to record a change in the expected collectibility from operating leases as a direct reduction to rental revenues. Previously, these changes were recorded as a provision for credit losses and included in operating expenses. We have reclassified amounts of $5,826, $5,068, $4,508, and $2,022 for the years ended December 31, 2018, 2017, 2016, and 2015, respectively, in the above summarized financial data for comparison purposes. (2) FFO does not represent cash flow from operations as defined by GAAP. We use FFO as a supplemental measure of our operating performance. For a definition of FFO as well as a discussion of its uses and inherent limitations, please refer to "Non-GAAP Financial Measures" below. 41 Item 7. 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 that are included in this Annual Report on Form 10-K. Capitalized terms not defined in this Item 7 shall have the definitions ascribed to those terms in Items 1-6 of this Annual Report on Form 10-K. Overview—Basis of Presentation WPG Inc. is an Indiana corporation that operates as a self administered and self managed REIT, under 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, exclusive of net capital gains, 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. 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 December 31, 2019, our assets consisted of material interests in 104 shopping centers in the United States, consisting of open air properties and enclosed retail properties, comprised of approximately 56 million square feet of managed GLA. The consolidated financial statements are prepared in accordance with U.S. GAAP. The consolidated balance sheets as of December 31, 2019 and December 31, 2018 include the accounts of WPG Inc. and WPG L.P., as well as their wholly-owned subsidiaries. The consolidated statements of operations include the consolidated accounts of the Company. All intercompany transactions have been eliminated in consolidation. Leadership Changes and Severance Impacting Financial Results 2019 Activity 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 approximately $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 year ended December 31, 2019. 2018 Activity On May 7, 2018, the Company's Executive Vice President, Property Management 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. In connection with and as part of the aforementioned management and personnel changes, the Company recorded aggregate severance charges of $2.0 million, including $0.5 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 year ended December 31, 2018. Southgate Mall On April 24, 2018, the Company closed on the acquisition of Southgate Mall, located in Missoula, Montana, for $58.0 million. The enclosed retail property contains approximately 631,000 square feet of GLA and is anchored by a recently constructed AMC Theater, a new Lucky’s Market grocer that replaced a portion of a former Sears, J.C. Penney (acquired in January 2020) and Dillard’s (non-owned) buildings and is the dominant retail center in this secondary market, with no competitive destination retail property located within 130 miles. On September 27, 2018, an affiliate of WPG Inc. closed on a $35.0 million full-recourse mortgage note payable with a three- year term and a fixed interest rate of 4.48% per annum secured by Southgate Mall. The mortgage note payable requires interest only payments and will initially mature on September 27, 2021, subject to two one-year extensions available at our option subject to compliance with the terms of the underlying loan agreement and payment of customary extension fees. The proceeds were used to reduce corporate debt and for ongoing redevelopment efforts. 42 Sears Parcel Acquisitions On April 11, 2018, we acquired, through a sale-leaseback transaction, four Sears department stores and adjacent Sears Auto Centers 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 and was funded by a combination of $13.4 million from our Facility, $9.7 million from the Four Corners transaction, as discussed in "Overview - Basis of Presentation - Outparcel Sales," and $5.4 million from our joint venture partner related to their pro-rata share of the joint venture that owns Polaris Fashion Place®. We have control of these stores for future redevelopment and in some instances, have commenced redevelopment activities (see "Development Activity" for additional details). Outparcel Sales We are party to two separate purchase and sale agreements to sell certain outparcels to FCPT Acquisitions, LLC ("Four Corners"). The following table summarizes the key terms of each of the closings that occurred during the year ended December 31, 2019 (dollars in thousands): Sales Date Parcels Sold Purchase Price Sales Proceeds January 18, 2019 February 11, 2019 April 3, 2019 June 28, 2019 August 1, 2019 August 29, 2019 September 16, 2019 September 27, 2019 October 18, 2019 December 30, 2019 8 1 1 3 1 1 1 2 2 5 $ 9,435 $ 2,766 2,048 3,050 1,210 3,397 3,205 4,412 3,011 8,560 9,364 2,720 2,016 3,031 1,199 3,394 3,118 4,377 2,989 8,495 25 $ 41,094 $ 40,703 Excluding any subsequent amendments thereto, the Company expects to close on the approximately $4.6 million of remaining outparcels from the first purchase and sale agreement and the majority of the remaining $29.0 million from the second purchase and sale agreement in 2020, subject to due diligence and closing conditions. The net proceeds were generally used to fund ongoing redevelopment efforts and for general corporate purposes. Additionally, on January 21, 2020, the Company executed a letter of intent with an additional unaffiliated real estate investor to sell eight outparcels for a combined purchase price of approximately $14.2 million. We expect to close on the majority of these outparcels in 2020, subject to due diligence and closing conditions. The following table summarizes the key terms of the closings with Four Corners that occurred during the year ended December 31, 2018 (dollars in thousands): Sales Date Parcels Sold Purchase Price Sales Proceeds January 12, 2018 June 29, 2018 July 27, 2018 October 31, 2018 November 16, 2018 10 $ 13,692 $ 13,506 5 2 2 1 9,503 4,607 1,718 3,195 9,423 4,530 1,714 3,166 20 $ 32,715 $ 32,339 The Company used the proceeds to fund a portion of the acquisition of the Sears parcels on April 11, 2018 as discussed above, to reduce corporate debt, and to fund ongoing redevelopment efforts. 43 The O'Connor Joint Ventures The Company has two joint ventures with O'Connor Mall Partners, L.P. ("O'Connor"). • 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®; 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. On December 20, 2019, the O'Connor Joint Venture I closed on the extension of the mortgage loan secured by The Mall at Johnson City. The extension is effective May 6, 2020 and will extend the maturity of the mortgage loan to May 6, 2023, with two additional one-year extension options available to the joint venture. The extension requires a $5.0 million principal prepayment on May 6, 2020, in addition to funding certain reserve accounts of $10.0 million for future redevelopment and property improvements. On April 11, 2018, the O'Connor Joint Venture I closed on the acquisition of the Sears department store located at Polaris Fashion Place® in connection with our acquisition of additional Sears department stores (see details under "Overview - Basis of Presentation - Sears Parcel Acquisitions"). • The O'Connor Joint Venture II During the year ended December 31, 2017, we completed an additional joint venture transaction with O'Connor with respect to the ownership and operation of seven of the Company's retail properties and certain related outparcels, consisting of the following: The Arboretum, located in Austin, Texas; Arbor Hills, located in Ann Arbor, Michigan; the Oklahoma City Properties, located in Oklahoma City, Oklahoma; 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"). The transaction valued the properties at $598.6 million before closing adjustments and debt assumptions, and we retained a non-controlling 51% interest. The transaction generated net proceeds to the Company of approximately $138.9 million, after taking into consideration costs associated with the transaction and the assumption of debt, which we used to reduce the Company's debt as well as for general corporate purposes. We deconsolidated the properties included in the O'Connor Joint Venture II and recorded a gain in connection with this partial sale of $126.1 million, which is included in gain on disposition of interests in properties, net in the consolidated statements of operations and comprehensive (loss) income. The gain was recorded pursuant to ASC 360-20 and calculated based upon proceeds received, less 49% of the book value of the deconsolidated net assets. Our retained 51% non-controlling equity method interest was valued at historical cost based upon the pro rata book value of the retained interest in the net assets. We retained management, leasing, and development responsibilities for the properties included in the O'Connor Joint Venture II. In connection with the formation of this joint venture, we recorded transaction costs of approximately $6.4 million as part of our basis in this investment. Impairment During the fourth quarter of 2019, the mortgage loan secured by Charlottesville Fashion Square, located in Charlottesville, Virginia was transferred to the special servicer (see section "Financing and Debt" for further details). As part of our quarterly assessment and in connection with the preparation of the financial statements included in this report, we considered this a triggering event and further shortened the estimated hold period, which resulted in the carrying value not being recoverable from the estimated undiscounted cash flows. The fair value of the property was based on the respective discounted estimated future cash flows, using a discount rate of 18.5% and a terminal capitalization rate of 15.5%, which were determined using management's assessment of the property operating performance and general market conditions. We compared the estimated fair value of $19.8 million to the related carrying value of $26.1 million, which resulted in the recording of an impairment charge of approximately $6.3 million in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2019. 44 During the third quarter of 2019, we recorded impairment charges related to Chautauqua Mall, located in Lakewood, New York, Matteson Plaza, located in Matteson, Illinois, and New Towne Mall, located in New Philadelphia, Ohio. In the case of Chautauqua Mall and New Towne Mall, the impairment charge was attributed to declines in the estimated undiscounted cash flows which resulted in the carrying value not being recoverable. The fair value of each property was based on the respective discounted estimated future cash flows of each property, using a discount rate of 18.5% and a terminal capitalization rate of 15.5%, which were determined using management's assessment of the property operating performance and general market conditions. As it relates to Matteson Plaza, the impairment charge was due to the change in facts and circumstances when we decided to hold the asset for a shorter period which resulted in the carrying value not being recoverable from the projected cash flows. The fair value was based on the executed purchase and sale agreement with an unaffiliated real estate investor, which was sold on January 14, 2020 (see "Acquisitions and Dispositions" for details). We recorded an aggregate impairment charge for these three properties of approximately $28.9 million in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2019. During the fourth quarter of 2017, a major anchor tenant of Rushmore Mall, located in Rapid City, South Dakota, informed us of their intention to close their store at the property. The impending closure was deemed a triggering event and, therefore, we evaluated this property in conjunction with our quarterly impairment review and preparation of our financial statements for the year ended December 31, 2017. We compared the estimated fair value of $37.5 million to the related carrying value of $75.0 million, which resulted in the recording of an impairment charge of approximately $37.5 million in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2017. On October 4, 2017, the Company entered into a purchase and sale agreement to sell Colonial Park Mall, located in Harrisburg, Pennsylvania, to an unaffiliated private real estate investor, which was sold on November 3, 2017. During the third quarter of 2017, we shortened the hold period used in assessing impairment for this asset, which resulted in the carrying value not being recoverable from the expected cash flows. We compared the fair value measurement of the property to its relative carrying value, which resulted in the recording of an impairment charge of approximately $20.9 million in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2017. During the first quarter of 2017, the Company entered into a purchase and sale agreement to dispose of Morgantown Commons, located in Morgantown, West Virginia, which was sold in the second quarter of 2017. We shortened the hold period used in assessing impairment for the asset during the quarter ended March 31, 2017, which resulted in the carrying value not being recoverable from the expected cash flows. The purchase offer represented the best available evidence of fair value for this property. We compared the fair value to the carrying value, which resulted in the recording of an impairment charge of approximately $8.5 million in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2017. 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, 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 December 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 Tier 2 and noncore properties. Refer to "Portfolio Summary" below for our property listing. 45 When excluding the impact of bankruptcies, store closings, and co-tenancy impact primarily related to the bankruptcies of Bon-Ton Stores, Inc., Sears, and Toys R' Us (the "Anchor Store Impact") and additional 2019 bankruptcies, which include Charlotte Russe, Gymboree, and Payless Shoesource, business fundamentals in our core portfolio for 2019 were generally stable compared to 2018. Ending occupancy for the Tier 1 and open air properties was 93.4% as of December 31, 2019, as compared to 94.7% as of December 31, 2018. Average base minimum rent per square foot for the core portfolio decreased 2.4% when comparing December 31, 2019 to December 31, 2018, primarily due to temporary reductions related to tenants subject to co-tenancy claims. Comparable NOI for the Tier 1 and open air properties decreased 5.2% when comparing calendar year 2019 to 2018. The Tier 1 properties had a decrease in comparable NOI of 8.0%, and the open air properties had an increase in comparable NOI of 2.1%. This decrease in NOI of $24.5 million for the Tier 1 and open air properties relate to lower revenue of $14.8 million from the Anchor Store Impact and an additional $6.1 million from the 2019 bankruptcies as noted above. The following table sets forth key operating statistics for the combined portfolio of core properties or interests in properties: Ending occupancy (1) Average base minimum rent per square foot (2) $ 93.4% (1.3)% 21.52 (2.4)% $ 94.7% 22.04 0.3% 0.3% $ 94.4% 21.98 December 31, 2019 % Change December 31, 2018 % Change December 31, 2017 (1) Ending occupancy is the percentage of GLA which is leased as of the last day of the reporting period. We include all Company-owned space except for anchors, majors, 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 year ended December 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 core portfolio, comprising approximately 2,284,800 square feet. The average annual initial base minimum rent for new leases was $20.26 per square foot ("psf") and for renewed leases was $32.05 psf. For these leases, the average for tenant allowances was $31.66 psf for new leases and $8.75 psf for renewals. During the year ended December 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 comparable core portfolio, comprising approximately 1,934,900 square feet. The average annual initial base minimum rent for new leases was $24.08 psf and for renewed leases was $27.35 psf. For these leases, the average for tenant allowances was $32.64 psf for new leases and $5.82 psf for renewals. Portfolio Summary The table below provides some of our key metrics for the core enclosed retail property tiers as well as some key metrics for our open air property portfolio: Leased Occupancy %1 Store Sales Per Square Foot for 12 Months Ended Store Occupancy Cost % % of Total Comp NOI for 12 Months Ended 12/31/19 12/31/18 12/31/19 12/31/18 12/31/19 12/31/18 12/31/19 Property Count Open Air Properties Tier 1 Enclosed retail properties Tier 1 and Open Air 49 42 91 95.7 % 91.4 % 93.4% 95.5 % 94.0 % $ 413 $ 397 11.2 % 11.8 % 94.7% 27.3 % 65.6 % 92.9% 1Metrics only include properties owned as of December 31, 2019, and exclude Tier 2 and Noncore properties. 46 Enclosed Retail Property Tiers The following table categorizes the enclosed retail properties into the respective tiers as of December 31, 2019: Arbor Hills Arboretum, The Ashland Town Center Bowie Town Center Brunswick Square Clay Terrace Cottonwood Mall Dayton Mall Edison Mall Grand Central Mall Great Lakes Mall Irving Mall Jefferson Valley Mall Tier 1 Mesa Mall Morgantown Mall Northtown Mall Northwoods Mall Oklahoma City Properties Orange Park Mall Paddock Mall Pearlridge Center Polaris Fashion Place Port Charlotte Town Center Scottsdale Quarter Southern Hills Mall Southern Park Mall Tier 2/Noncore Tier 2 Anderson Mall Boynton Beach Mall Chautauqua Mall Indian Mound Mall Lima Mall Maplewood Mall New Towne Mall Oak Court Mall Rolling Oaks Mall Sunland Park Mall Noncore Lincolnwood Town Center Southgate Mall Charlottesville Fashion Square Lindale Mall Longview Mall The Outlet Collection | Seattle Muncie Mall Town Center at Aurora Seminole Towne Center Malibu Lumber Yard Town Center Crossing & Plaza Mall at Fairfield Commons, The Waterford Lakes Town Center Mall at Johnson City, The Markland Mall Melbourne Square Weberstown Mall Westminster Mall1 WestShore Plaza 1Due to major planned redevelopment, Westminster will be reclassed to Tier 2 in 2020 until stabilized. Critical Accounting Policies The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements. From time to time, we reevaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information. Below is a discussion of accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain. For a summary of our significant accounting policies, please refer to Note 3 of the notes to the consolidated financial statements. 47 • 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 common area maintenance or "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 payments due under an operating lease is probable. We have elected the practical expedient in Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)" 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 (CAM) of the non- cancelable lease term on a straight-line basis in accordance with Topic 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. • We review investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable. These circumstances include, but are not limited to, declines in a property's cash flows, ending occupancy, estimated market values or our decision to dispose of a property before the end of its estimated useful life. Furthermore, this evaluation is conducted no less frequently than quarterly, irrespective of changes in circumstances. We measure any impairment of investment property when the estimated undiscounted operating income before depreciation and amortization plus its residual value is less than the carrying value of the property. To the extent impairment has occurred, we charge to expense the excess of carrying value of the property over its estimated fair value. The evaluation of impairment is subject to certain management assumptions including projected net operating income, anticipated hold period, expected capital expenditures and the capitalization rate used to estimate the property's residual value. We may decide to dispose of properties that are held for use and the consideration received from these property dispositions may differ from their carrying values. We also review our investments, including investments in unconsolidated entities, if events or circumstances change indicating that the carrying amount of our investments may not be recoverable. We will record an impairment charge if we determine that a decline in the fair value of the investments in unconsolidated entities is other-than-temporary. Changes in economic and operating conditions that occur subsequent to our review of recoverability of investment property and other investments in unconsolidated entities could impact the assumptions used in that assessment and could result in future charges to earnings if assumptions regarding those investments differ from actual results. • To maintain its status as a REIT, WPG Inc. must distribute at least 90% of its REIT taxable income, exclusive of net capital gains in any given year and meet certain asset and income tests. We monitor our business and transactions that may potentially impact WPG Inc.'s REIT status. In the unlikely event that WPG Inc. fails to maintain REIT status, and available relief provisions do not apply, then it would be required to pay federal income taxes at regular corporate income tax rates during the period it did not qualify as a REIT. If WPG Inc. lost its REIT status, it could not elect to be taxed as a REIT for four years unless its failure was due to reasonable cause and certain other conditions were met. As a result, failing to maintain REIT status would result in a significant increase in the income tax expense recorded and paid during those periods. 48 • We make estimates as part of our recording of property acquisitions to the various components of the acquisition based upon the fair value of each component. The most significant components of our allocations are typically the recording of the fair value of buildings as-if-vacant, land and market value of in-place leases. In the case of the fair value of buildings and the recording of the fair value of land and other intangibles, our estimates of the values of these components will affect the amount of depreciation we record over the estimated useful life of the property acquired or the remaining lease term. In the case of the market value of in-place leases, we make our best estimates of the tenants' ability to pay rents based upon the tenants' operating performance at the property, including the competitive position of the property in its market as well as tenant sales, rents per square foot, and overall occupancy cost for the tenants in place at the acquisition date. Our assumptions affect the amount of future revenue that we will recognize over the remaining lease term for the acquired in-place leases. • A variety of costs are incurred in the development and leasing of properties. After determination is made to capitalize a cost, it is allocated to the specific component of a project that is benefited. Determination of when a development project is substantially complete and capitalization must cease involves a degree of professional judgment. The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. We consider a construction project as substantially completed when it is held available for occupancy, and accordingly, cease capitalization of costs upon opening. When it is determined that the project is no longer viable, capitalized costs are charged to expense. New Accounting Pronouncements Adoption of New Standards On January 1, 2019, we adopted ASU 2016-02. 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 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 operating lease payments is 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 now 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"). For the years ended December 31, 2018 and 2017, the Company deferred $17.7 million and $16.9 million of internal leasing costs and legal costs, respectively, 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. 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. 49 In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses," which introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities, and net investments in leases as well as reinsurance and trade receivables. In November 2018, the FASB issued ASU 2018-19, which clarifies that operating lease receivables are outside the scope of the new standard. This standard will be effective for fiscal years beginning after December 15, 2019. Our seller-provided bridge financing associated with our October 10, 2019 closing of Perennial (see "Financing and Debt - Other Indebtedness (Perennial)" for further details) and certain other miscellaneous accounts will be in scope of ASU 2016-13, but we do not expect this will have a material impact on our financial statements. Results of Operations The following acquisitions and dispositions affected our results in the comparative periods: • On December 19, 2019, we completed the sale of Charles Towne Square, located in Charleston, South Carolina, to an unaffiliated private real estate investor. • On December 18, 2019, we transitioned West Ridge Mall and Plaza ("West Ridge," collectively), located in Topeka, Kansas, to the lender. • During 2019, we completed the sale of 25 outparcels to Four Corners (see details under "Overview - Basis of Presentation - Four Corners Outparcel Sales"). • On July 1, 2019, we transitioned Towne West Square, located in Wichita, Kansas, to the lender. • During 2018, we completed the sale of 20 outparcels to Four Corners (see details under "Overview - Basis of Presentation - Four Corners Outparcel Sales"). • On October 23, 2018, we transitioned Rushmore Mall to the lender. • 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 November 3, 2017, we completed the sale of Colonial Park Mall. • On October 17, 2017, we completed a discounted payoff of the mortgage loan secured by Southern Hills Mall, located in Sioux City, Iowa. • On October 3, 2017, we transitioned Valle Vista Mall, located in Harlingen, Texas, to the lender. • On June 13, 2017, we sold 49% of our interest in Malibu Lumber Yard as part of the O'Connor Joint Venture II transaction. • On June 7, 2017, we completed the sale of Morgantown Commons. • On May 16, 2017, we completed the sale of an 80,000 square foot vacant anchor parcel at Indian Mound Mall, located in Newark, Ohio. • On May 12, 2017, we completed the transaction forming the O'Connor Joint Venture II with regard to the ownership and operation of six of the Company's retail properties and certain related outparcels. Under the terms of the joint venture agreement, we retained a 51% non-controlling interest and sold a 49% interest to O'Connor, the third party partner. • On April, 25, 2017, we completed a discounted payoff of the mortgage loan secured by Mesa Mall, located in Grand Junction, Colorado. • On February 21, 2017, we completed the sale of Gulf View Square, located in Port Richey, Florida, and River Oaks Center, located in Chicago, Illinois. • On January 10, 2017, we completed the sale of Virginia Center Commons, located in Glen Allen, Virginia. Year Ended December 31, 2019 vs. Year Ended December 31, 2018 For purposes of the following comparisons, the transactions listed above that occurred in the periods under comparison are referred to as the "Property Transactions," and "comparable properties" refers to the remaining properties we owned and operated throughout both years in the year-to-year comparisons. Rental income decreased $56.8 million primarily due to a $43.7 million decrease attributable to the comparable properties, primarily attributed to the Anchor Store Impact, 2019 bankruptcies, and a $13.1 million decrease related to the Property Transactions. 50 Property operating expenses increased $5.9 million, primarily due to an increase of $7.5 million attributable to the comparable properties, which was driven by an overall increase in both recurring and incentive compensation costs as we have transformed the roles and responsibilities of our property general manager in addition to incentivizing these individuals to meet certain sponsorship and short-term tenant targets, an increase in property insurance costs, and an increase in utility costs, offset by a $1.6 million decrease attributable to the Property Transactions. Depreciation and amortization increased $13.5 million, primarily due to a $15.3 million increase attributable to the comparable properties which related to the accelerated depreciation of certain building assets offset by lower capitalized lease costs amortization. Offsetting this increase was a $1.8 million decrease attributable to the Property Transactions. Real estate taxes decreased $4.5 million, primarily due to a $3.5 million decrease in the comparable properties due to reduced tax assessments and capitalization of real estate taxes associated with redevelopment efforts and a $1.0 million decrease attributable to the Property Transactions. General and administrative expenses increased $12.1 million, of which $13.2 million was attributable to the impact of the new lease accounting standard which prohibits the Company from capitalizing non-incremental internal costs attributable to leasing and legal efforts. Offsetting this increase was a reduction in annual incentive compensation of $1.1 million. The $35.3 million impairment loss recorded in 2019 related to the write down of Charlottesville Fashion Square, Chautauqua Mall, New Towne Mall, and Matteson Plaza, as described in further detail under "Impairment." No impairment charges were recorded in 2018. Interest expense, net, increased $11.4 million, of which a net $7.6 million was attributable to corporate debt activity primarily related to higher interest rates due to the credit rating downgrade and increased leverage levels, a $6.4 million increase attributable to the April 2019 financing of Waterford Lakes Town Center, located in Orlando, Florida, and a $1.9 million increase attributable to the October 10, 2019 Perennial transaction (see details under "Overview - Basis of Presentation - Perennial"). Offsetting these increases was a decrease of $3.2 million primarily attributable to the Property Transactions and a $1.3 million decrease primarily related to repaid mortgages. Gain on disposition of interests in properties, net increased $13.8 million which is primarily attributed to the timing of the closing of the various Four Corners tranches within the comparable periods, in addition to the sale of Charles Towne Square. Gain on extinguishment of debt, net recognized in the 2019 period consisted of the $24.8 million gain related to the transitioning of the $49.5 million mortgage loan secured by West Ridge, the $37.7 million gain related to the transitioning of $45.2 million mortgage loan secured by Towne West Square and a $1.2 million gain related to the partial retirement of the Senior Notes due 2024, as defined in "Financing and Debt." The gain on extinguishment of debt, net recognized in the 2018 period consisted of the $51.4 million gain related to the transition of the $94.0 million mortgage loan secured by Rushmore Mall. For WPG Inc., net income attributable to noncontrolling interests primarily relates to the allocation of income to third parties based on their respective weighted average ownership interest in WPG L.P., which percentage remained consistent over the periods. Year Ended December 31, 2018 vs. Year Ended December 31, 2017 For purposes of the following comparisons, the transactions listed above that occurred in the periods under comparison (excluding the properties included in the O'Connor Joint Venture II and the discounted payoffs of Mesa Mall and Southern Hills Mall, which are referred to as their respective capitalized terms) are referred to as the "Property Transactions," and "comparable properties" refers to the remaining properties we owned and operated throughout both years in the year-to-year comparisons. Rental income decreased $41.8 million, primarily due to a $20.0 million decrease related to the O'Connor Joint Venture II properties, a $13.0 million decrease attributable to the comparable properties primarily due to the result of anchor tenant bankruptcies and related co-tenancy claims, and a $8.8 million decrease related to the Property Transactions. Other income increased $6.2 million, primarily attributable to the receipt of $4.7 million of franchise tax proceeds, a $1.6 million increase in management, leasing and development fee income from the unconsolidated joint ventures to which we provide such services, and a $0.4 million increase in ancillary income from the comparable properties, offset by a $0.4 million decrease attributable to the Property Transactions, and a $0.1 million decrease attributable to the O'Connor Joint Venture II properties. Property operating expenses increased $1.9 million, primarily due to an increase of $8.1 million attributable to the comparable properties, primarily driven by snow removal costs, property and liability insurance costs, on-site security costs, trash removal costs, utility costs, operational repairs and maintenance, and employee benefits, offset by a $3.3 million decrease attributable to the Property Transactions and a $2.9 million decrease attributable to the O'Connor Joint Venture II properties. Depreciation and amortization decreased $0.9 million, primarily due to a $6.9 million decrease attributable to the O'Connor Joint Venture II properties and a $4.0 million decrease attributable to the Property Transactions, offset by a $10.0 million increase attributable to the comparable properties, which was primarily attributable to accelerated depreciation of certain tenant related improvements and intangibles in addition to development assets placed into service. Real estate taxes decreased $3.0 million, primarily due to a $3.4 million decrease attributable to the O'Connor Joint Venture II properties, offset by a $0.2 million increase attributable to the Property Transactions and a $0.2 million increase attributable to the comparable properties. 51 General and administrative expenses increased $4.2 million, primarily attributable to $2.0 million of severance costs, as discussed in "Overview - Basis of Presentation' and $2.2 million primarily attributable to professional fees, office rent, amortization of stock-based compensation and travel costs. Ground rent decreased $1.6 million primarily attributable to the O'Connor Joint Venture II properties. The $66.9 million in impairment losses recorded in 2017 relate to the write down of Rushmore Mall, Colonial Park Mall and Morgantown Commons, as described in further detail under "Impairment." No impairment charges were recorded in 2018. Interest expense, net, increased $15.4 million, of which $26.8 million was attributable to corporate debt activity primarily related to the August 2017 bond offering and amortization of deferred financing fees related to the January 2018 Facility recast and $0.1 million related to default interest on properties transitioned, or to be transitioned, to lenders. Offsetting these increases were decreases of $8.3 million attributable to the payoffs of the mortgage loans secured by Mesa Mall, WestShore Plaza, located in Tampa, Florida, Southern Hills Mall, Henderson Square, located in King of Prussia, Pennsylvania, The Outlet Collection® | Seattle, located in Auburn, Washington, and Whitehall Mall, located in Whitehall, Pennsylvania, $1.8 million attributable to the O'Connor Joint Venture II Properties, $1.0 million related to the Property Transactions, and $0.4 million attributable to the comparable properties. Gain on disposition of interests in properties, net for 2018 is primarily attributable to the outparcel sales to Four Corners. The 2017 net gain was attributed to sales of Morgantown Commons, a vacant anchor parcel at Indian Mound Mall, the O'Connor Joint Venture II transactions, Gulf View Square, River Oaks Center, and Virginia Center Commons. Gain on extinguishment of debt, net recognized in the 2018 period consisted of the $51.4 million gain related to the transition of the $94.0 million mortgage loan secured by Rushmore Mall. The gain on extinguishment of debt, net recognized in the 2017 period consisted of the $90.6 million gain related to the discounted payoff of the $99.7 million mortgage loan secured by Southern Hills Mall, transitioning of the $40.0 million mortgage loan secured by Valle Vista Mall to the lender, and the discounted payoff of the $87.3 million mortgage loan secured by Mesa Mall. Income and other taxes decreased $1.9 million, which was primarily attributable to a nonrecurring state use tax that was incurred in 2017. For WPG Inc., net income attributable to noncontrolling interests primarily relates to the allocation of 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 senior unsecured revolving credit facility, or "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 $209.3 million during the year ended December 31, 2019. Our balance of cash and cash equivalents decreased $1.1 million during 2019 to $41.4 million as of December 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 the 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 non-variable rate mortgages or interest rate swaps that effectively fix the interest rate. At December 31, 2019, floating rate debt (excluding loans hedged to fixed interest) comprised 11.9% of our total consolidated debt. We will continue to monitor our borrowing mix to limit market risk. During the first quarter of 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 (effective May 2, 2019), December 2015 Term Loan (effective February 15, 2019), and Senior Notes due 2024 (effective August 15, 2019) (as defined in "Overview - Basis of Presentation - Financing and Debt"). Due to the downgrade and based upon current leverage levels, as of December 31, 2019, our Revolver bears interest at LIBOR plus 1.80% (an increase of 55 basis points), our Term Loan bears interest at LIBOR plus 2.10% (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 bear interest at 6.450% (an increase of 50 basis points). The impact of the credit downgrade resulted in an increase in borrowing costs of approximately $6.4 million during 2019. Such a downgrade may also impact terms and conditions of future borrowings in addition to adversely affecting our ability to access the public markets. 52 On December 31, 2019, we had an aggregate available borrowing capacity of $442.8 million under the Revolver, net of outstanding borrowings of $207.0 million and $0.2 million reserved for outstanding letters of credit. The weighted average interest rate on the Revolver was 4.0% for the year ended December 31, 2019. The consolidated indebtedness of our business was approximately $3.1 billion as of December 31, 2019, or an increase of approximately $124.1 million from December 31, 2018. The change in consolidated indebtedness from December 31, 2018 is described in greater detail under "Financing and Debt." LIBOR Transition In July 2017, the FCA, which regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Rates Committee ("AARC"), which identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to USD-LIBOR in derivatives and other financial contracts. The Company is not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form. As of December 31, 2019, the Company has three consolidated variable rate debt contracts, totaling approximately $372.0 million, and one unconsolidated variable rate debt contract, totaling $6.5 million (pro-rata share), indexed to LIBOR. In addition, we have three consolidated variable rate debt contracts, totaling approximately $641.3 million, swapped to LIBOR plus a fixed spread under 11 outstanding interest rate derivatives. When including extension options, approximately $897.0 million of the consolidated indebtedness and the $6.5 million (pro-rata share) of unconsolidated indebtedness referenced above have maturity dates outside of the expected discontinuance date. The Company is currently monitoring and evaluating the related risks, which include interest on loans, and amounts received or paid on the derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require negotiation with a respective counterparty. If a contract is not transitioned to an alternative rate and LIBOR is discontinued, the impact on our contracts is likely to vary by contract. If LIBOR is discontinued or if the methods of calculating LIBOR change from their current form, interest rates on our current or future indebtedness may be adversely affected. While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transitions to an alternative reference rate will be accelerated or magnified. 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 2020. 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 interests in joint ventures. Cash Flows Our net cash flow from operating activities totaled $209.3 million during 2019. During 2019, we also: • • • • • • funded capital expenditures of $176.7 million; received net proceeds from the disposition of interests in properties and outparcels of $53.4 million; funded investments in unconsolidated entities of $19.8 million; received distributions of capital from unconsolidated entities of $28.0 million; received net proceeds from our debt financing, refinancing, and repayment activities of $158.1 million; and funded distributions to common and preferred shareholders and unitholders of $237.5 million. 53 In general, we anticipate that cash generated from operations will be sufficient to meet operating expenses, monthly debt service and recurring capital expenditures. On a long-term basis, we intend to make distributions to shareholders as necessary to maintain WPG Inc.'s status as a REIT. 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 2020, 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, or seek other additional sources of financing as discussed above. Financing and Debt Mortgage Debt Total mortgage indebtedness at December 31, 2019 and 2018 was as follows (in thousands): Face amount of mortgage loans Fair value adjustments, net Debt issuance cost, net Carrying value of mortgage loans December 31, 2019 December 31, 2018 $ 1,117,242 $ 980,276 3,463 (5,097) 1,115,608 $ $ 5,764 (2,771) 983,269 A roll forward of mortgage indebtedness from December 31, 2018 to December 31, 2019 is summarized as follows (in thousands): Balance at December 31, 2018 Debt amortization payments Repayment of debt Debt borrowings, net of issuance costs Debt canceled upon lender foreclosures, net of debt issuance costs Amortization of fair value and other adjustments Amortization of debt issuance costs Balance at December 31, 2019 $ 983,269 (18,115) (47,175) 293,416 (94,633) (2,301) 1,147 $ 1,115,608 On December 18, 2019, the $49.5 million mortgage on West Ridge was canceled upon the lender foreclosure (see "Covenants" section below for additional details). On September 16, 2019, an affiliate of WPG Inc. repaid its existing $47.2 million, 7.50% fixed rate cross-defaulted and cross-collateralized pool of mortgages that encumbered Forest Plaza, located in Rockford, Illinois; Lakeline Plaza, located in Cedar Park, Texas; Muncie Towne Plaza, located in Muncie, Indiana; and White Oaks Plaza, located in Springfield, Illinois, which was scheduled to mature on October 16, 2019. Simultaneously, the Company closed on a new $117.0 million, 3.67% fixed rate cross- defaulted and cross-collateralized pool of mortgages encumbering the same properties. The new loan requires monthly interest- only payments and will mature on October 1, 2029. On July 1, 2019, the $45.2 million mortgage on Towne West Square, located in Wichita, Kansas, was canceled upon a deed- in-lieu of foreclosure agreement (see "Covenants" section below for additional details). 54 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. On April 1, 2019, the Company exercised the first of two options to extend the maturity date of the $52.0 million mortgage note payable on Town Center at Aurora® 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 to fix the interest rate of the note payable at one-month LIBOR plus 2.27% per annum through both extension periods. At December 31, 2019, the interest rate on the note payable was 4.92%. On October 23, 2018, the $94.0 million mortgage on Rushmore Mall was canceled upon a deed-in-lieu of foreclosure agreement (see "Covenants" section below for additional details). On October 2, 2018, an affiliate of WPG Inc. repaid the $8.3 million mortgage loan on Whitehall Mall. This repayment was funded by cash on hand. On September 27, 2018, an affiliate of WPG Inc. closed on a $35.0 million full-recourse note payable secured by Southgate Mall (see details under "Overview - Basis of Presentation - Southgate"). On June 8, 2018, the Company exercised the first of three options to extend the maturity date of the $65.0 million term loan secured by Weberstown Mall for one year. On January 19, 2018, an affiliate of WPG Inc. repaid the $86.5 million mortgage loan on The Outlet Collection® | Seattle. This repayment was funded by borrowings on the Revolver (as defined below). Highly-levered Assets As of December 31, 2019, we have identified two 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 $78.3 million and encumber Charlottesville Fashion Square and Muncie Mall, located in Muncie, Indiana, both of which have been identified as noncore properties. Additionally, we have identified the $52.5 million 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 during the year ended December 31, 2019. 55 Unsecured Debt The following table identifies our total unsecured debt outstanding at December 31, 2019 and December 31, 2018: Notes payable: Face amount - the Exchange Notes(1) Face amount - Senior Notes due 2024(2) Debt discount, net Debt issuance costs, net Total carrying value of notes payable Unsecured term loans:(7) Face amount - Term Loan(3)(4) Face amount - December 2015 Term Loan(5) Debt issuance costs, net Total carrying value of unsecured term loans Revolving credit facility:(3)(6) Face amount Debt issuance costs, net Total carrying value of revolving credit facility December 31, 2019 December 31, 2018 $ 250,000 $ 250,000 720,900 (7,864) (5,470) 957,566 $ 750,000 (9,680) (7,623) 982,697 350,000 $ 350,000 340,000 (3,358) 686,642 207,000 (2,855) 204,145 $ $ $ 340,000 (4,491) 685,509 290,000 (3,998) 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, bore interest at 5.950% per annum through August 14, 2019, at which time the interest rate increased to 6.450% per annum due to the credit downgrade. The Senior Notes due 2024 mature on August 15, 2024. (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 2.10% 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 4.86% per annum through June 30, 2021. At December 31, 2019, the applicable interest rate on the unhedged portion of the Term Loan was one-month LIBOR plus 2.10% or 3.86%. (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 at one-month LIBOR plus 1.80% 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 December 31, 2019, we had an aggregate available borrowing capacity of $442.8 million under the Revolver, net of $0.2 million reserved for outstanding letters of credit. At December 31, 2019, the applicable interest rate on the Revolver was one-month LIBOR plus 1.80%, or 3.56%. The interest rate on the Revolver could vary in the future based upon changes to the Company's credit ratings and leverage levels. (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 leverage levels. During the year ended December 31, 2019, the Company retired $29.1 million outstanding principal on the Senior Notes due 2024 and recognized a gain of approximately $1.2 million, which is recorded in gain on extinguishment of debt, net in the consolidated statements of operations and comprehensive (loss) income for the period then ended. On January 22, 2018, WPG L.P. amended the terms of the Facility to provide for borrowings of $1.0 billion. The Facility can be increased to $1.5 billion through currently uncommitted Facility commitments. Excluding the accordion feature, the Facility includes a $650.0 million Revolver and $350.0 million Term Loan. The $350.0 million Term Loan was fully funded at closing, and the Company used the proceeds to repay a $270.0 million outstanding term loan and to pay down the Revolver. 56 Other Indebtedness (Perennial) On October 10, 2019, WPG L.P. closed on the sale and leaseback of four assets (collectively, the "Properties") pursuant to the purchase and sale agreement executed on July 24, 2019 between WPG L.P. and Mall Ground Portfolio, LLC, an affiliate of Perennial Investment & Advisors, LLC and Kawa Capital Partners, LLC ("the Ground Lessor"). The Properties are: Edison Mall, located in Fort Myers, Florida; Great Lakes Mall, located in Mentor, Ohio; Irving Mall, located in Irving, Texas; and Jefferson Valley Mall, located in Yorktown Heights, New York. Under the agreement, the Ground Lessor acquired a fee interest in the land at the Properties for a price of approximately $98.9 million. Concurrently, WPG L.P. entered into a new 99-year master ground lease for the leasehold interest at the Properties. The master ground lease includes fixed annual payments to the Ground Lessor at an initial annualized rate of 7.4% and contains annual rent escalators over the aforementioned term. The agreement includes an option for WPG L.P. to repurchase the fee interest in the land at $109.3 million in year 30 of the master ground lease. If WPG L.P. does not exercise this option, then the Ground Lessor will retain the fee interest in the land, and the fee interest in the improvements and development rights will transfer to the Ground Lessor at the end of the 99-year ground lease term. WPG L.P. received approximately $42.3 million in proceeds upon closing, net of $55.0 million in bridge financing provided by WPG L.P. to the Ground Lessor and closing costs. The bridge financing has a maximum five-year balloon term, which can be pre-paid without penalty, and carries an interest rate of 4.0%. The bridge financing is included in "Deferred costs and other assets" on the consolidated balance sheet at December 31, 2019. The net proceeds were generally used to fund ongoing redevelopment efforts and for general corporate purposes. WPG L.P. continues to own a fee interest in the improvements and development rights through the term of the aforementioned master ground lease and continues to manage, lease and develop the Properties and maintains full control over the leasehold interest and in the land and fee interest in the improvements and development rights at the respective Properties. For accounting purposes, the repurchase option precluded WPG L.P. from meeting the criteria for sales recognition. As such, the gross proceeds received have been accounted for as a financial liability, net of capitalized closing costs of $1.6 million, and subject to accretion over the relevant term. As of December 31, 2019, the net financial liability was approximately $97.6 million, including $0.3 million of accretion. Expense is being recognized utilizing an effective interest rate of 8.56% per annum during the repurchase period. During the year ended December 31, 2019, we recognized expense of approximately $1.9 million, which is included in interest expense, net in the consolidated statements of operations and comprehensive (loss) income. 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 one or more of the respective lenders including adjustments to the applicable interest rate. As of December 31, 2019, management believes the Company is in compliance with all covenants of its unsecured debt. The total balance of mortgages was approximately $1.1 billion as of December 31, 2019. At December 31, 2019, certain of our consolidated subsidiaries were the borrowers under 20 non-recourse loans and two full-recourse loans secured by mortgages encumbering 24 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. 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. If the borrower fails to comply with these covenants, the lenders could accelerate the debt and enforce its right against their collateral. On November 5, 2019, we received a letter, dated October 30, 2019, from the lender notifying the borrower, a consolidated subsidiary of WPG L.P., that the $45.1 million mortgage loan secured by Charlottesville Fashion Square was transferred to special servicing because the borrower notified the lender that future projected cash flows will be insufficient to ensure future compliance with the mortgage loan due to the loss of certain tenants. 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 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 $49.5 million mortgage loan secured by West Ridge. 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 December 18, 2019, an affiliate of the Company transitioned the property to the lender. 57 On May 29, 2018, we received a notice of default letter, dated May 25, 2018, from the special servicer to the borrower, a consolidated subsidiary of WPG L.P., concerning the $94.0 million mortgage loan secured by Rushmore Mall ("Rushmore"). The notice was issued by the special servicer because the borrower notified the lender that there were insufficient funds to ensure future compliance with the mortgage loan due to the loss of certain tenants at Rushmore. On October 23, 2018, an affiliate of the Company transitioned the property to the lender. 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. On July 1, 2019, an affiliate of the Company transitioned the property to the lender. On March 30, 2017, the Company transferred the then $40.0 million mortgage loan secured by Valle Vista Mall to the special servicer at the request of the borrower, a consolidated subsidiary of WPG L.P. On May 18, 2017, we received a notice of default letter, dated that same date, from the special servicer because the borrower did not repay the loan in full by its May 10, 2017 maturity date. On October 3, 2017, an affiliate of WPG Inc. transitioned the property to the lender. On June 6, 2016, we received a notice of default letter, dated June 3, 2016, from the special servicer to the borrower of the then $99.7 million mortgage loan secured by Southern Hills Mall. The letter was sent because the borrower, a consolidated subsidiary of WPG L.P., did not repay the loan in full by its June 1, 2016 maturity date. On October 27, 2016, we received notification that a receiver had been appointed to manage and lease the property. On October 17, 2017, an affiliate of WPG Inc. completed a discounted payoff of the mortgage loan for $55.0 million and we retained ownership and management of the property. On June 30, 2016, we received a notice, dated that same date, that the then $87.3 million mortgage loan secured by Mesa Mall had been transferred to the special servicer due to the payment default that occurred when the borrower, a consolidated subsidiary of WPG L.P., did not repay the loan in full by its June 1, 2016 maturity date. On April 25, 2017, the Company completed a discounted payoff of the mortgage loan for $63.0 million and retained ownership and management of the property. During the year ended December 31, 2019, the Company recognized a net gain of $62.5 million related to the $94.7 million mortgage debt cancellation and ownership transfer of West Ridge and Towne West Square, which is included in gain on extinguishment of debt, net in the consolidated statements of operations and comprehensive (loss) income for the year then ended. During the year ended December 31, 2018, the Company recognized a net gain of $51.4 million related to the $94.0 million mortgage debt cancellation and ownership transfer of Rushmore, which is included in gain on extinguishment of debt, net in the consolidated statements of operations and comprehensive (loss) income for the year then ended. During the year ended December 31, 2017, the Company recognized a net gain of $90.6 million based on the cancellation of mortgage debt of $108.9 million related to discounted payoff of the mortgage note payable secured by Southern Hills Mall, ownership transfer of Valle Vista Mall, and discounted payoff of the mortgage note payable secured by Mesa Mall, which is included in gain on extinguishment of debt, net in the consolidated statements of operations and comprehensive (loss) income for the year then ended. At December 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 which the Company still holds title, for impairment indicators as part of our quarterly assessment. Refer to "Impairment" for additional details. 58 Summary of Financing Our consolidated debt and the effective weighted average interest rates as of December 31, 2019 and 2018 consisted of the following (dollars in thousands): Fixed-rate debt, face amount Variable-rate debt, face amount Total face amount of debt Bond discount Fair value adjustments, net Debt issuance costs, net Total carrying value of debt Contractual Obligations December 31, 2019 $ 2,712,304 372,000 3,084,304 (7,864) 3,463 (18,341) 3,061,562 $ Weighted Average Interest Rate December 31, 2018 Weighted Average Interest Rate 4.91% 3.87% 4.75% 5.17% $ 2,505,276 3.73% 5.00% 455,000 2,960,276 (9,680) 5,764 (18,883) $ 2,937,477 The following table summarizes the material aspects of the Company's future obligations for consolidated entities as of December 31, 2019, assuming the obligations remain outstanding through maturities noted below (in thousands): Long-term debt(1) Interest payments(2) Distributions(3) Ground rent/operating leases(4) Purchase/tenant obligations(5) Total 2020 2021 - 2022 2023 - 2024 Thereafter Total $ 346,176 $ 967,559 $ 1,390,559 $ 390,133 $ 3,094,427 143,749 253,201 136,440 291,405 3,568 2,230 122,503 — 4,312 — — 2,461 — — 20,377 — 824,795 3,568 29,380 122,503 $ 618,226 $ 1,225,072 $ 1,529,460 $ 701,915 $ 4,074,673 (1)Represents principal maturities only and therefore excludes net fair value adjustments of $3,463, net debt issuance costs of $(18,341) and bond discount of $(7,864) as of December 31, 2019. The principal maturities reflect any available extension options within the control of the Company. Additionally, includes the difference between our carrying value of the financial liability of $99.2 million and the repurchase option payment of $109.3 million related to our Perennial transaction (see "Financing and Debt - Other Indebtedness (Perennial)" for additional details). (2)Variable rate interest payments are estimated based on the LIBOR rate and our credit ratings in place at December 31, 2019. Additionally, includes minimum annual payments owed under our Perennial transaction (see "Financing and Debt - Other Indebtedness (Perennial)" for additional details). (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. 59 The following table summarizes the material aspects of the Company's proportionate share of future obligations for unconsolidated entities as of December 31, 2019, assuming the obligations remain outstanding through initial maturities (in thousands): Long-term debt(1) Interest payments(2) Ground rent/operating leases(3) Purchase/tenant obligations(4) Total 2020 2021 - 2022 2023 - 2024 Thereafter Total $ 7,522 $ 48,001 $ 21,374 $ 541,178 $ 618,075 27,488 3,985 18,145 48,534 8,056 — 44,393 8,468 — 22,652 185,327 — 143,067 205,836 18,145 $ 57,140 $ 104,591 $ 74,235 $ 749,157 $ 985,123 (1)Represents principal maturities only and therefore excludes net fair value adjustments of $3,974 and debt issuance costs of $(2,206) as of December 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 December 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 Our 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 December 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. Equity Activity Preferred Stock Series H Cumulative Redeemable Preferred Stock On January 15, 2015, WPG Inc. issued 4,000,000 shares of 7.5% Series H Preferred Shares. Dividends accrue quarterly at an annual rate of 7.5% per share. WPG Inc. can redeem this series, in whole or in part, at a redemption price of $25.00 per share, plus accumulated and unpaid dividends. WPG L.P. issued to WPG Inc. a like number of preferred units as consideration for the Series H Preferred Shares and can redeem this series, in whole or in part, when WPG Inc. can redeem the Series H Preferred Shares at like terms. All shares remain issued and outstanding as of December 31, 2019 and 2018. Series I Cumulative Redeemable Preferred Stock On January 15, 2015, WPG Inc. issued 3,800,000 shares of 6.875% Series I Preferred Shares. Dividends accrue quarterly at an annual rate of 6.875% per share. WPG Inc. can redeem this series, in whole or in part, at a redemption price of $25.00 per share, plus accumulated and unpaid dividends. WPG L.P. issued to WPG Inc. a like number of preferred units as consideration for the Series I Preferred Shares and can redeem this series, in whole or in part, when WPG Inc. can redeem the Series I Preferred Shares at like terms. All shares remain issued and outstanding as of December 31, 2019 and 2018. 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. During the year ended December 31, 2017, WPG Inc. issued 314,577 shares of common stock to a limited partner of WPG L.P. in exchange for an equal number of units pursuant to the WPG L.P. Partnership Agreement. This transaction increased WPG Inc.’s ownership interest in WPG L.P. There were no similar transactions during the years ended December 31, 2019 and 2018. At December 31, 2019, WPG Inc. had reserved 34,682,956 shares of common stock for possible issuance upon the exchange of units held by limited partners. 60 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, these preferred units are classified as redeemable noncontrolling interests outside of permanent equity. Share Based Compensation On May 28, 2014, the WPG Inc. Board of Directors (the "Board") adopted the Washington Prime Group, L.P. 2014 Stock Incentive Plan (the "2014 Plan"), which permitted 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 were reserved for issuance, with a maximum number of awards to be granted to a participant in any calendar year of 500,000 shares/units. On May 16, 2019, the common shareholders of WPG Inc. approved the Washington Prime Group, L.P. 2019 Stock Incentive Plan (the "2019 Plan"), which replaced the 2014 Plan with respect to the issuance of new awards. The Board and its Compensation Committee (the "Committee") previously approved and adopted the 2019 Plan, subject to WPG Inc. common shareholder approval, during the Board and Committee's regular meetings in February 2019. An aggregate of 7,290,000 shares of common stock are reserved for issuance, excluding carryover shares from the 2014 Plan. 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 in WPG L.P. The 2019 Plan terminates on May 16, 2029. Annual Long-Term Incentive Awards During the years ended December 31, 2019, 2018 and 2017, the Company approved the terms and conditions of the 2019, 2018, and 2017 annual awards (the "2019 Annual Long-Term Incentive Awards," "2018 Annual Long-Term Incentive Awards," and "2017 Annual 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 WPG Inc. to WPG Inc.'s common shareholders for the applicable dividend payment dates. Compensation expense is recognized on a straight-line basis over the three year vesting term, except in instances that result in accelerated vesting due to severance arrangements. With respect to PSUs awarded in connection with the annual awards, actual PSUs earned may range from 0%-150% of the PSUs allocated to the award recipient, based on WPG Inc.'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 WPG Inc. to WPG Inc.’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, except in instances that result in accelerated amortization due to severance arrangements. The following table summarizes the issuance of the 2019 Annual Long-Term Incentive Awards, 2018 Annual Long-Term Incentive Awards, and 2017 Annual Long-Term Incentive Awards, respectively: Grant Date RSUs issued Grant date fair value per unit PSUs issued Grant date fair value per unit 2019 Annual Long- Term Incentive Awards 2018 Annual Long- Term Incentive Awards 2017 Annual Long- Term Incentive Awards February 20, 2019 February 20, 2018 February 21, 2017 587,000 $6.10 587,000 $4.88 358,198 $9.58 358,198 $7.72 572,163 $5.77 572,163 $4.98 61 During 2016, the Company approved the performance criteria and maximum dollar amount of the 2016 annual awards (the "2016 Annual Long-Term Incentive Awards"), that generally range from 30%-100% of actual base salary, for certain executive officers and employees of the Company. The number of awards was determined by converting the cash value of the award to a number of RSUs (the "Allocated RSUs") based on the closing price of WPG Inc.'s common shares for the final 15 trading days of 2016. Eventual recipients were eligible to receive a percentage of the Allocated RSUs based on the Company's performance on its strategic goals detailed in the Company's 2016 cash bonus plan and the Company's relative TSR compared to a peer group based on companies with similar assets and revenue. Payout for 50% of the Allocated RSUs was based on the Company's performance on the strategic goals and the payout on the remaining 50% was based on the Company's TSR performance. Both the strategic goal component as well as the TSR performance were achieved at target, resulting in a 100% payout. During the year ended December 31, 2017, the Company awarded 324,237 Allocated RSUs, with a grant date fair value of $2.2 million, related to the 2016 Annual Long-Term Incentive Awards, which will vest in one-third installments on each of February 21, 2018, 2019 and 2020, subject to the participant's continued employment with the Company through each vesting date and the participant's continued compliance with certain applicable covenants, except in instances that result in accelerated vesting due to severance arrangements. Other Compensation Arrangements On August 2, 2019, in connection with the execution of an amended and restated employment agreement, the Committee granted Mr. Louis G. Conforti, the Company's Chief Executive Officer and Director, a retention award of 500,000 RSUs, with a grant date fair value of $1.8 million, and 500,000 PSUs, at target with a grant date fair value of $1.2 million, for his continued service through August 2, 2024. RSUs represent a contingent right to receive one WPG Inc. common share for each vested RSU. Dividend equivalents corresponding to the amount of any regular cash dividends paid by WPG Inc. to WPG Inc.’s common shareholders for the applicable dividend payment dates will accrue and be deemed reinvested in additional RSUs, which themselves will accrue dividend equivalents, and will be paid out if and when the underlying RSU vests. The RSUs will vest in one-third installments on August 2, 2022, 2023, and 2024, subject to Mr. Conforti's continued employment through such applicable date. Compensation expense is recognized on a straight-line basis over the five year vesting term. Actual PSUs earned may range from 0%-200% of the PSUs awarded based on WPG Inc.'s annualized TSR over a three year performance period that commenced on August 2, 2019, provided Mr. Conforti's continued employment through the vesting date. Dividend equivalents corresponding to the amount of any regular cash dividends paid by WPG Inc. to WPG Inc.’s common shareholders for the applicable dividend payment dates will accrue and be deemed reinvested in additional PSUs, which themselves will accrue dividend equivalents, and will be earned when and if the underlying PSU vests. Earned PSUs, if any, vest in one-third installments on August 2, 2022, 2023, and 2024. The PSUs were valued through the use of a Monte Carlo model and the related compensation expense is recognized over the five year term on a graded-vesting basis based on the applicable vesting period of the PSUs. WPG RSU Awards The Company issues RSUs to certain executive officers, non-executive employees, and non-employee directors of the Board. The RSUs are service-based awards and the related fair value is expensed over the applicable service periods, except in instances that result in accelerated vesting due to severance arrangements. Vested RSUs represent a contingent right to receive one WPG Inc. common share for each vested RSU. Additionally, Board members may only convert vested RSUs to WPG Inc. common shares upon leaving the Board. A summary of the status of the WPG RSUs at December 31, 2019 and changes during the year are presented below: Outstanding unvested at beginning of year RSUs granted RSUs vested, not released RSUs vested and released RSUs forfeited Outstanding unvested at end of year Activity for the Year Ended December 31, 2019 Executive & Non-Executive Employees Non-Employee Directors Total 1,430,665 1,200,313 — (809,424) (145,282) 1,676,272 138,648 1,569,313 206,142 (138,648) — — 206,142 1,406,455 (138,648) (809,424) (145,282) 1,882,414 Unrecognized compensation cost (in thousands) Weighted-average expense period (in years) $ 5,864 $ 2.5 392 $ 0.4 6,256 2.3 62 During the year ended December 31, 2019, the Company granted 1,406,455 RSUs with a fair value of $6.6 million, of which 500,000 RSUs with a fair value of $1.8 million relates to Mr. Conforti's August 2, 2019 special grant and 572,163 RSUs with a fair value of $3.3 million relates to the annual long-term incentive award issuances that occurred in February 2019 (see "Annual Long-Term Incentive Awards" section above). Board of Directors Compensation On May 16, 2019, the Board approved annual compensation for the period of May 29, 2019 through May 28, 2020 for the non-employee members of the Board. Each non-employee director's annual compensation (other than the Board Chairman who receives annual compensation of $450,000) totaled $230,000 based on a combination of cash and RSUs, or if so elected by the director, all RSUs (see table above for RSUs granted). Stock Options Options granted generally vest over a three year period, with options exercisable at a rate of 33.3% per annum beginning with the first anniversary of the grant date. These options were valued using the Black-Scholes pricing model and the expenses associated with these options are amortized over the requisite vesting period. During the year ended December 31, 2019, no stock options were granted to employees, 391 stock options were exercised by employees and 78,061 stock options were canceled, forfeited or expired. As of December 31, 2019, there were 601,289 stock options outstanding. Share Award Related Compensation Expense During the years ended December 31, 2019, 2018 and 2017, the Company recorded share award related compensation expense pertaining to the award and option plans noted above of $7.8 million, $8.3 million, and $6.4 million 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 Committee may, in its discretion, accelerate the vesting for retiring Board members. Distributions During each of the years ended December 31, 2019 and 2018, the Board declared common share/unit dividends of $1.00 per common share/unit. On February 25, 2020, the Board declared common share/unit dividends of $0.125 per common share/unit. The dividend is payable on March 16, 2020 to shareholders/unitholders of record on March 9, 2020. This reflects an annual reduction of $0.50 per common share/unit from our previous dividend policy and is expected to provide the Company with improved cash flow in excess of $110.0 million in 2020 alone, which will primarily be used to fund our ongoing redevelopment efforts as we continue to transform our core portfolio. 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. On January 24, 2020, we purchased an anchor parcel at Southgate Mall for $10.0 million. On April 24, 2018, the Company closed on the acquisition of Southgate Mall for $58.0 million (see details under "Overview - Basis of Presentation - Southgate Mall"). On April 11, 2018, the Company closed on the acquisition of four Sears anchor parcels and related outparcels for $28.5 million (see details under "Overview - Basis of Presentation - Sears Parcel Acquisitions"). Dispositions. We pursue the disposition of properties that no longer meet our strategic criteria or interests in properties to generate proceeds for alternative business uses. On January 31, 2020, we completed the sale of Dekalb Plaza, located in King of Prussia, Pennsylvania, to an unaffiliated private real estate investor for a purchase price of $13.6 million. 63 On January 14, 2020, we completed the sale of Matteson Plaza to an unaffiliated private real estate investor for a purchase price of $1.1 million. On December 19, 2019, we completed the sale of Charles Towne Square to an unaffiliated private real estate investor for a purchase price of $5.0 million. During the year ended December 31, 2019, we completed the sale of 25 outparcels with Four Corners. The allocated purchase price was $41.1 million (see details under "Overview - Basis of Presentation - Four Corners Outparcel Sales"). Additionally, during the year ended December 31, 2019, the Company sold certain undeveloped land parcels and developed outparcels for an aggregate purchase price of $8.8 million. In connection with the 2019 sales noted above, the Company recorded a net gain of $38.4 million for the year ended December 31, 2019, which is included in gain on disposition of interests in properties, net in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2019. During the year ended December 31, 2018, we completed the sale of 20 outparcels with Four Corners. The allocated purchase price was $32.7 million (see details under "Overview - Basis of Presentation - Four Corners Outparcel Sales"). In connection with the 2018 sales noted above, the Company recorded a net gain of $24.6 million, which is included in gain on disposition of interest in properties, net in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2018. On December 18, 2019, West Ridge was transitioned to the lender (see "Financing and Debt" above for further discussion). Upon the ownership transfer, we reduced our debt by $49.5 million. On July 1, 2019, Towne West Square was transitioned to the lender (see "Financing and Debt" above for further discussion). Upon the ownership transfer, we reduced our debt by $45.2 million. On October 23, 2018, Rushmore was transitioned to the lender (see "Financing and Debt" above for further discussion). Upon the ownership transfer, we reduced our debt by $94.0 million. Development Activity New Development, Expansions and Redevelopments. We routinely incur costs related to construction for significant redevelopment and expansion projects at our properties. Our share of development costs for calendar year 2019 related to these activities was approximately $103 million. Our estimated stabilized return or yield, on invested capital typically ranges in the high single digits. We have identified 30 department stores (Sears, The Bon-Ton Stores, and one former Belk store) in our portfolio that we plan to redevelop and we are actively working on repositioning. Of these locations, five are currently occupied by Sears, resulting in 25 that we can currently develop. At the end of the fourth quarter 2019, 18 of these former department store locations have been addressed with signed letters of intent (LOIs), fully executed leases, or replacement tenant openings. Many projects are actively under construction and three replacement stores opened in 2019. These former department store locations represent an opportunity to enhance the experience at the property by bringing in offerings such as dining, grocery, entertainment, home furnishings, and 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 former department stores. The progress on some of these repositioning projects are discussed below: • 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 added a Big Lots, which opened in July 2019, in the former Toys R' Us location. Lastly, we have commenced construction on the former Sears space which will add an exciting exterior facing element to the center featuring dynamic first-to-market retailers, including Home Goods, PetSmart, Ross Dress for Less, and TJ Maxx. This new open air component will complete the transformation of Grand Central Mall from a traditional enclosed regional center into a hybrid town center and the new stores are expected to open before the 2020 holiday shopping season. We will invest between $31 million and $33 million in this redevelopment with an expected yield of approximately 6% - 8%. • At Lincolnwood Town Center in Lincolnwood, Illinois, The RoomPlace opened in August 2019, taking approximately two thirds of the 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 approximately 7% - 8%. 64 • We proactively terminated a lease with Sears at Southern Park Mall in Youngstown, Ohio and the store closed during the third quarter of 2018. In 2019, we completed the demolition of the former Sears store and plans include an exciting line up of outward facing retail stores and restaurants, as well as green space that can be used for community events. The planned additions include fitness, dining and shopping offerings that will diversify the mix at the property. • At The Mall at Fairfield Commons, in Beavercreek, Ohio, the Sears store closed in December 2018. We will reposition the former department store with a Morris Home Furniture and a first to market Round 1 Entertainment. Morris Home Furniture, which is expected to open in the first quarter of 2020, will occupy the upper level and Round 1 Entertainment, which opened in November of 2019, occupies the lower level. • At WestShore Plaza, in Tampa, Florida, we terminated the Sears lease during the first quarter of 2019, and we are currently in the entitlement process to bring a mixed use component to the center. In addition to gaining control of the former Sears location, we purchased a parcel that is currently leased to office tenants. Acquiring this high-visibility corner allows a more strategic approach as we add our exciting mixed-use component to the property. 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 added a second location within Southgate Mall, replacing a former Herberger’s (former Bon-Ton, Inc. Stores) further illustrating robust demand within the catchment area. The Dillard’s store at Southgate Mall opened in June 2019. Our combined investment in these two department store repositioning efforts is expected to be less than $7 million. • 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. In addition, at Morgantown Mall, we have plans to tear down the former Sears store. Finally, we have plans to add a new retailer and entertainment user in the former Belk location and are working on the final lease negotiations with the replacement tenants. • At Port Charlotte Town Center in Port Charlotte, Florida, we have a signed LOI to add a new-to-market entertainment venue to replace a former Sears store. This premier entertainment and dining destination will offer food, family activities and the newest arcade games in the 88,000 square foot location. • FieldhouseUSA (see below for information on FieldhouseUSA) will replace the former Sears department store locations at both Polaris Fashion Place® in Columbus, Ohio and Town Center at Aurora® in Aurora, Colorado. The Company proactively gained control of both Sears spaces in 2018 for redevelopment efforts. New retail and complementary mixed uses are planned for both projects with additional details being announced in the future. • At The Mall at Johnson City in Johnson City, Tennessee, we plan to replace the former Sears with a first-to- market Home Goods. We proactively negotiated an early termination with Sears to gain control to bring this tenant to the market. In addition to the new retail addition, we will complete an extensive renovation of the property. 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 December 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 65% committed, including deals with a national theater and a national value fashion apparel retailer, which are expected to open in late 2020. 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 approximately 9% - 10%. 65 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. We have addressed, through executed leases and signed LOI’s, more than 90% of the retail space with some first-to-market and first- to-portfolio tenants. During 2019, more than 12,000 square feet of retailers opened, including Amazon Books, Paige, and Vineyard Vines. 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 opened in October of 2019 and replaced 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 approximately 10% - 12%. Additionally, during the fourth quarter of 2019, we purchased the former Elder-Beerman store from a third party in order to gain control of the redevelopment. Our plans involve adding new uses to the center to compliment the strong retail offerings at the property. We continue to make progress replacing our former Toys R' Us locations. We have three recent openings, including the previously discussed Big Lots store at Grand Central Mall. At the Plaza at Buckland Hills in Manchester, Connecticut, a new K&G Superstore opened in September 2019 and Marshall's opened in October 2019 in the former Toys R' Us location at the center. Capital Expenditures The following table summarizes total consolidated capital expenditures on a cash basis for the year ended December 31, 2019 (in thousands): Redevelopments and expansions Tenant allowances Operational capital expenditures Total(1) 2019 87,058 26,089 33,500 146,647 $ $ (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. 66 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, 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 (including LIBOR rates or the unavailability of LIBOR); 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; risks associated with climate change as well as the associated costs and burdens of not implementing reasonable sustainability measures to mitigate or avoid the adverse impact of such changes; the failure to achieve earnings/funds from operations targets or estimates; the failure to achieve projected returns or yields on 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 this Annual Report on Form 10- K and other reports and statements filed by WPG Inc. and WPG L.P. with the SEC. 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 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 income determined in accordance with GAAP as a measure of operating performance; and are not alternatives to cash flows as a measure of liquidity. 67 The following schedule reconciles total FFO to net income for the years ended December 31, 2019, 2018 and 2017 (in thousands, except share/unit and per share/unit amounts): Net income Less: Preferred dividends and distributions on preferred operating partnership units Adjustments to Arrive at FFO: Real estate depreciation and amortization, including joint venture impact Impairment loss, including (gain) on disposition of interests in properties, net Net income attributable to noncontrolling interest holders in properties Noncontrolling interests portion of depreciation and amortization FFO of the Operating Partnership (1) FFO allocable to limited partners FFO allocable to common shareholders/unitholders Diluted (loss) earnings per share/unit Adjustments to arrive at FFO per share/unit: Depreciation and amortization from consolidated properties and our share of real estate depreciation and amortization from unconsolidated properties Impairment loss, including (gain) on disposition of interests in properties, net Diluted FFO per share/unit Weighted average shares outstanding - basic Weighted average limited partnership units outstanding Weighted average additional dilutive securities outstanding Weighted average shares/units outstanding - diluted For the Year Ended December 31, 2019 2018 2017 $ 2,760 $ 108,655 $ 231,593 (14,272) (14,272) (14,272) 310,430 26,586 (45) (67) 325,392 50,670 295,900 (3,353) (76) (35) 386,819 60,062 274,722 $ 326,757 (0.05) $ 0.42 1.38 0.12 1.45 $ 1.33 (0.02) 1.73 $ $ $ 292,748 (57,846) (68) (27) 452,128 70,837 381,291 0.98 1.32 (0.26) 2.04 $ $ $ 188,445,434 187,696,339 186,829,385 34,730,014 34,703,770 34,808,890 635,859 603,674 337,508 223,811,307 223,003,783 221,975,783 (1) FFO of the operating partnership decreased $61.5 million for the year ended December 31, 2019 when compared to the year ended December 31, 2018. During the year ended December 31, 2019, we received $40.0 million less in operating income related to comparable properties, which can be primarily attributed to the Anchor Store Impact, 2019 bankruptcies, and the sale of certain outparcels. Additionally, general and administrative expenses increased $12.1 million, primarily related to the impact of the new lease accounting standard which prohibits the Company from capitalizing non-incremental internal leasing and legal efforts. Lastly, interest expense, net, increased $11.4 million, which was primarily attributable to corporate debt activity primarily related to higher interest rates due to the credit rating downgrade, certain mortgage loan financings and the Perennial transaction. Lastly, we recorded an additional $12.3 million in gain on the extinguishment of debt during the year ended December 31, 2019 when compared to the same period ending December 31, 2018. 68 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 core portfolio to net income and presents comparable NOI percent change for the years ended December 31, 2019 and 2018 (in thousands): Net Income Loss (income) from unconsolidated entities Income and other taxes Gain on extinguishment of debt, net Gain on disposition of interests in properties, net Interest expense, net Operating Income Depreciation and amortization Impairment loss General and administrative Fee income Management fee allocation Pro-rata share of unconsolidated joint ventures in comp NOI Property allocated corporate expense Non-comparable properties and other(1) NOI from sold properties Termination income Straight-line rents Ground lease adjustments for straight-line and fair market value Fair market value and inducement adjustments to base rents Less: Tier 2 and noncore properties (2) For the Year Ended December 31, 2019 2018 $ 2,760 $ 108,655 1,499 1,296 (63,660) (38,373) 153,382 56,904 271,320 35,256 51,187 (11,682) 140 70,463 16,870 423 (2,482) (1,630) (4,695) 20 (6,194) (32,131) (541) 1,532 (51,395) (24,602) 141,987 175,636 257,796 — 39,090 (9,527) 157 72,348 14,591 (5,512) (12,720) (3,457) (3,629) 50 (8,952) (47,646) Comparable NOI - Tier 1 and open air properties $ 443,769 $ 468,225 Comparable NOI percentage change - Tier 1 and open air properties (5.2)% (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. 69 Item 7A. 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 December 31, 2019, $372.0 million (excluding debt issuance costs of $6.2 million) of our aggregate consolidated indebtedness (11.9% 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 December 31, 2019, a 50 basis point increase in LIBOR rates would result in a decrease in earnings and cash flow of $1.9 million annually and a 50 basis point decrease in LIBOR rates would result in an increase in earnings and cash flow of $1.9 million annually. This assumes that the amount outstanding under our variable rate debt remains at $372.0 million, the balance as of December 31, 2019. See the additional discussion of the LIBOR transition under "Liquidity and Capital Resources." Item 8. Financial Statements and Supplementary Data The financial statements of the Company included in this report are listed in Part IV, Item 15 of this report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. 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 at a reasonable assurance level. Management's Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. As of December 31, 2019, management assessed the effectiveness of WPG Inc.'s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that, as of December 31, 2019, WPG Inc.’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 70 Independent Registered Public Accounting Firm’s Report on Internal Control Over Financial Reporting. Ernst & Young LLP, an independent registered public accounting firm, has audited our consolidated financial statements included in this Annual Report on Form 10-K and, as part of its audit, has issued its report, included herein on page F-3, on the effectiveness of our internal control over financial reporting. 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 December 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 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 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 at a reasonable assurance level. Management's Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. As of December 31, 2019, management assessed the effectiveness of WPG L.P.'s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that, as of December 31, 2019, WPG L.P.’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Independent Registered Public Accounting Firm’s Report on Internal Control Over Financial Reporting. Ernst & Young LLP, an independent registered public accounting firm, has audited our consolidated financial statements included in this Annual Report on Form 10-K and, as part of its audit, has issued its report, included herein on page F-10, on the effectiveness of our internal control over financial reporting. 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 December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 71 Item 10. Directors, Executive Officers and Corporate Governance Part III The information required by this item is incorporated herein by reference to the definitive proxy statement for our 2020 annual meeting of stockholders to be filed with the Commission pursuant to Regulation 14A. Item 11. Executive Compensation The information required by this item is incorporated herein by reference to the definitive proxy statement for our 2020 annual meeting of stockholders to be filed with the Commission pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated herein by reference to the definitive proxy statement for our 2020 annual meeting of stockholders to be filed with the Commission pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions and Director Independence The information required by this item is incorporated herein by reference to the definitive proxy statement for our 2020 annual meeting of stockholders to be filed with the Commission pursuant to Regulation 14A. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated herein by reference to the definitive proxy statement for our 2020 annual meeting of stockholders to be filed with the Commission pursuant to Regulation 14A. 72 Part IV Item 15. Exhibits and Financial Statement Schedules 1. Financial Statements Included herein at pages F-1 through F-50. 2. Financial Statement Schedules The following financial statement schedule is included herein at pages F-51 through F-54: Schedule III—Real Estate and Accumulated Depreciation All other schedules for which provision is made in Regulation S-X are either not required to be included herein under the related instructions or are inapplicable or the related information is included in the footnotes to the applicable financial statement and, therefore, have been omitted. 73 3. Exhibits The following exhibits are filed as part of this Annual Report on Form 10-K: Exhibit Number 2.1 3.1 3.2 3.3 3.4 3.5 4 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 10.1 10.2 Exhibit Descriptions Separation and Distribution Agreement by and among Simon Property Group, Inc., Simon Property Group, L.P., Washington Prime Group Inc. and Washington Prime Group, L.P., dated as of May 27, 2014 (incorporated by reference to Form 8-K filed on May 29, 2014). Amended and Restated Articles of Incorporation for the Registrant (incorporated by reference to Form 8-K filed on May 22, 2017). Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company Relating to Name Change (incorporated by reference to Form 8-K filed on May 26, 2015). Articles of Amendment to the Amended and Restated Articles of Incorporation of Washington Prime Group Inc. relating to corporate name change (incorporated by reference to Form 8-K filed on September 2, 2016). Articles of Amendment to the Amended and Restated Articles of Incorporation of the Washington Prime Group Inc. (incorporated by reference to Form 8-K filed on May 22, 2017). Amended and Restated Bylaws of Washington Prime Group Inc., effective August 30, 2016 (incorporated by reference to Form 8-K filed on September 2, 2016). Description of Registrant's Securities Indenture, dated as of March 24, 2015, between Washington Prime Group, L.P. and U.S. Bank National Association, as Trustee (incorporated by reference to Form 8-K filed March 26, 2015). First Supplemental Indenture, dated as of March 24, 2015, between Washington Prime Group, L.P. and U.S. Bank National Association, as Trustee (incorporated by reference to Form 8-K filed March 26, 2015). Second Supplemental Indenture, dated as of August 4, 2017, between Washington Prime Group, L.P. and U.S. Bank National Association, as Trustee (incorporated by reference to Form 8-K August 4, 2017). Registration Rights Agreement, dated as of March 24, 2015, by and among Washington Prime Group, L.P. and Citigroup Global Markets Inc., J.P. Morgan Securities LLC and RBS Securities Inc., as representatives of the initial purchasers named therein (incorporated by reference to Form 8-K filed March 26, 2015). * Glimcher Realty Trust Amended and Restated 2004 Incentive Compensation Plan (incorporated by reference to S-8 filed January 15, 2015). * Glimcher Realty Trust 2012 Incentive Compensation Plan (incorporated by reference to S-8 filed January 15, 2015). * Washington Prime Group, L.P. 2014 Stock Incentive Plan (incorporated by reference to Form 8 K filed May 29, 2014). 2019 Washington Prime Group, L.P. Stock Incentive Plan (incorporated by reference to Form 8-K filed on May 20, 2019). Articles of Amendment of Washington Prime Group Inc. setting forth the Terms of Series H Cumulative Redeemable Preferred Stock (incorporated by reference to Form 8 A filed January 14, 2015). Articles of Amendment of Washington Prime Group Inc. setting forth the Terms of Series I Cumulative Redeemable Preferred Stock (incorporated by reference to Form 8 A filed January 14, 2015). Amended and Restated Limited Partnership Agreement of Washington Prime Group, L.P. (incorporated by reference to Form 8 K filed May 29, 2014). Amendment No. 2 to Amended and Restated Limited Partnership Agreement of Washington Prime Group, L.P. dated as of January 14, 2015, setting forth the Terms of Series H Preferred Units (incorporated by reference to Form 10 K filed February 26, 2015). Amendment No. 3 to Amended and Restated Limited Partnership Agreement of Washington Prime Group, L.P. dated as of January 14, 2015, setting forth the Terms of Series I Preferred Units (incorporated by reference to Form 10 K filed February 26, 2015). Amendment No. 4 to Amended and Restated Limited Partnership Agreement of Washington Prime Group, L.P. dated as of January 14, 2015, setting forth the Terms of Series I 1Preferred Units (incorporated by reference to Form 10 K filed February 26, 2015). Senior Secured Term Loan Agreement, dated as of June 8, 2016, by and among Washington Prime Group, L.P., WTM Glimcher, LLC, The Huntington National Bank, PNC Bank, National Association, U.S. Bank National Association, and several lenders from time to time (relates to mortgage loan for Weberstown Mall) (incorporated by reference to Form 10 Q filed on August 4, 2016). Term Loan Promissory Note, dated June 8, 2016 (The Huntington National Bank) (relates to mortgage loan for Weberstown Mall) (incorporated by reference to Form 10 Q filed on August 4, 2016). 74 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23 10.24 10.25 10.26 Term Loan Promissory Note, dated June 8, 2016 (U.S. Bank National Association) (relates to mortgage loan for Weberstown Mall) (incorporated by reference to Form 10 Q filed on August 4, 2016). Term Loan Promissory Note, dated June 8, 2016 (PNC Bank, National Association) (relates to mortgage loan for Weberstown Mall) (incorporated by reference to Form 10 Q filed on August 4, 2016). Environmental Indemnity Agreement, dated June 8, 2016, by Washington Prime Group, L.P. and WTM Glimcher, LLC to and for benefit of The Huntington National Bank and other lenders under Senior Secured Term Loan Agreement (relates to mortgage loan for Weberstown Mall) (incorporated by reference to Form 10 Q filed on August 4, 2016). Collateral Assignment of Membership Interest Agreement, dated June 8, 2016, by Weberstown Mall, LLC to The Huntington National Bank and other lenders under Senior Secured Term Loan Agreement (relates to mortgage loan for Weberstown Mall) (incorporated by reference to Form 10 Q filed on August 4, 2016). Purchase Agreement, dated as of March 17, 2015, by and between Washington Prime Group, L.P. and Citigroup Global Markets Inc., J.P. Morgan Securities LLC and RBS Securities Inc., as representatives of the initial purchasers named therein, relating to 2.850% Senior Notes due 2020 (incorporated by reference to Form 8-K filed March 23, 2015). Amended and Restated Revolving Credit and Term Loan Agreement, dated January 22, 2018 (incorporated by reference to Form 8-K January 22, 2018). Loan Agreement, dated October 10, 2019, by and between Washington Prime Group, L.P. and Mall Ground Portfolio, LLC (incorporated by reference to Form 8-K filed on October 17, 2019). Transition Services Agreement by and among Simon Property Group, Inc., Simon Property Group, L.P., Washington Prime Group Inc. and Washington Prime Group, L.P. dated May 28, 2014 (incorporated by reference to Form 8 K filed May 29, 2014). Tax Matters Agreement by and among Simon Property Group, Inc., Simon Property Group, L.P., Washington Prime Group Inc. and Washington Prime Group, L.P. dated May 28, 2014 (incorporated by reference to Form 8 K filed May 29, 2014). Employee Matters Agreement by and among Simon Property Group, Inc., Simon Property Group, L.P., Washington Prime Group Inc. and Washington Prime Group, L.P. dated May 28, 2014 (incorporated by reference to Form 8 K filed May 29, 2014). Form of Indemnification Agreement between Washington Prime Group Inc. and each of its executive officers and directors (incorporated by reference to Amendment No. 3 to Form 10 filed April 21, 2014). * Separation Agreement and General Release by and between WP Glimcher Inc. and Michael P. Glimcher, dated as of June 20, 2016 (incorporated by reference to Form 8-K filed on June 24, 2016). * Employment Agreement, dated August 6, 2018, effective as of August 3, 2018, by and between Washington Prime Group Inc. and Joshua P. Lindimore (incorporated by reference to Form 10-Q filed on April, 25, 2019). * First Amendment to Employment Agreement, dated and effective as of May 16, 2019, by and between Washington Prime Group Inc. and Joshua P. Lindimore (incorporated by reference to Form 8-K filed on May 20, 2019). * Amendment to Employment Agreement, dated and effective as of August 2, 2019, by and between Washington Prime Group Inc. and Louis G. Conforti (incorporated by reference to Form 8-K filed on August 2, 2019). * Performance Stock Unit Award Agreement, dated and effective as of August 2, 2019, by and between Washington Prime Group Inc. and Louis G. Conforti (incorporated by reference to Form 8-K filed on August 2, 2019). * Restricted Stock Unit Award Agreement, dated and effective as of August 2, 2019, by and between Washington Prime Group Inc. and Louis G. Conforti (incorporated by reference to Form 8-K filed on August 2, 2019). * Employee Restricted Stock Unit Award Agreement, dated October 6, 2016, among Washington Prime Group Inc., Washington Prime Group, L.P. and Louis G. Conforti (incorporated by reference to Form 8-K filed on October 11, 2016). * Description of Terms of 2015 Annual LTIP Unit Awards (incorporated by reference to Form 10 Q filed on May 7, 2015). * Amended and Restated Employment Agreement, dated January 31, 2017, by and between Washington Prime Group Inc. and Mark E. Yale (incorporated by reference to Form 8-K filed on February 2, 2017). * Amended and Restated Employment Agreement, dated January 31, 2017, by and between Washington Prime Group Inc. and Robert P. Demchak (incorporated by reference to Form 8-K filed on February 2, 2017). * Employment Agreement between the Washington Prime Group Inc. and Melissa (Lisa) A. Indest, dated August 6, 2018 and effective as of August 3, 2018 (incorporated by reference to Form 8-K filed on August 6, 2018). * First Amendment to Employment Agreement between the Washington Prime Group Inc. and Lisa A. Indest, dated February 12, 2019 and effective as of February 12, 2019 (incorporated by reference to Form 8-K filed on February 15, 2019). * First Amendment to the Amended and Restated Employment Agreement between Washington Prime Group Inc. and Robert P. Demchak, dated February 21, 2017 (incorporated by reference to Form 10 Q filed on April 27, 2017). 75 * * * * * * Series 2015B LTIP Unit Award Agreement by and among WP Glimcher Inc., Washington Prime Group, L.P., and Michael P. Glimcher, dated as of February 25, 2016 (relates to LTIP Unit award for 2015 annual awards) (incorporated by reference to Form 10 Q filed on May 6, 2016). Series 2015B LTIP Unit Award Agreement by and among WP Glimcher Inc., Washington Prime Group, L.P., and Mark E. Yale, dated as of February 25, 2016 (relates to LTIP Unit award for 2015 annual awards) (incorporated by reference to Form 10 Q filed on May 6, 2016). Series 2015B LTIP Unit Award Agreement by and among WP Glimcher Inc., Washington Prime Group, L.P., and Mark S. Ordan dated as of February 25, 2016 (relates to LTIP Unit award for 2015 annual awards) (incorporated by reference to Form 10 Q filed on May 6, 2016). Series 2015B LTIP Unit Award Agreement by and among WP Glimcher Inc., Washington Prime Group, L.P., and Melissa A. Indest, dated as of February 25, 2016 (relates to LTIP Unit award for 2015 annual awards) (incorporated by reference to Form 10 Q filed on May 6, 2016). Series 2015B LTIP Unit Award Agreement by and among WP Glimcher Inc., Washington Prime Group, L.P., and Keric M. “Butch” Knerr, dated as of February 25, 2016 (relates to LTIP Unit award for 2015 annual awards) (incorporated by reference to Form 10 Q filed on May 6, 2016). Series 2015B LTIP Unit Award Agreement by and among WP Glimcher Inc., Washington Prime Group, L.P., and Thomas J. Drought, Jr., dated as of February 25, 2016 (relates to LTIP Unit award for 2015 annual awards) (incorporated by reference to Form 10 Q filed on May 6, 2016). * Form of Certificate of Designation of Series 2015B LTIP Units of Washington Prime Group, L.P. (incorporated by reference to Form 10 Q filed on May 6, 2016). * Certificate of Designation of Series 2014B LTIP Units of Washington Prime Group, L.P. (incorporated by reference to Form 8 K filed on August 28, 2014). * Certificate of Designation of Series 2015A LTIP Units of Washington Prime Group, L.P. (incorporated by reference to Form 10 Q filed on May 7, 2015). * Form of Non Employee Director Restricted Stock Unit Award Agreement (incorporated by reference to Form 8 K filed on August 8, 2014). * Form of Series 2014B LTIP Unit Award Agreements with Officers (incorporated by reference to Form 8 K filed on August 28, 2014). * Form of Series 2015A LTIP Unit Award Agreements with Executive Officers Other Than EVP, Legal & Compliance (incorporated by reference to Form 10 Q filed on May 7, 2015). * Form Employee Restricted Stock Unit Award Agreement 2017 (incorporated by reference to Form 10 Q filed on April 27, 2017). * Form Employee Performance Share Unit Award Agreement (incorporated by reference to Form 10-Q filed on April 25, 2019). * Form Employee Restricted Stock Unit Award Agreement (Employee with Employment Agreement/2019) (incorporated by reference to Form 10-Q filed on April 25, 2019). * Form Employee Restricted Stock Unit Award Agreement (Employee without Employment Agreement/2019) (incorporated by reference to Form 10-Q filed on April 25, 2019). * Form of Restricted Stock Unit Award Agreement (Executives - 2019 Plan) (incorporated by reference to Form 10- Q filed on July 25, 2019). * Form of Performance Stock Unit Award Agreement (Executives - 2019 Plan) (incorporated by reference to Form 10-Q filed on July 25, 2019). * Form of Restricted Stock Unit Award Agreement (Directors - 2019 Plan) (incorporated by reference to Form 10-Q filed on July 25, 2019). * Form of Restricted Stock Unit Award Agreement (Non-Executives - 2019 Plan) (incorporated by reference to Form 10-Q filed on July 25, 2019). * Form Employee Restricted Stock Unit Award Agreement (Employee with Employment Agreement) (incorporated by reference to Form 10 Q filed on April 27, 2017). * Form Employee Performance Share Unit Award Agreement (Employee with Employment Agreement) (incorporated by reference to Form 10 Q filed on April 27, 2017). * Form Employee Performance Share Unit Award Agreement (Employee without Employment Agreement) (incorporated by reference to Form 10 Q filed on April 27, 2017). ** List of Subsidiaries ** Consent of Ernst & Young LLP for Washington Prime Group Inc. ** Consent of Ernst & Young LLP for Washington Prime Group, L.P. ** Certification by the Chief Executive Officer 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 for Washington Prime Group Inc. 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 10.36 10.37 10.38 10.39 10.40 10.41 10.42 10.43 10.44 10.45 10.46 10.47 10.48 10.49 21.1 23.1 23.2 31.1 76 31.2 31.3 31.4 32.1 32.2 ** Certification by the Chief Financial Officer 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 for Washington Prime Group Inc. ** ** Certification by the Chief Executive Officer 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 for Washington Prime Group, L.P. Certification by the Chief Financial Officer 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 for Washington Prime Group, L.P. ** Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Washington Prime Group Inc. ** Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Washington Prime Group, L.P. ** XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. 101.INS 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 104 ** Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * ** Compensatory plans or arrangements required to be filed pursuant to Item 15(b) of Form 10-K. Filed electronically herewith. Item 16. Form 10-K Summary None. 77 Pursuant to the requirements of Section 13 or 15(d) 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. SIGNATURES WASHINGTON PRIME GROUP INC. WASHINGTON PRIME GROUP, L.P. by: Washington Prime Group Inc., its sole general partner By: /s/ LOUIS G. CONFORTI Louis G. Conforti Chief Executive Officer & Director (Principal Executive Officer) Dated: February 27, 2020 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Capacity Date /s/ ROBERT J. LAIKIN Robert J. Laikin /s/ LOUIS G. CONFORTI Louis G. Conforti /s/ J. TAGGART BIRGE J. Taggart Birge /s/ JOHN J. DILLON III John J. Dillon III /s/ JOHN F. LEVY John F. Levy Chairman of the Board of Directors February 27, 2020 Chief Executive Officer and Director (Principal Executive Officer) Director Director Director February 27, 2020 February 27, 2020 February 27, 2020 February 27, 2020 /s/ JACQUELYN R. SOFFER Director February 27, 2020 Jacquelyn R. Soffer /s/ SHERYL G. VON BLUCHER Director February 27, 2020 Sheryl G. von Blucher /s/ MARK E. YALE Mark E. Yale /s/ MELISSA A. INDEST Melissa A. Indest Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 27, 2020 Executive Vice President, Finance and Chief Accounting Officer (Principal Accounting Officer) February 27, 2020 78 WASHINGTON PRIME GROUP INC. AND WASHINGTON PRIME GROUP, L.P. INDEX TO FINANCIAL STATEMENTS Financial Statements for Washington Prime Group Inc.: Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2019 and 2018 Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2019, 2018 and 2017 Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 2017 Financial Statements for Washington Prime Group, L.P.: Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2019 and 2018 Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2019, 2018 and 2017 Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 2017 Notes to Consolidated Financial Statements Schedule III—Real Estate and Accumulated Depreciation Notes to Schedule III Page Number F-2 F-5 F-6 F-7 F-8 F-10 F-12 F-13 F-14 F-15 F-17 F-51 F-54 F-1 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Washington Prime Group Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Washington Prime Group Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index to Financial Statements on Page F-1 (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework), and our report dated February 27, 2020 expressed an unqualified opinion thereon. Adoption of ASU No. 2016-02 As discussed in Note 3 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates. F-2 Impairment of Investment Properties Description of the Matter How We Addressed the Matter in Our Audit At December 31, 2019, the Company’s net consolidated investment properties totaled $3,504,670 thousand. As discussed in Note 3 of the consolidated financial statements, the Company’s investment properties are reviewed for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Impairment losses for investment properties are measured when the undiscounted operating income before depreciation and amortization plus its residual value is less than the carrying amount of the related property. Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the property. investment properties for Auditing management’s evaluation of impairment and measurement of impairment was complex due to the significant estimation uncertainty in determining the estimated future undiscounted cash flows of individual properties that exhibited indicators of impairment and in the determination of the fair value of properties in instances where impairment was measured. In particular, these estimates were sensitive to significant assumptions that included projected property- level net operating income, anticipated hold period, estimated capital expenditures and the capitalization rate, all of which can be affected by expectations of tenant rental demand, future market conditions, competition amongst retail real estate owners, as well as management’s intent to hold and operate the property over the term and in the manner assumed in the analysis. We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls related to the Company’s process for evaluating investment properties for impairment, including controls over management’s review of the significant assumptions described above. To test the Company’s evaluation of investment properties for impairment, we performed audit procedures that included, among others, assessing the methodologies, evaluating the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by management in its analysis. We compared the significant assumptions used by management to historical operating results of the particular property, relevant observable market information for recent sales of comparable assets, current industry trends or other relevant factors. As part of our evaluation, we assessed the historical accuracy of management’s estimates and performed sensitivity analyses of certain assumptions, including capitalization rates, to evaluate the changes in the recoverability of certain properties that would result from changes in the assumptions. To test the fair value of properties used by the Company for impairment measurement purposes, we performed audit procedures that included, among others, evaluating the significant assumptions and completeness and accuracy of operating data used to estimate fair value. We involved a valuation specialist to assist in evaluating the capitalization rates that the Company used in its analysis of residual value at the end of the anticipated hold period and in the measurement of impairment, and we compared the projected property- level net operating income to historical actual results. /s/ Ernst & Young LLP We have served as the Company's auditor since 2013. Indianapolis, Indiana February 27, 2020 F-3 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Washington Prime Group Inc.: Opinion on Internal Control over Financial Reporting We have audited Washington Prime Group Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Washington Prime Group Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements of the Company and our report dated February 27, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Indianapolis, Indiana February 27, 2020 F-4 Washington Prime Group Inc. Consolidated Balance Sheets (dollars in thousands, except share and par value amounts) ASSETS: Investment properties at cost Less: accumulated depreciation Cash and cash equivalents Tenant receivables and accrued revenue, net Investment in and advances to unconsolidated entities, at equity Deferred costs and other assets Total assets LIABILITIES: Mortgage notes payable Notes payable Unsecured term loans Revolving credit facility Other indebtedness Accounts payable, accrued expenses, intangibles, and deferred revenues Distributions payable Cash distributions and losses in unconsolidated entities, at equity Total liabilities Redeemable noncontrolling interests EQUITY: Stockholders' Equity: Series H Cumulative Redeemable Preferred Stock, $0.0001 par value, 4,000,000 shares issued and outstanding as of December 31, 2019 and 2018 Series I Cumulative Redeemable Preferred Stock, $0.0001 par value, 3,800,000 shares issued and outstanding as of December 31, 2019 and 2018 Common stock, $0.0001 par value, 350,000,000 shares authorized; 186,884,276 and 186,074,461 issued and outstanding as of December 31, 2019 and 2018, respectively Capital in excess of par value Accumulated deficit Accumulated other comprehensive (loss) income Total stockholders' equity Noncontrolling interests Total equity December 31, 2019 December 31, 2018 $ 5,902,406 $ 5,914,705 $ $ 2,397,736 3,504,670 41,421 82,762 417,092 205,034 4,250,979 1,115,608 957,566 686,642 204,145 97,601 260,904 3,252 15,421 3,341,139 3,265 $ $ 2,283,764 3,630,941 42,542 85,463 433,207 169,135 4,361,288 983,269 982,697 685,509 286,002 — 253,862 2,992 15,421 3,209,752 3,265 104,251 104,251 98,325 98,325 19 1,254,771 (655,492) (5,525) 796,349 110,226 906,575 19 1,247,639 (456,924) 6,400 999,710 148,561 1,148,271 Total liabilities, redeemable noncontrolling interests and equity $ 4,250,979 $ 4,361,288 The accompanying notes are an integral part of these statements. F-5 Washington Prime Group Inc. Consolidated Statements of Operations and Comprehensive (Loss) Income (dollars in thousands, except per share amounts) For the Year Ended December 31, 2019 2018 2017 $ 633,633 $ 690,432 $ 732,215 27,851 661,484 27,047 717,479 20,839 753,054 154,328 271,320 82,139 9,513 51,187 837 35,256 604,580 148,433 257,796 86,665 9,070 39,090 789 — 146,529 258,740 89,617 9,107 34,892 2,438 66,925 541,843 608,248 (153,382) 38,373 (141,987) 24,602 (126,541) 124,771 63,660 (1,296) (1,499) 2,760 (1,514) 4,274 (14,032) (9,758) $ 51,395 (1,532) 541 108,655 15,051 90,579 (3,417) 1,395 231,593 34,530 93,604 (14,032) 79,572 197,063 (14,032) $ 183,031 (0.05) $ 0.42 $ 0.98 2,760 (14,102) (11,342) (3,691) (7,651) $ $ 108,655 (1,284) 107,371 14,871 $ 231,593 2,401 233,994 34,927 92,500 $ 199,067 REVENUE: Rental income Other income Total revenues EXPENSES: Property operating Depreciation and amortization Real estate taxes Advertising and promotion General and administrative Ground rent Impairment loss Total operating expenses Interest expense, net Gain on disposition of interests in properties, net Gain on extinguishment of debt, net Income and other taxes (Loss) income from unconsolidated entities NET INCOME Net (loss) income attributable to noncontrolling interests NET INCOME ATTRIBUTABLE TO THE COMPANY Less: Preferred share dividends NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS (LOSS) EARNINGS PER COMMON SHARE, BASIC AND DILUTED COMPREHENSIVE (LOSS) INCOME: Net income Unrealized (loss) income on interest rate derivative instruments Comprehensive (loss) income Comprehensive (loss) income attributable to noncontrolling interests Comprehensive (loss) income attributable to common shareholders $ $ $ $ The accompanying notes are an integral part of these statements. F-6 Washington Prime Group Inc. Consolidated Statements of Cash Flows (dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,760 $ 108,655 $ 231,593 For the Year Ended December 31, 2019 2018 2017 Adjustments to reconcile net 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 Gain on extinguishment of debt, net Gain on disposition of interests in properties and outparcels, net Impairment loss Change in estimate of collectibility of rental income Loss (income) from unconsolidated entities Distributions of income from unconsolidated entities Changes in assets and liabilities: Tenant receivables and accrued revenue, net Deferred costs and other assets Accounts payable, accrued expenses, deferred revenues and other liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired Capital expenditures, net Net proceeds from disposition of interests in properties and outparcels Investments in unconsolidated entities Distributions of capital from unconsolidated entities Net cash (used in) provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to noncontrolling interest holders in properties Redemption of limited partner units/preferred shares Net proceeds from issuance of common shares, including common stock plans Purchase of redeemable noncontrolling interest Distributions on common and preferred shares/units Proceeds from issuance of debt, net of transaction costs Repayments of debt Net cash used in financing activities INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of year 273,204 (63,660) (38,373) 35,256 7,538 1,499 3,045 (2,212) (4,542) (5,210) 209,305 — (176,737) 53,449 (19,820) 27,990 (115,118) (80) (276) 1 — (237,544) 602,742 (444,639) (79,796) 259,022 (51,395) (24,602) — 5,826 (541) 8,619 327 (23,087) 4,421 287,245 (80,108) (153,850) 39,212 (20,178) 35,096 (179,828) (66) (28) — — (236,821) 708,563 (588,182) (116,534) 259,167 (90,579) (125,063) 66,925 5,068 (1,395) 1,873 2,309 (21,209) (4,058) 324,631 — (147,329) 218,801 (50,911) 73,289 93,850 (114) (251) 13 (6,830) (236,152) 1,293,322 (1,486,781) (436,793) 14,391 (9,117) (18,312) 61,084 70,201 88,513 70,201 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of year $ 75,475 $ 61,084 $ The accompanying notes are an integral part of these statements. F-7 Washington Prime Group Inc. Consolidated Statements of Equity (dollars in thousands, except per share/unit amounts) Capital in Excess of Par Value Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total Stockholders' Equity Non- Controlling Interests Total Equity Redeemable Non- Controlling Interests $1,232,638 $ (346,706) $ 4,916 1,093,443 $ 169,368 1,262,811 $ 10,660 Preferred Series H Preferred Series I Common Stock Balance, December 31, 2016 Exercise of stock options Redemption of limited partner units Exchange of limited partner units Other Equity-based compensation Adjustments to noncontrolling interests Purchase of redeemable noncontrolling interest Distributions on common shares/units ($1.00 per common share/unit) Distributions declared on preferred shares Other comprehensive income Net income, excluding $240 of distributions to preferred unitholders $ 104,251 $ 98,325 $ — — — — — — — — — — — — — — — — — — — — — — Balance, December 31, 2017 104,251 98,325 Cumulative effect of accounting standards Redemption of limited partner units Other Equity-based compensation Adjustments to noncontrolling interests Distributions on common shares/units ($1.00 per common share/unit) Distributions declared on preferred shares Other comprehensive loss Net income, excluding $240 of distributions to preferred unitholders — — — — — — — — — — — — — — — — — — Balance, December 31, 2018 104,251 98,325 19 — — — — — — — — — — — 19 — — — — — — — — — 19 13 — 2,463 (146) 5,280 (330) 565 — — — — — — — — — — — (186,919) (14,032) — 197,063 1,240,483 (350,594) (389) — (103) 7,480 168 — — — — 1,890 — — — — (187,792) (14,032) 93,604 — — — — — — — — — 2,004 — 6,920 584 — — — — — — — 6,400 13 — 2,463 (146) 5,280 (330) 565 — (251) (2,463) — 1,122 330 — 13 (251) — (146) 6,402 — 565 (186,919) (35,075) (221,994) (14,032) 2,004 — 397 (14,032) 2,401 197,063 34,290 231,353 — — — — — — (7,395) — — — — 1,099,404 167,718 1,267,122 3,265 2,085 — (103) 7,480 168 389 (28) — 842 (168) 2,474 (28) (103) 8,322 — (187,792) (34,823) (222,615) (14,032) (1,104) 93,604 999,710 — (14,032) (180) (1,284) 14,811 108,415 — — — — — — — — — — (1,104) 1,247,639 (456,924) 148,561 1,148,271 3,265 The accompanying notes are an integral part of these statements. F-8 Washington Prime Group Inc. Consolidated Statements of Equity (Continued) (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 (Loss) Income Total Stockholders' Equity Non- Controlling Interests Total Equity Redeemable Non- Controlling Interests Exercise of stock options Redemption of limited partner units Other Equity-based compensation Adjustments to noncontrolling interests Distributions on common shares/units ($1.00 per common share/unit) Distributions declared on preferred shares Other comprehensive loss Net income (loss), excluding $240 of distributions to preferred unitholders Balance, December 31, 2019 — — — — — — — — — — — — — — — — — — $ 104,251 $ 98,325 $ — — — — — — — — — 19 1 — (32) 7,800 (637) — — — — — — — — — (188,810) (14,032) — — — — — — — — (11,925) 1 — (32) 7,800 (637) — (276) — 37 637 1 (276) (32) 7,837 — (188,810) (34,802) (223,612) (14,032) (11,925) — (14,032) (2,177) (14,102) 4,274 — 4,274 (1,754) 2,520 — — — — — — — — — $1,254,771 $ (655,492) $ (5,525) $ 796,349 $ 110,226 $ 906,575 $ 3,265 The accompanying notes are an integral part of these statements. F-9 To the Partners of Washington Prime Group, L.P. and the Board of Directors of Washington Prime Group Inc.: Report of Independent Registered Public Accounting Firm Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Washington Prime Group, L.P. (the Partnership) as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index to Financial Statements on Page F-1 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework), and our report dated February 27, 2020 expressed an unqualified opinion thereon. Adoption of ASU No. 2016-02 As discussed in Note 3 to the consolidated financial statements, the Partnership changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments. Basis for Opinion These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Partnership’s auditor since 2015. Indianapolis, Indiana February 27, 2020 F-10 To the Partners of Washington Prime Group, L.P. and the Board of Directors of Washington Prime Group Inc.: Report of Independent Registered Public Accounting Firm Opinion on Internal Control over Financial Reporting We have audited Washington Prime Group, L.P.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Washington Prime Group, L.P. (the Partnership) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements of the Partnership and our report dated February 27, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Indianapolis, Indiana February 27, 2020 F-11 Washington Prime Group, L.P. Consolidated Balance Sheets (dollars in thousands, except unit amounts) ASSETS: Investment properties at cost Less: accumulated depreciation Cash and cash equivalents Tenant receivables and accrued revenue, net Investment in and advances to unconsolidated entities, at equity Deferred costs and other assets Total assets LIABILITIES: Mortgage notes payable Notes payable Unsecured term loans Revolving credit facility Other indebtedness Accounts payable, accrued expenses, intangibles, and deferred revenues Distributions payable Cash distributions and losses in unconsolidated entities, at equity Total liabilities Redeemable noncontrolling interests EQUITY: Partners' Equity: General partner Preferred equity, 7,800,000 units issued and outstanding as of December 31, 2019 and 2018 Common equity, 186,884,276 and 186,074,461 units issued and outstanding as of December 31, 2019 and 2018, respectively Total general partners' equity Limited partners, 34,682,956 and 34,755,660 units issued and outstanding as of December 31, 2019 and 2018, respectively Total partners' equity Noncontrolling interests Total equity December 31, 2019 December 31, 2018 $ 5,902,406 $ 5,914,705 $ $ 2,397,736 3,504,670 41,421 82,762 417,092 205,034 4,250,979 1,115,608 957,566 686,642 204,145 97,601 260,904 3,252 15,421 3,341,139 3,265 202,576 593,773 796,349 109,193 905,542 1,033 906,575 $ $ 2,283,764 3,630,941 42,542 85,463 433,207 169,135 4,361,288 983,269 982,697 685,509 286,002 — 253,862 2,992 15,421 3,209,752 3,265 202,576 797,134 999,710 147,493 1,147,203 1,068 1,148,271 Total liabilities, redeemable noncontrolling interests and equity $ 4,250,979 $ 4,361,288 The accompanying notes are an integral part of these statements. F-12 Washington Prime Group, L.P. Consolidated Statements of Operations and Comprehensive (Loss) Income (dollars in thousands, except per unit amounts) For the Year Ended December 31, 2018 2017 2019 REVENUE: Rental income Other income Total revenues EXPENSES: Property operating Depreciation and amortization Real estate taxes Advertising and promotion General and administrative Ground rent Impairment loss Total operating expenses Interest expense, net Gain on disposition of interests in properties, net Gain on extinguishment of debt, net Income and other taxes (Loss) income from unconsolidated entities NET INCOME Net income attributable to noncontrolling interests NET INCOME ATTRIBUTABLE TO UNITHOLDERS Less: Preferred unit distributions NET (LOSS) INCOME ATTRIBUTABLE TO COMMON UNITHOLDERS NET (LOSS) INCOME ATTRIBUTABLE TO COMMON UNITHOLDERS: General partner Limited partners Net (loss) income attributable to common unitholders (LOSS) EARNINGS PER COMMON UNIT, BASIC AND DILUTED COMPREHENSIVE (LOSS) INCOME: Net income Unrealized (loss) income on interest rate derivative instruments Comprehensive (loss) income Comprehensive income attributable to noncontrolling interests Comprehensive (loss) income attributable to unitholders $ 633,633 27,851 661,484 $ 690,432 27,047 717,479 $ 732,215 20,839 753,054 154,328 271,320 82,139 9,513 51,187 837 35,256 604,580 148,433 257,796 86,665 9,070 39,090 789 — 541,843 146,529 258,740 89,617 9,107 34,892 2,438 66,925 608,248 (153,382) 38,373 63,660 (1,296) (1,499) 2,760 45 2,715 (14,272) (11,557) $ (141,987) 24,602 51,395 (1,532) 541 108,655 76 108,579 (14,272) 94,307 (126,541) 124,771 90,579 (3,417) 1,395 231,593 68 231,525 (14,272) $ 217,253 (9,758) $ (1,799) (11,557) $ 79,572 14,735 94,307 $ 183,031 34,222 $ 217,253 (0.05) $ 0.42 $ 0.98 2,760 (14,102) (11,342) 45 $ 108,655 (1,284) 107,371 76 (11,387) $ 107,295 $ 231,593 2,401 233,994 68 $ 233,926 $ $ $ $ $ $ The accompanying notes are an integral part of these statements. F-13 Washington Prime Group, L.P. Consolidated Statements of Cash Flows (dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income Adjustments to reconcile net 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 Gain on extinguishment of debt, net Gain on disposition of interests in properties and outparcels, net Impairment loss Change in estimate of collectibility of rental income Loss (income) from unconsolidated entities Distributions of income from unconsolidated entities Changes in assets and liabilities: Tenant receivables and accrued revenue, net Deferred costs and other assets Accounts payable, accrued expenses, deferred revenues and other liabilities Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired Capital expenditures, net Net proceeds from disposition of interests in properties and outparcels Investments in unconsolidated entities Distributions of capital from unconsolidated entities Net cash (used in) provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to noncontrolling interest holders in properties Redemption of limited partner/preferred units Net proceeds from issuance of common units, including equity-based compensation plans Purchase of redeemable noncontrolling interest Distributions to unitholders Proceeds from issuance of debt, net of transaction costs Repayments of debt Net cash used in financing activities For the Year Ended December 31, 2019 2018 2017 $ 2,760 $ 108,655 $ 231,593 273,204 (63,660) (38,373) 35,256 7,538 1,499 3,045 (2,212) (4,542) (5,210) 209,305 — (176,737) 53,449 (19,820) 27,990 (115,118) (80) (276) 1 — (237,544) 602,742 (444,639) (79,796) 259,022 (51,395) (24,602) — 5,826 (541) 8,619 327 (23,087) 4,421 287,245 (80,108) (153,850) 39,212 (20,178) 35,096 (179,828) (66) (28) — — (236,821) 708,563 (588,182) (116,534) 259,167 (90,579) (125,063) 66,925 5,068 (1,395) 1,873 2,309 (21,209) (4,058) 324,631 — (147,329) 218,801 (50,911) 73,289 93,850 (114) (251) 13 (6,830) (236,152) 1,293,322 (1,486,781) (436,793) INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of year 14,391 61,084 (9,117) 70,201 (18,312) 88,513 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of year $ 75,475 $ 61,084 $ 70,201 The accompanying notes are an integral part of these statements. F-14 Balance, December 31, 2016 Exercise of stock options Redemption of limited partner units Exchange of limited partner units Other Equity-based compensation Adjustments to noncontrolling interests Purchase of redeemable noncontrolling interest Distributions to common unitholders, net Distributions declared on preferred units Other comprehensive income Net income Balance, December 31, 2017 Cumulative effect of accounting standards Redemption of limited partner units Other Equity-based compensation Adjustments to noncontrolling interests Distributions to common unitholders Distributions declared on preferred units Other comprehensive loss Net income Balance, December 31, 2018 Washington Prime Group, L.P. 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 $ 202,576 $ 890,867 1,093,443 $ 168,264 1,261,707 $ 1,104 1,262,811 $ 10,660 — — — — — — — — (14,032) — 14,032 202,576 — — — — — — (14,032) — 14,032 202,576 13 — 2,463 (146) 5,280 (330) 565 (186,919) — 2,004 183,031 896,828 2,085 — (103) 7,480 168 (187,792) — (1,104) 79,572 13 — 2,463 (146) 5,280 (330) 565 (186,919) (14,032) 2,004 197,063 1,099,404 2,085 — (103) 7,480 168 (187,792) (14,032) (1,104) 93,604 797,134 999,710 — (251) (2,463) — 1,122 330 — (34,961) — 397 34,222 166,660 389 (28) — 842 (168) 13 (251) — (146) 6,402 — 565 (221,880) (14,032) 2,401 231,285 — — — — — — — (114) — — 68 13 (251) — (146) 6,402 — 565 (221,994) (14,032) 2,401 231,353 1,266,064 1,058 1,267,122 2,474 (28) (103) 8,322 — — — — — — 2,474 (28) (103) 8,322 — (34,757) (222,549) (66) (222,615) — (180) 14,735 147,493 (14,032) (1,284) 108,339 — — 76 (14,032) (1,284) 108,415 1,147,203 1,068 1,148,271 — — — — — — (7,395) — (240) — 240 3,265 — — — — — — (240) — 240 3,265 The accompanying notes are an integral part of these statements. F-15 Exercise of stock options Redemption of limited partner units Other Equity-based compensation Adjustments to noncontrolling interests Distributions to common unitholders Distributions declared on preferred shares Other comprehensive loss Net income (loss) Balance, December 31, 2019 Washington Prime Group, L.P. Consolidated Statements of Equity (Continued) (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 — — — — — — 1 — (32) 7,800 (637) 1 — (32) 7,800 (637) — (276) — 37 637 1 (276) (32) 7,837 — — — — — — 1 (276) (32) 7,837 — (188,810) (188,810) (34,722) (223,532) (80) (223,612) (14,032) — 14,032 — (11,925) (9,758) (14,032) (11,925) 4,274 — (2,177) (1,799) (14,032) (14,102) 2,475 — — 45 (14,032) (14,102) 2,520 — — — — — — (240) — 240 $ 202,576 $ 593,773 $ 796,349 $ 109,193 $ 905,542 $ 1,033 $ 906,575 $ 3,265 The accompanying notes are an integral part of these statements. F-16 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to 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, exclusive of net capital gains, 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 December 31, 2019, our assets consisted of material interests in 104 shopping centers in the United States, consisting of open air properties and enclosed retail properties, comprised of approximately 56 million square feet (unaudited) of managed gross leasable area ("GLA"). 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 expenditures 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. Leadership Changes and Severance Impacting Financial Results 2019 Activity 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 year ended December 31, 2019. 2018 Activity On May 7, 2018, the Company's Executive Vice President, Property Management 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. In connection with and as part of the aforementioned management and personnel changes, the Company recorded aggregate severance charges of $2.0 million, including $0.5 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 year ended December 31, 2018. 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 December 31, 2019 and 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. F-17 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit 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. During the year ended December 31, 2019, we sold our interest in undeveloped land that was previously identified as a VIE. As of December 31, 2019, we have one VIE which consists of our interest in WPG L.P. There have been no changes during the year ended December 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 year ended December 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 historically committed to or intends to fund the venture. As of December 31, 2019, our assets consisted of material interests in 104 shopping centers. The consolidated financial statements as of that date reflect the consolidation of 87 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. 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 income attributable to noncontrolling interests. WPG Inc.'s weighted average ownership interest in WPG L.P. was 84.4%, 84.4% and 84.3% for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019 and 2018, WPG Inc.'s ownership interest in WPG L.P. was 84.5% 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 Cash and Cash Equivalents We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents. Cash equivalents are carried at cost, which approximates fair value. Cash equivalents generally consist of commercial paper, bankers' acceptances, repurchase agreements, and money market deposits or securities. Financial instruments that potentially subject us to concentrations of credit risk include our cash and cash equivalents and our tenant receivables. We place our cash and cash equivalents with institutions with high credit quality. However, at certain times, such cash and cash equivalents may be in excess of FDIC and SIPC insurance limits. F-18 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) Reconciliation of Cash, Cash Equivalents, and Restricted Cash The following is a summary of our cash, cash equivalents and restricted cash total as presented in our statements of cash flows for the years ended December 31, 2019, 2018 and 2017: Cash and cash equivalents Restricted cash Total cash, cash equivalents and restricted cash For the Year Ended December 31, 2019 2018 2017 $ $ 41,421 34,054 75,475 $ $ 42,542 18,542 61,084 $ $ 52,019 18,182 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 December 31, 2019 and 2018. Investment Properties We record investment properties at fair value when acquired. Investment properties include costs of acquisitions; development, predevelopment, and construction (including allocable salaries and related benefits); tenant allowances and improvements; and interest and real estate taxes incurred during construction. We capitalize improvements and replacements from repair and maintenance when the repair and maintenance extends the useful life, increases capacity, or improves the efficiency of the asset. All other repair and maintenance items are expensed as incurred. We capitalize interest on projects during periods of construction until the projects are ready for their intended purpose based on interest rates in place during the construction period. Capitalized interest for the years ended December 31, 2019, 2018 and 2017 was $3,961, $2,234 and $1,521, respectively. We record depreciation on buildings and improvements utilizing the straight-line method over an estimated original useful life, which is generally five to 40 years. We review depreciable lives of investment properties periodically and we make adjustments when necessary to reflect a shorter economic life. We amortize tenant allowances and tenant improvements utilizing the straight- line method over the term of the related lease or occupancy term of the tenant, if shorter. We record depreciation on equipment and fixtures utilizing the straight-line method over three to ten years. We review investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable. These circumstances include, but are not limited to, declines in a property's cash flows, ending occupancy, estimated market values or our decision to dispose of a property before the end of its estimated useful life. Furthermore, this evaluation is conducted no less frequently than quarterly, irrespective of changes in circumstances. We measure any impairment of investment property when the estimated undiscounted operating income before depreciation and amortization plus its residual value is less than the carrying value of the property. To the extent impairment has occurred, we charge to expense the excess of carrying value of the property over its estimated fair value. The evaluation of impairment is subject to certain management assumptions including projected net operating income, anticipated hold period, expected capital expenditures and the capitalization rate used to estimate the property's residual value. We may decide to dispose of properties that are held for use and the consideration received from these property dispositions may differ from their carrying values. We also review our investments, including investments in unconsolidated entities, if events or circumstances change indicating that the carrying amount of our investments may not be recoverable. We will record an impairment charge if we determine that a decline in the fair value of the investments in unconsolidated entities is other-than-temporary. Changes in economic and operating conditions that occur subsequent to our review of recoverability of investment property and other investments in unconsolidated entities could impact the assumptions used in that assessment and could result in future charges to earnings if assumptions regarding those investments differ from actual results. See the "Impairment" section within Note 4 - "Investment in Real Estate" for a discussion of recent impairments. F-19 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) Investments in Unconsolidated Entities Joint ventures are common in the real estate industry. We use joint ventures to finance properties, develop new properties, and diversify our risk in a particular property or portfolio of properties. We held material unconsolidated joint venture ownership interests in 13 properties as of December 31, 2019 and 2018 (see Note 5 - "Investment in Unconsolidated Entities, at Equity"). Certain of our joint venture properties are subject to various rights of first refusal, buy-sell provisions, put and call rights, or other sale or marketing rights for partners which are customary in real estate joint venture agreements and the industry. We and our partners in these joint ventures may initiate these provisions (subject to any applicable lock up or similar restrictions), which may result in either the sale of our interest or the use of available cash or borrowings to acquire the joint venture interest from our partner. 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”). Topic 820 guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, Topic 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). 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. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Note 6 - "Indebtedness" includes a discussion of the fair value of debt measured using Level 1 and Level 2 inputs. Note 4 - "Investment in Real Estate" includes a discussion of the fair value inputs used in our impairment analyses, using Level 3 inputs, primarily. Level 3 inputs include our estimations of net operating results of the property, capitalization rates and discount rates. The Company has derivatives that must be measured under the fair value standard (see Note 7 - "Derivative Financial Instruments"). The Company currently does not have any non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis. Purchase Accounting Valuation We record the total consideration of acquisitions, including transaction costs as permitted under Accounting Standards Update ("ASU ") 2017-1, "Business Combinations (Topic 805): Clarifying the Definition of a Business," and any excess investment in unconsolidated entities to the various components of the acquisition based upon the fair value of each component which may be derived from various Level 2 and Level 3 inputs. Level 3 inputs include our estimations of net operating results of the property, capitalization rates and discount rates. Also, we may utilize third party valuation specialists. These components typically include buildings, land and intangibles related to in-place leases and we estimate: • • • • the fair value of land and related improvements and buildings on an as-if-vacant basis; the market value of in-place leases based upon our best estimate of current market rents and amortize the resulting market rent adjustment into revenues; the value of costs to obtain tenants, including tenant allowances and improvements and leasing commissions; and the value of revenue and recovery of costs foregone during a reasonable lease-up period, as if the space was vacant. F-20 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The fair value of buildings is depreciated over the estimated remaining life of the acquired buildings or related improvements. We amortize tenant improvements, in-place lease assets and other lease-related intangibles over the remaining life of the underlying leases. We also estimate the value of other acquired intangible assets, if any, which are amortized over the remaining life of the underlying related intangibles. 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 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, and were included in "Deferred costs and other assets" and "Accounts payable, accrued expenses, intangibles and deferred revenues" respectively. 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 9 - 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 our assessment of the collectibility of amounts to be received for operating leases 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. F-21 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) 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 years ended December 31, 2018 and 2017, we capitalized approximately $17.7 million and $16.9 million of internal legal and leasing costs, respectively, 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. 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. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses," which introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities, and net investments in leases as well as reinsurance and trade receivables. In November 2018, the FASB issued ASU 2018-19, which clarifies that operating lease receivables are outside the scope of the new standard. This standard will be effective for fiscal years beginning after December 15, 2019. Our seller-provided bridge financing associated with our October 10, 2019 closing of Perennial (see Note 6 - "Indebtedness" for further details) and certain other miscellaneous accounts will be in scope of ASU 2016-13, but we do not expect this will have a material impact on our financial statements. 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 years ended December 31, 2018 and 2017 are now included in rental income and are no longer be presented as separate line items. Additionally, termination income of $3.5 million, which was previously disclosed in other income for each of the years ended December 31, 2018 and 2017, and provision for credit losses of $5.8 million and $5.1 million, which was previously disclosed as a separate line item during the years ended December 31, 2018 and 2017, respectively, were also reclassified to rental income for comparability of prior periods to the current period. Deferred Costs and Other Assets Deferred costs and other assets include the following as of December 31, 2019 and 2018: 2019 2018 Deferred leasing costs and corporate improvements, net $ 53,729 $ In-place lease intangibles, net Acquired above market lease intangibles, net Mortgage and other escrow deposits Seller financing receivable(1) Prepaids, notes receivable and other assets, net 27,538 13,419 34,054 55,000 74,260 38,453 18,827 18,542 — 21,294 205,034 $ 19,053 169,135 $ (1)During the year ended December 31, 2019, the Company provided a $55.0 million bridge financing to certain counterparties as part of the Perennial transaction, as defined in Note 6 - "Indebtedness." F-22 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) Deferred Leasing Costs and Corporate Improvements Our deferred leasing costs consist of internal salaries and related benefits prior to the adoption of ASU 2016-02 and fees paid to third party brokers. We record amortization of deferred leasing costs on a straight-line basis over the terms of the related leases. Details of deferred leasing costs and corporate improvements as of December 31, 2019 and 2018 are as follows: Deferred leasing costs Corporate improvements Accumulated amortization Deferred lease costs and corporate improvements, net $ 2019 2018 $ 121,363 $ 142,903 6,099 (73,733) 53,729 $ 6,072 (74,715) 74,260 Amortization of deferred leasing costs is a component of depreciation and amortization expense. The accompanying consolidated statements of operations include amortization expense of $24.5 million, $27.9 million, and $25.9 million for the years ended December 31, 2019, 2018 and 2017, respectively. Revenue Recognition 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 included in 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 operating lease payments 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 (CAM) 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. F-23 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The following table summarizes our rental income for the years ended December 31, 2019, 2018 and 2017: Operating lease payments, fixed Operating lease payments, variable Amortization of straight-line rent, inducements, and rent abatements Net amortization/accretion of above and below-market leases Change in estimate of collectibility of rental income Total rental income For the Year Ended December 31, 2019 2018 2017 $ 539,458 $ 592,481 $ 632,055 90,922 4,409 91,784 3,022 96,096 1,809 6,382 (7,538) $ 633,633 8,971 (5,826) $ 690,432 7,323 (5,068) $ 732,215 We record a change in estimate of collectibility of rental income on a lease-by-lease basis in the period there is a change in our assessment of whether the collectibility of operating lease payments is probable. Accounts are written off when they are deemed to be no longer collectible. The following table provides a rollforward of activity during the years ended December 31, 2019, 2018 and 2017 is as follows: For the Year Ended December 31, 2018 2019 2017 Balance, beginning of year Change in estimate of collectibility of rental income Accounts deconsolidated upon joint venture formation (see Note 5) Accounts written off, net of recoveries, and other Balance, end of year $ $ 10,131 7,538 — (4,758) 12,911 $ $ 7,867 5,826 — (3,562) 10,131 $ $ 8,578 5,068 (1,271) (4,508) 7,867 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 December 31, 2019 are as follows: 2020 2021 2022 2023 2024 Thereafter $ $ 467,066 392,633 328,972 267,483 205,129 633,706 2,294,989 Other Income The following table summarizes our other income for the years ended December 31, 2019, 2018 and 2017: Ancillary Fee related Miscellaneous Total other income For the Year Ended December 31, 2019 2018 2017 $ 11,016 $ 10,275 $ 11,682 5,153 9,527 7,245 9,848 7,906 3,085 $ 27,851 $ 27,047 $ 20,839 F-24 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) Ancillary: We seek to monetize our common areas through robust ancillary programs. These programs include destination holiday experiences, customer service programs, sponsored children's play areas and local events, and static and digital media initiatives. We enter into agreements with unrelated third parties under these programs and charge a negotiated fee in exchange for providing the unrelated third party access to the common area as defined under the respective agreements. We recognize the fee as revenue as we satisfy our performance obligations, which typically occurs over one year. Fee related: We collect fee income primarily from our unconsolidated joint ventures in exchange for providing management, leasing, and development services. Management fees are charged as a percentage of revenues (as defined in the applicable management agreements) and are recognized as revenue as we render such services. Leasing fees are charged on a fixed amount per square foot signed or a percentage of net rent negotiated within the underlying lease and are recognized upon lease execution. Development fees are charged on a contractual percentage of hard costs to develop the respective asset and are recognized as we satisfy our obligation to provide the development services. Miscellaneous: Miscellaneous income primarily relates to insurance proceeds received from property insurance claims and excess franchise tax refunds received for a previously-owned property. We recognize these items upon cash receipt. Income and Other Taxes WPG Inc. has elected to be taxed as a REIT under Sections 856 through 860 of the Code and applicable Treasury regulations relating to REIT qualification. In order to maintain REIT status, the regulations require the entity to distribute at least 90% of taxable income, exclusive of net capital gains, to its owners and meet certain other asset and income tests as well as other requirements. WPG Inc. intends to continue to adhere to these requirements and maintain its REIT status and that of its REIT subsidiaries. As a REIT, WPG Inc. will generally not be liable for federal corporate income taxes as long as it continues to distribute at least of 100% of its taxable income. Thus, we made no provision for federal income taxes on WPG Inc. in the accompanying consolidated financial statements. If WPG Inc. fails to qualify as a REIT, it will be subject to tax at regular corporate rates for the years in which it failed to qualify. If WPG Inc. loses its REIT status it could not elect to be taxed as a REIT for four years unless its failure to qualify was due to reasonable cause and certain other conditions were satisfied. We have also elected taxable REIT subsidiary ("TRS") status for some of WPG Inc.'s subsidiaries. This enables us to provide services that would otherwise be considered impermissible for REITs and participate in activities that do not qualify as "rents from real property." For the years ended December 31, 2019, 2018 and 2017, we recorded federal income tax (benefits) provisions of $(79), $525, and $(87), respectively, related to the taxable income generated by the TRS entities, which is included in income and other taxes in the accompanying consolidated statements of operations and comprehensive (loss) income. For these entities, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates to be in effect when the temporary differences reverse. As of December 31, 2019 and 2018, the Company had a deferred tax asset of $410 and $110, respectively, as a result of federal and state net operating loss carryovers. A valuation allowance for deferred tax assets is provided if we believe all or some portion of the deferred tax asset may not be realized. An increase or decrease in the valuation allowance that results from the change in circumstances that causes a change in our judgment about the realizability of the related deferred tax asset is included in income. As of December 31, 2019 and 2018, the TRS valuation allowance for federal and state net operating loss carryovers was $410 and $110, respectively. As of December 31, 2019 and 2018, the TRS had no net deferred tax assets related to net operating loss carryovers. We are also subject to certain other taxes, including state and local taxes and franchise taxes, which are included in income and other taxes in the accompanying consolidated statements of operations and comprehensive (loss) income. For federal income tax purposes, the cash distributions paid to WPG Inc.'s common and preferred shareholders may be characterized as ordinary income, return of capital (generally non-taxable) or capital gains. Tax law permits certain characterization of distributions which could result in differences between cash basis and tax basis distribution amounts. F-25 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The following characterizes distributions paid per common and preferred share on a tax basis for the years ended December 31, 2019, 2018 and 2017: Common shares Ordinary income Capital gain Series H Preferred Shares Ordinary income Capital gain Series I Preferred Shares Ordinary income Capital gain 2019 2018 2017 $ % $ % $ % $ 0.5001 50.01% $ 1.0000 100.00% $ 0.4306 0.4999 49.99% — — 0.5694 43.06% 56.94% $ 1.0000 100.00% $ 1.0000 100.00% $ 1.0000 100.00% $ 0.9378 50.01% $ 1.8752 100.00% $ 1.0093 0.9374 49.99% — — 1.3347 43.06% 56.94% $ 1.8752 100.00% $ 1.8752 100.00% $ 2.3440 100.00% $ 0.8596 50.01% $ 1.7188 100.00% $ 0.9251 0.8592 49.99% — — 1.2234 43.06% 56.94% $ 1.7188 100.00% $ 1.7188 100.00% $ 2.1485 100.00% The capital gains characterized in the aforementioned table for the year ended December 31, 2019 have been designated as capital gain dividends pursuant to §857(b)(3)(B) of the Code. Noncontrolling Interests for WPG Inc. Details of the carrying amount of WPG Inc.'s noncontrolling interests are as follows as of December 31, 2019 and 2018: Limited partners' interests in WPG L.P. Noncontrolling interests in properties Total noncontrolling interests 2019 109,193 1,033 110,226 $ $ 2018 147,493 1,068 148,561 $ $ Net income attributable to noncontrolling interests (which includes limited partners' interests in WPG L.P. and noncontrolling interests in consolidated properties) is a component of consolidated net income of WPG Inc. Redeemable Noncontrolling Interests for WPG Inc. At December 31, 2019 and 2018, redeemable noncontrolling interests represented the outstanding 130,592 units of WPG L.P. 7.3% Series I-1 Preferred Units (the "Series I-1 Preferred Units"). Dividends accrue quarterly at an annual rate of 7.3% per share. The unaffiliated third parties have, at their option, the right to have their equity purchased by the Company subject to the satisfaction of certain conditions. F-26 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) 4. Investment in Real Estate Summary Investment properties consisted of the following as of December 31, 2019 and 2018: Land Buildings and improvements Total land, buildings and improvements Furniture, fixtures and equipment Investment properties at cost Less: accumulated depreciation Investment properties at cost, net $ 2019 823,887 4,974,330 5,798,217 104,189 5,902,406 2,397,736 $ 2018 836,214 4,980,939 5,817,153 97,552 5,914,705 2,283,764 $ 3,504,670 $ 3,630,941 Construction in progress included above $ 115,280 $ 35,068 Real Estate Acquisitions and Dispositions We acquire interests in properties to generate both current income and long-term appreciation in value. We acquire interests in individual properties or portfolios of retail real estate companies that meet our investment criteria and dispose of properties which no longer meet our strategic criteria. Unless otherwise noted below, gains and losses on these transactions are included in gain on sale of interests in properties, net in the accompanying consolidated statements of operations and comprehensive (loss) income. No acquisition activity occurred during the years ended December 31, 2019 and 2017. Acquisition activity for the year ended December 31, 2018 and disposition activity for the years ended December 31, 2019, 2018 and 2017 is highlighted as follows: 2018 Acquisitions On April 11, 2018, we acquired, through a sale-leaseback transaction, four Sears department stores and adjacent Sears Auto Centers 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 and was funded by a combination of $13.4 million from our Facility (as defined in Note 6 - "Indebtedness"), $9.7 million from the first tranche of the Four Corners transaction, as discussed below, and $5.4 million from O'Connor Mall Partners, L.P. ("O'Connor") related to their pro-rata share of the joint venture that owns Polaris Fashion Place® (see Note 5 - "Investment in Unconsolidated Entities, at Equity"). On April 24, 2018, the Company closed on the acquisition of Southgate Mall, located in Missoula, Montana, for $58.0 million, which was funded from our Facility (as defined in Note 6 - "Indebtedness"). The following table summarizes the fair value allocation for the acquisitions, which was finalized during the three months ended June 30, 2018: Investment properties Investment in and advances to unconsolidated entities, at equity Deferred costs and other assets Accounts payable, accrued expenses, intangibles, and deferred revenue Net cash paid for acquisitions $ $ 72,647 5,543 10,311 (8,393) 80,108 Intangibles of $10.3 million, which relate primarily to above-market leases and lease in place values, are included in “Deferred costs and other assets” as of the respective acquisition dates. The initial weighted average useful life of the intangible assets was 11.5 years. Intangibles of $4.9 million, which relate primarily to below-market leases, are included in “Accounts payable, accrued expense, intangibles, and deferred revenue” as of the respective acquisition dates. The initial weighted average useful life of the intangible liabilities was 9.6 years. We capitalized $0.6 million of transaction costs as the transactions were accounted for as asset acquisitions. F-27 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) 2019 Dispositions On December 19, 2019, we completed the sale of Charles Towne Square, located in Charleston, South Carolina, to an unaffiliated private real estate investor for a purchase price of $5.0 million. The net proceeds of $4.6 million were used to fund ongoing redevelopment efforts and general corporate purposes. We are party to two separate purchase and sale agreements to sell certain outparcels to FCPT Acquisitions, LLC ("Four Corners"). The following table summarizes the key terms of each of the closings that occurred during the year ended December 31, 2019: Sales Date Parcels Sold Purchase Price Sales Proceeds January 18, 2019 February 11, 2019 April 3, 2019 June 28, 2019 August 1, 2019 August 29, 2019 September 16, 2019 September 27, 2019 October 18, 2019 December 30, 2019 8 1 1 3 1 1 1 2 2 5 $ 9,435 $ 2,766 2,048 3,050 1,210 3,397 3,205 4,412 3,011 8,560 9,364 2,720 2,016 3,031 1,199 3,394 3,118 4,377 2,989 8,495 25 $ 41,094 $ 40,703 Excluding any subsequent amendments thereto, the Company has approximately $4.6 million of outparcels from the first purchase and sale agreement and approximately $29.0 million from the second purchase and sale agreement remaining to close, subject to due diligence and closing conditions. Additionally, during the year ended December 31, 2019, the Company sold certain undeveloped land parcels and developed outparcels for an aggregate purchase price of approximately $8.8 million, receiving net proceeds of approximately $8.2 million. The net proceeds from the disposition activities were generally used to fund ongoing redevelopment efforts and for general corporate purposes. In connection with the 2019 dispositions, the Company recorded a net gain of $38.4 million which is included in gain on disposition of interests in properties, net in the accompanying consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2019. On December 18, 2019, West Ridge Mall and Plaza (collectively "West Ridge"), located in Topeka, Kansas, were transitioned to the lender (see Note 6 - "Indebtedness" for further discussion). On July 1, 2019, Towne West Square, located in Wichita, Kansas, was transitioned to the lender (see Note 6 - "Indebtedness" for further discussion). 2018 Dispositions The following table summarizes the key terms of each of the closings with Four Corners that occurred during the December 31, 2018: Sales Date Parcels Sold Purchase Price Sales Proceeds January 12, 2018 June 29, 2018 July 27, 2018 October 31, 2018 November 16, 2018 10 $ 13,692 $ 13,506 5 2 2 1 9,503 4,607 1,718 3,195 9,423 4,530 1,714 3,166 20 $ 32,715 $ 32,339 F-28 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The net proceeds were used to fund a portion of the acquisition of the Sears parcels on April 11, 2018, as discussed above, to fund ongoing redevelopment efforts and for general corporate purposes. In connection with the 2018 dispositions, the Company recorded a net gain of $24.6 million which is included in gain on disposition of interests in properties, net in the accompanying consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2018. On October 23, 2018, Rushmore Mall, located in Rapid City, South Dakota, was transitioned to the lender (see Note 6 - "Indebtedness" for further discussion). 2017 Dispositions On November 3, 2017, we completed the sale of Colonial Park Mall, located in Harrisburg, Pennsylvania, to an unaffiliated private real estate investor for a purchase price of $15.0 million. The net proceeds were used for general corporate purposes. On June 13, 2017, we sold 49% of our interest in Malibu Lumber Yard, located in Malibu, California, as part of the O'Connor Joint Venture II transaction (as defined below and as discussed in in Note 5 - "Investment in Unconsolidated Entities, at Equity"). On June 7, 2017, we completed the sale of Morgantown Commons, located in Morgantown, West Virginia, to an unaffiliated private real estate investor for a purchase price of approximately $6.7 million. The net proceeds were used for general corporate purposes. On May 16, 2017, we completed the sale of an 80,000 square foot (unaudited) vacant anchor parcel at Indian Mound Mall, located in Newark, Ohio, to an unaffiliated private real estate investor for a purchase price of approximately $0.8 million. The net proceeds were used for general corporate purposes. On May 12, 2017, we completed the transaction with regard to the ownership and operation of six of the Company's retail properties and certain related outparcels (the "O'Connor Joint Venture II" as discussed in Note 5 - "Investment in Unconsolidated Entities, at Equity"). On February 21, 2017, we completed the sale of Gulf View Square, located in Port Richey, Florida, and River Oaks Center, located in Chicago, Illinois, to unaffiliated private real estate investors for an aggregate purchase price of $42.0 million. The net proceeds from the transaction were used to reduce corporate debt. On January 10, 2017, we completed the sale of Virginia Center Commons, located in Glen Allen, Virginia, to an unaffiliated private real estate investor for a purchase price of $9.0 million. The net proceeds from the transaction were used to reduce corporate debt. In connection with the 2017 dispositions, the Company recorded a net gain of $124.8 million which is included in gain on disposition of interests in properties, net in the accompanying consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2017. On October 3, 2017, Valle Vista Mall, located in Harlingen, Texas, was transitioned to the lender (see Note 6 - "Indebtedness" for further discussion). Intangible Assets and Liabilities Associated with Acquisitions Intangible assets and liabilities, which were recorded at the respective acquisition dates, are associated with the Company's acquisitions of properties at fair value. The gross intangibles recorded as of their respective acquisition date are comprised of an asset for acquired above-market leases in which the Company is the lessor, a liability for acquired below-market leases in which the Company is the lessor, and an asset for in-place leases. The following table denotes the gross carrying values of the respective intangibles as of December 31, 2019 and 2018: Intangible Asset/Liability December 31, 2019 December 31, 2018 Above-market leases - Company is lessor Below-market leases - Company is lessor In-place leases $ $ $ 46,745 108,345 103,043 $ $ $ 48,373 117,395 109,379 Balance as of F-29 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The intangibles related to above and below-market leases in which the Company is the lessor are amortized to minimum rents on a straight-line basis over the estimated life of the lease, with amortization as a net increase to minimum rents in the amounts of $6,382, $8,971, and $7,323 for the years ended December 31, 2019, 2018 and 2017, respectively. In-place leases are amortized to depreciation and amortization expense over the life of the leases to which they pertain, with such amortization of $11,409, $14,780, and $18,457 for the years ended December 31, 2019, 2018 and 2017, respectively. The table below identifies the types of intangible assets and liabilities, their location on the consolidated balance sheets, their weighted average amortization period, and their book value, which is net of accumulated amortization, as of December 31, 2019 and 2018: Intangible Asset/Liability Location on the Consolidated Balance Sheets Above-market leases - Company is lessor Deferred costs and other assets Below-market leases - Company is lessor In-place leases Accounts payable, accrued expenses, intangibles and deferred revenues Deferred costs and other assets Balance as of Weighted Average Remaining Amortization (in years) 7.1 12.3 12.0 December 31, 2019 December 31, 2018 $ $ $ 13,419 54,885 27,538 $ $ $ 18,827 66,651 38,453 The future net amortization of intangibles as an increase (decrease) to net income as of December 31, 2019 is as follows: Above/Below-Market Leases-Lessor In-place Leases Total Net Intangible Amortization 2020 2021 2022 2023 2024 Thereafter Impairment $ $ 4,264 $ 4,417 4,015 3,509 3,395 21,866 41,466 $ (6,944) $ (3,351) (2,612) (2,116) (1,615) (10,900) (27,538) $ (2,680) 1,066 1,403 1,393 1,780 10,966 13,928 During the fourth quarter of 2019, the mortgage loan secured by Charlottesville Fashion Square, located in Charlottesville, Virginia was transferred to the special servicer (see Note 6 - "Indebtedness" for further details). As part of our quarterly assessment and in connection with the preparation of the financial statements included in this report, we considered this a triggering event and further shortened the estimated hold period, which resulted in the carrying value not being recoverable from the estimated undiscounted cash flows. The fair value of the property was based on the respective discounted estimated future cash flows, using a discount rate of 18.5% and a terminal capitalization rate of 15.5%, which were determined using management's assessment of the property operating performance and general market conditions (Level 3 inputs). We compared the estimated fair value of $19.8 million to the related carrying value of $26.1 million, which resulted in the recording of an impairment charge of approximately $6.3 million in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2019. During the third quarter of 2019, we recorded impairment charges related to Chautauqua Mall, located in Lakewood, New York, Matteson Plaza, located in Matteson, Illinois, and New Towne Mall, located in New Philadelphia, Ohio. In the case of Chautauqua Mall and New Towne Mall, the impairment charge was attributed to declines in the estimated undiscounted cash flows which resulted in the carrying value not being recoverable. The fair value of each property was based on the respective discounted estimated future cash flows of each property, using a discount rate of 18.5% and a terminal capitalization rate of 15.5%, which were determined using management's assessment of the property operating performance and general market conditions (Level 3 inputs). As it relates to Matteson Plaza, the impairment charge was due to the change in facts and circumstances when we decided to hold the asset for a shorter period which resulted in the carrying value not being recoverable from the projected cash flows. The fair value was based on the executed purchase and sale agreement with an unaffiliated real estate investor (See Note 12 - "Subsequent Events"). We recorded an aggregate impairment charge for these three properties of approximately $28.9 million in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2019. F-30 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) During the fourth quarter of 2017, a major anchor tenant of Rushmore Mall informed us of their intention to close their store at the property. The impending closure was deemed a triggering event and, therefore, we evaluated this property in conjunction with our quarterly impairment review and preparation of our financial statements for the year ended December 31, 2017. We compared the estimated fair value of $37.5 million to the related carrying value of $75.0 million, which resulted in the recording of an impairment charge of approximately $37.5 million in the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2017. On November 3, 2017, the Company completed the sale of Colonial Park Mall for $15.0 million. During the third quarter of 2017, we compared the fair value measurement of the property to its relative carrying value, which resulted in the recording of an impairment charge of approximately $20.9 million in the accompanying consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2017. The impairment charge was due to the change in facts and circumstances when we decided to hold the asset for a shorter period which resulted in the carrying value not being recoverable from the projected cash flows. During the first quarter of 2017, the Company entered into a purchase and sale agreement to dispose of Morgantown Commons, which was sold in the second quarter of 2017. Earlier in 2017, we shortened the hold period used in assessing impairment for the asset, which resulted in the carrying value not being recoverable from the expected cash flows. The purchase offer represented the best available evidence of fair value for this property. We compared the fair value to the carrying value, which resulted in the recording of an impairment charge of approximately $8.5 million in the accompanying consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2017. 5. Investment in Unconsolidated Entities, at Equity The Company's investment activity in unconsolidated real estate entities for the years ended December 31, 2019 and 2018 consisted of investments in the following 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®; 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. On December 20, 2019, the O'Connor Joint Venture I closed on the extension of the mortgage loan secured by The Mall at Johnson City. The extension is effective May 6, 2020 and will extend the maturity of the mortgage loan to May 6, 2023, with an additional two one-year extension options available to the joint venture. The extension requires a $5.0 million principal prepayment on May 6, 2020, in addition to funding certain reserve accounts of $10.0 million for future redevelopment and property improvements. On April 11, 2018, the O'Connor Joint Venture I closed on the acquisition of the Sears department store located at Polaris Fashion Place® in connection with our acquisition of additional Sears department stores (see Note 4 - "Investment in Real Estate"). • The O'Connor Joint Venture II During the year ended December 31, 2017, we completed an additional joint venture transaction with O'Connor with respect to the ownership and operation of seven of the Company's retail properties and certain related outparcels, consisting of the following: The Arboretum, located in Austin, Texas; Arbor Hills; the Oklahoma City Properties, located in Oklahoma City, Oklahoma; Gateway Centers, located in Austin, Texas; Malibu Lumber Yard; 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"). The transaction valued the properties at $598.6 million before closing adjustments and debt assumptions, and we retained a non-controlling 51% interest. The transaction generated net proceeds to the Company of approximately $138.9 million, after taking into consideration costs associated with the transaction and the assumption of debt, which we used to reduce the Company's debt as well as for general corporate purposes. We deconsolidated the properties included in the O'Connor Joint Venture II and recorded a gain in connection with this partial sale of $126.1 million, which is included in gain on disposition of interests in properties, net in the accompanying consolidated statements of operations and comprehensive (loss) income. F-31 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The gain was recorded pursuant to ASC 360-20 and calculated based upon proceeds received, less 49% of the book value of the deconsolidated net assets. Our retained 51% non-controlling equity method interest was valued at historical cost based upon the pro rata book value of the retained interest in the net assets. We retained management and leasing responsibilities for the properties included in the O'Connor Joint Venture II. In connection with the formation of this joint venture, we recorded transaction costs of approximately $6.4 million as part of our basis in this investment. • The Seminole Joint Venture This investment consists of a 45% non-controlling interest held by the Company in Seminole Towne Center, an approximate 1.1 million square foot (unaudited) enclosed regional retail property located in the Orlando, Florida area. The Company's effective financial interest in this property (after preferences) was approximately 0% for the year ended December 31, 2019. We retain day to day management, leasing, and development responsibilities for the Seminole Joint Venture. • Other Joint Venture The Company also holds an indirect 12.5% ownership interest in certain real estate through a joint venture with an unaffiliated third party. We do not have management, leasing and development responsibilities for this joint venture. Advances to the joint ventures totaled $0.5 million and $5.3 million as of December 31, 2019 and 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 statements of operations for the O'Connor Joint Venture I, Seminole Joint Venture, and our indirect 12.5% ownership interest are included below for all periods presented. The results for the O'Connor Joint Venture II are included below for the years ended December 31, 2019 and 2018, and from May 12, 2017 (the closing date of the venture), and in the case of Malibu Lumber Yard from June 13, 2017 (the date the property was contributed to the venture), through December 31, 2017. For the Year Ended December 31, 2019 2018 2017 $ 262,463 $ 262,410 $ 234,314 110,399 101,953 50,111 (1,288) (61,523) $ (12,700) $ 106,402 97,810 58,198 583 (52,477) 6,304 93,502 89,397 51,415 1,585 (45,906) 7,094 1,395 $ $ Total revenues Operating expenses Depreciation and amortization Operating income (Loss) gain on sale of interests in property and unconsolidated entities, net Interest expense, taxes, and other, net Net (loss) income from the Company's unconsolidated real estate entities Our share of (loss) income from the Company's unconsolidated real estate entities $ (1,499) $ 541 F-32 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The following table presents the combined balance sheets for the unconsolidated joint venture properties for the periods indicated above during which the Company accounted for these investments as unconsolidated entities as of December 31, 2019 and 2018: Assets: Investment properties at cost, net Construction in progress Cash and cash equivalents Tenant receivables and accrued revenue, net Deferred costs and other assets (1) Total assets Liabilities and Members’ Equity: Mortgage notes payable Accounts payable, accrued expenses, intangibles, and deferred revenues(2) Total liabilities Members’ equity Total liabilities and members’ equity Our share of members’ equity, net Our share of members’ equity, net Advances and excess investment Net investment in and advances to unconsolidated entities, at equity(3) December 31, 2019 2018 $ 1,905,336 $ 1,964,699 38,280 43,137 31,238 21,019 43,169 31,661 301,133 147,481 $ 2,319,124 $ 2,208,029 $ 1,282,307 297,163 $ 1,292,801 137,073 1,579,470 1,429,874 739,654 778,155 $ 2,319,124 $ 2,208,029 $ $ $ 384,332 384,332 17,339 401,671 $ $ $ 396,229 396,229 21,557 417,786 (1) (2) (3) Includes value of acquired in-place leases and acquired above-market leases with a net book value of $79,457 and $91,609 as of December 31, 2019 and 2018, respectively. Additionally, includes ROU assets of $172,991 related to ground leases for which our joint ventures are the lessees as of December 31, 2019. Includes the net book value of below market leases of $45,757 and $57,392 as of December 31, 2019 and 2018, respectively. Additionally, includes lease liabilities of $172,991 related to ground leases for which our joint ventures are the lessees as of December 31, 2019. Includes $417,092 and $433,207 of investment in and advances to unconsolidated entities, at equity as of December 31, 2019 and 2018, respectively, and $15,421 and $15,421 of cash distributions and losses in unconsolidated entities, at equity as of December 31, 2019 and 2018, respectively. 6. Indebtedness Mortgage Debt Total mortgage indebtedness at December 31, 2019 and 2018 was as follows: Face amount of mortgage loans Fair value adjustments, net Debt issuance cost, net Carrying value of mortgage loans 2019 2018 $ 1,117,242 $ 980,276 3,463 (5,097) $ 1,115,608 $ 5,764 (2,771) 983,269 The mortgage debt had weighted average interest and maturity of 4.61% and 4.5 years at December 31, 2019 and 5.00% and 3.5 years at December 31, 2018. F-33 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) A roll forward of mortgage indebtedness from December 31, 2018 to December 31, 2019 is summarized as follows: Balance at December 31, 2018 Debt amortization payments Repayment of debt Debt borrowings, net of issuance costs Debt canceled upon lender foreclosures, net of debt issuance costs Amortization of fair value and other adjustments Amortization of debt issuance costs Balance at December 31, 2019 2019 Activity $ 983,269 (18,115) (47,175) 293,416 (94,633) (2,301) 1,147 $ 1,115,608 On December 18, 2019, the $49.5 million mortgage on West Ridge, was canceled upon the lender foreclosure (see "Covenants" section below for additional details). On September 16, 2019, an affiliate of WPG Inc. repaid its existing $47.2 million, 7.50% fixed rate cross-defaulted and cross-collateralized pool of mortgages that encumbered Forest Plaza, located in Rockford, Illinois; Lakeline Plaza, located in Cedar Park, Texas; Muncie Towne Plaza, located in Muncie, Indiana; and White Oaks Plaza, located in Springfield, Illinois, which was scheduled to mature on October 16, 2019. Simultaneously, the Company closed on a new $117.0 million, 3.67% fixed rate cross- defaulted and cross-collateralized pool of mortgages encumbering the same properties. The new loan requires monthly interest- only payments and will mature on October 1, 2029. On July 1, 2019, the $45.2 million mortgage on Towne West Square was canceled upon the lender foreclosure (see "Covenants" section below for additional details). 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. On April 1, 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® 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 to fix the interest rate of the note payable at one-month LIBOR plus 2.27%, or 4.92% per annum through both extension periods. 2018 Activity On October 23, 2018, the $94.0 million mortgage on Rushmore Mall was canceled upon a deed-in-lieu of foreclosure agreement (see "Covenants" section below for additional details). On October 2, 2018, an affiliate of WPG Inc. repaid the $8.3 million mortgage loan on Whitehall Mall, located in Whitehall, Pennsylvania. This repayment was funded by cash on hand. On September 27, 2018, an affiliate of WPG Inc. closed on a $35.0 million full-recourse mortgage note payable with a three- year term and a fixed rate of 4.48% secured by Southgate Mall. The mortgage note payable requires interest only payments and will initially mature on September 27, 2021, subject to two one-year extensions available at our option subject to compliance with the terms of the underlying loan agreement and payment of customary extension fees. The proceeds were used to reduce corporate debt and for ongoing redevelopment efforts. On June 8, 2018, the Company exercised the first of three options to extend the maturity date of the $65.0 million term loan secured by Weberstown Mall for one year. F-34 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) On January 19, 2018, an affiliate of WPG Inc. repaid the $86.5 million mortgage loan on The Outlet Collection® | Seattle, located in Auburn, Washington. This repayment was funded by borrowings on the Revolver (as defined below). Unsecured Debt The following table identifies our total unsecured debt outstanding at December 31, 2019 and December 31, 2018: Notes payable: Face amount - the Exchange Notes(1) Face amount - Senior Notes due 2024(2) Debt discount, net Debt issuance costs, net Total carrying value of notes payable Unsecured term loans:(7) Face amount - Term Loan(3)(4) Face amount - December 2015 Term Loan(5) Debt issuance costs, net Total carrying value of unsecured term loans Revolving credit facility:(3)(6) Face amount Debt issuance costs, net Total carrying value of revolving credit facility December 31, 2019 December 31, 2018 $ 250,000 $ 250,000 720,900 (7,864) (5,470) 957,566 $ 750,000 (9,680) (7,623) 982,697 350,000 $ 350,000 340,000 (3,358) 686,642 207,000 (2,855) 204,145 $ $ $ 340,000 (4,491) 685,509 290,000 (3,998) 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, bore interest at 5.950% per annum through August 14, 2019, at which time the interest rate increased to 6.450% per annum due to the credit downgrade. The Senior Notes due 2024 mature on August 15, 2024. (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 2.10% 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 4.86% per annum through June 30, 2021. At December 31, 2019, the applicable interest rate on the unhedged portion of the Term Loan was one-month LIBOR plus 2.10% or 3.86%. (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 at one-month LIBOR plus 1.80% 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 December 31, 2019, we had an aggregate available borrowing capacity of $442.8 million under the Revolver, net of $0.2 million reserved for outstanding letters of credit. At December 31, 2019, the applicable interest rate on the Revolver was one-month LIBOR plus 1.80%, or 3.56%. The interest rate on the Revolver could vary in the future based upon changes to the Company's credit ratings and leveraged levels. (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. During the year ended December 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 (55 basis point increase effective May 2, 2019), December 2015 Term Loan (55 basis point increase effective February 15, 2019), and Senior Notes due 2024 (50 basis point increase effective August 15, 2019). F-35 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) During the year ended December 31, 2019, the Company retired $29.1 million outstanding principal on the Senior Notes due 2024 and recognized a gain of approximately $1.2 million, which is recorded in gain on extinguishment of debt, net in the accompanying consolidated statements of operations and comprehensive (loss) income for the period then ended. On January 22, 2018, WPG L.P. amended the terms of the Facility to provide for borrowings of $1.0 billion. The Facility can be increased to $1.5 billion through currently uncommitted Facility commitments. Excluding the accordion feature, the Facility includes a $650.0 million Revolver and $350.0 million Term Loan. The $350.0 million Term Loan was fully funded at closing, and the Company used the proceeds to repay a $270.0 million outstanding term loan and to pay down the Revolver. The following table presents the borrowings and paydowns on the Revolver during the years ended December 31, 2019 and December 31, 2018: Beginning Balance Borrowings Paydowns Ending Balance 2019 2018 $ 290,000 $ 155,000 267,000 (350,000) $ 207,000 $ 332,000 (197,000) 290,000 During 2019, borrowings under the Revolver were primarily used for ongoing redevelopment efforts and general corporate purposes. Paydowns of outstanding borrowings were funded using proceeds from property dispositions (see Note 4 - "Investment in Real Estate"), new mortgage activity as discussed above and cash flow from operations. During 2018, borrowings under the Revolver were primarily used for general corporate purposes. Paydowns of outstanding borrowings were funded using proceeds from property dispositions (see Note 4 - "Investment in Real Estate"), new mortgage activity as discussed above and cash flow from operations. Other Indebtedness (Perennial) On October 10, 2019, WPG L.P. closed on the sale and leaseback of four assets (collectively, the "Properties") pursuant to the purchase and sale agreement executed on July 24, 2019 between WPG L.P. and Mall Ground Portfolio, LLC, an affiliate of Perennial Investment & Advisors, LLC and Kawa Capital Partners, LLC ("the Ground Lessor"). The Properties are: Edison Mall, located in Fort Myers, Florida; Great Lakes Mall, located in Mentor, Ohio; Irving Mall, located in Irving, Texas; and Jefferson Valley Mall, located in Yorktown Heights, New York. Under the agreement, the Ground Lessor acquired a fee interest in the land at the Properties for a price of approximately $98.9 million. Concurrently, WPG L.P. entered into a new 99-year master ground lease for the leasehold interest at the Properties. The master ground lease includes fixed annual payments to the Ground Lessor at an initial annualized rate of 7.4% and contains annual rent escalators over the aforementioned term. The agreement includes an option for WPG L.P. to repurchase the fee interest in the land at $109.3 million in year 30 of the master ground lease. If WPG L.P. does not exercise this option, then the Ground Lessor will retain the fee interest in the land, and the fee interest in the improvements and development rights will transfer to the Ground Lessor at the end of the 99-year ground lease term. WPG L.P. received approximately $42.3 million in proceeds upon closing, net of $55.0 million in bridge financing provided by WPG L.P. to the Ground Lessor and closing costs. The bridge financing has a maximum five-year balloon term, which can be pre-paid without penalty, and carries an interest rate of 4.0%. The bridge financing is included in "Deferred costs and other assets" on the accompanying consolidated balance sheet at December 31, 2019. The net proceeds were generally used to fund ongoing redevelopment efforts and for general corporate purposes. WPG L.P. continues to own a fee interest in the improvements and development rights through the term of the aforementioned master ground lease and continues to manage, lease and develop the Properties and maintains full control over the leasehold interest and in the land and fee interest in the improvements and development rights at the respective Properties. For accounting purposes, the repurchase option precluded WPG L.P. from meeting the criteria for sales recognition. As such, the gross proceeds received have been accounted for as a financial liability, net of capitalized closing costs of $1.6 million, and subject to accretion over the relevant term. As of December 31, 2019, the net financial liability was approximately $97.6 million, including $0.3 million of accretion. Expense is being recognized utilizing an effective interest rate of 8.56% during the repurchase period. During the year ended December 31, 2019, we recognized expense of $1.9 million, which is included in interest expense, net in the accompanying consolidated statements of operations and comprehensive (loss) income. F-36 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) 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 December 31, 2019, management believes the Company is in compliance with all covenants of its unsecured debt. The total balance of mortgages was approximately $1.1 billion as of December 31, 2019. At December 31, 2019, certain of our consolidated subsidiaries were the borrowers under 20 non-recourse loans and two full-recourse loans secured by mortgages encumbering 24 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. 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. If the borrower fails to comply with these covenants, the lender could accelerate the debt and enforce its right against their collateral. On November 5, 2019, we received a letter, dated October 30, 2019, from the lender notifying the borrower, a consolidated subsidiary of WPG L.P., that the $45.1 million mortgage loan secured by Charlottesville Fashion Square was transferred to special servicing because the borrower notified the lender that future projected cash flows will be insufficient to ensure future compliance with the mortgage loan due to the loss of certain tenants. 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 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 $49.5 million mortgage loan secured by West Ridge. 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 December 18, 2019, an affiliate of the Company transitioned the property to the lender. On May 29, 2018, we received a notice of default letter, dated May 25, 2018, from the special servicer to the borrower, a consolidated subsidiary of WPG L.P., concerning the $94.0 million mortgage loan secured by Rushmore Mall ("Rushmore"). The notice was issued by the special servicer because the borrower notified the lender that there were insufficient funds to ensure future compliance with the mortgage loan due to the loss of certain tenants at Rushmore. On October 23, 2018, an affiliate of the Company transitioned the property to the lender. 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 July 1, 2019, an affiliate of the Company transitioned the property to the lender. On March 30, 2017, the Company transferred the $40.0 million mortgage loan secured by Valle Vista Mall to the special servicer at the request of the borrower, a consolidated subsidiary of the Company. On May 18, 2017, we received a notice of default letter, dated that same date, from the special servicer because the borrower did not repay the loan in full by its May 10, 2017 maturity date. On October 3, 2017, an affiliate of WPG Inc. transitioned the property to the lender. On June 6, 2016, we received a notice of default letter, dated June 3, 2016, from the special servicer to the borrower of the $99.7 million mortgage loan secured by Southern Hills Mall. The letter was sent because the borrower, a consolidated subsidiary of the Company, did not repay the loan in full by its June 1, 2016 maturity date. On October 27, 2016, we received notification that a receiver has been appointed to manage and lease the property. On October 17, 2017, an affiliate of WPG Inc. completed a discounted payoff of the mortgage loan for $55.0 million and retained ownership and management of the property. On June 30, 2016, we received a notice, dated that same date, that the $87.3 million mortgage loan secured by Mesa Mall, located in Grand Junction, Colorado, had been transferred to the special servicer due to the payment default that occurred when the borrower, a consolidated subsidiary of the Company, did not repay the loan in full by its June 1, 2016 maturity date. On April 25, 2017, the Company completed a discounted payoff of the mortgage loan for $63.0 million and retained ownership and management of the property. F-37 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) At December 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 which the Company still holds title, for impairment indicators as part of our quarterly assessment. Refer to Note 4 - "Investment in Real Estate" for further details. Gain on Extinguishment of Debt, Net During the year ended December 31, 2019, the Company recognized a net gain of $62.5 million related to the $94.7 million mortgage debt cancellation and ownership transfer of West Ridge and Towne West Square, which is included in gain on extinguishment of debt, net in the consolidated statements of operations and comprehensive (loss) income for the year then ended. During the year ended December 31, 2018, the Company recognized a net gain of $51.4 million related to the $94.0 million mortgage debt cancellation and ownership transfer of Rushmore, which is included in gain on extinguishment of debt, net in the consolidated statements of operations and comprehensive (loss) income for the year then ended. During the year ended December 31, 2017, the Company recognized a net gain of $90.6 million based on the cancellation of mortgage debt of $108.9 million related to discounted payoff of the mortgage note payable secured by Southern Hills Mall, ownership transfer of Valle Vista Mall, and discounted payoff of the mortgage note payable secured by Mesa Mall, which is included in gain on extinguishment of debt, net in the consolidated statements of operations and comprehensive (loss) income for the year then ended. Debt Maturity and Cash Paid for Interest Scheduled principal repayments on indebtedness (including extension options) as of December 31, 2019 are as follows: 2020 2021 2022 2023 2024 Thereafter Total principal maturities Bond discount Fair value adjustments, net Debt issuance costs, net Future accretion of other indebtedness Total mortgages and corporate indebtedness $ 346,176 276,910 690,649 406,006 984,553 390,133 3,094,427 (7,864) 3,463 (18,341) (10,123) $ 3,061,562 Cash paid for interest for the years ended December 31, 2019, 2018 and 2017 was $149,775, $141,641 and $107,609, respectively. 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 corporate debt (including variable-rate unsecured debt swapped to fixed-rate and our other indebtedness, as discussed in Note 6 - "Indebtedness") 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 Level 1 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 2 inputs. F-38 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The book value and fair value of these financial instruments along with the related discount rate assumptions as of December 31, 2019 and 2018 are summarized as follows: Book value of fixed- rate mortgages(1) Fair value of fixed-rate mortgages Weighted average discount rates assumed in calculation of fair value for fixed-rate mortgages Book value of fixed-rate corporate debt(1) Fair value of fixed-rate corporate debt 2019 2018 $1,052,242 $ 915,276 $1,062,205 $ 928,129 4.24% 4.57% $1,660,062 $1,590,000 $1,673,105 $1,485,672 Weighted average discount rates assumed in calculation of fair value for fixed-rate corporate debt 6.03% 5.62% (1) Excludes deferred financing fees and applicable debt discounts. 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 $3.5 million will be reclassified as an increase 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®. On May 9, 2018, the Company entered into four three-year swaps, totaling $250.0 million with an effective date of June 29, 2018, to replace two three-year swaps totaling $270.0 million, which matured on June 30, 2018. As of December 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 $641.3 million. F-39 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the consolidated balance sheet as of December 31, 2019 and 2018: Derivatives designated as hedging instruments: Interest rate products Asset Derivatives Interest rate products Liability Derivatives Balance Sheet Location December 31, 2019 December 31, 2018 Deferred costs and other assets Accounts payable, accrued expenses, intangibles and deferred revenues $ $ — $ 9,306 6,592 $ 1,913 The asset derivative instruments were reported at their fair value of $0 and $9,306 in deferred costs and other assets at December 31, 2019 and 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 $6,592 and $1,913 in accounts payable, accrued expenses, intangibles, and deferred revenues at December 31, 2019 and 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. The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations and comprehensive (loss) income for the years ended December 31, 2019, 2018 and 2017: Derivatives in Cash Flow Hedging Relationships (Interest rate products) Amount of Gain or (Loss) Recognized in OCI on Derivative Location of Gain or (Loss) Recognized in Income on Derivatives For the Year Ended December 31, 2019 2018 2017 $ (13,363) $ 1,054 $ 1,256 Amount of Gain or (Loss) Reclassified from AOCI into Income Interest expense $ (739) $ (2,338) $ 1,145 The table below presents the effect of the Company's derivative financial instruments on the consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017: Effect of Cash Flow Hedges on Consolidated Statements of Operations For the year ended December 31, 2019 2018 2017 Total interest (expense) presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded $(153,382) $(141,987) $(126,541) Amount of (gain) loss reclassified from accumulated other comprehensive (loss) income into interest expense $ (739) $ (2,338) $ 1,145 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 December 31, 2019, the fair value of derivatives in a net liability position, plus accrued interest but excluding any adjustment for nonperformance risk, related to these agreements was $6,592. As of December 31, 2019, the Company has not posted any collateral related to these agreements. The Company is not in default with any of these provisions. If the Company had breached any of these provisions at December 31, 2019, it would have been required to settle its obligation under these agreements at their termination value of $6,592. F-40 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) 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 December 31, 2019 and 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. The tables below presents the Company’s net assets and (liabilities) measured at fair value as of December 31, 2019 and 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 December 31, 2019 Derivative instruments, net $ — $ (6,592) $ — $ (6,592) 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. Equity Preferred Stock Series H Cumulative Redeemable Preferred Stock On January 15, 2015, WPG Inc. issued 4,000,000 shares of 7.5% Series H Cumulative Redeemable Preferred Stock (the "Series H Preferred Shares"). Dividends accrue quarterly at an annual rate of 7.5% per share. WPG Inc. can redeem this series, in whole or in part, at a redemption price of $25.00 per share, plus accumulated and unpaid dividends. WPG L.P. issued to WPG Inc. a like number of preferred units as consideration for the Series H Preferred Shares and can redeem this series, in whole or in part, when WPG Inc. can redeem the Series H Preferred Shares at like terms. All shares remain issued and outstanding as of December 31, 2019 and 2018. Series I Cumulative Redeemable Preferred Stock On January 15, 2015, WPG Inc. issued 3,800,000 shares of 6.875% Series I Cumulative Redeemable Preferred Stock (the "Series I Preferred Shares"). Dividends accrue quarterly at an annual rate of 6.875% per share. WPG Inc. can redeem this series, in whole or in part, at a redemption price of $25.00 per share, plus accumulated and unpaid dividends. WPG L.P. issued to WPG Inc. a like number of preferred units as consideration for the Series I Preferred Shares and can redeem this series, in whole or in part, when WPG Inc. can redeem the Series I Preferred Shares at like terms. All shares remain issued and outstanding as of December 31, 2019 and 2018. F-41 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) 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. During the year ended December 31, 2017, WPG Inc. issued 314,577 shares of common stock to a limited partner of WPG L.P. in exchange for an equal number of units pursuant to the WPG L.P. Partnership Agreement. This transaction increased WPG Inc.’s ownership interest in WPG L.P. There were no similar transactions during the years ended December 31, 2019 and 2018. At December 31, 2019, WPG Inc. had reserved 34,682,956 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. Share Based Compensation On May 28, 2014, the WPG Inc. Board of Directors (the "Board") adopted the Washington Prime Group, L.P. 2014 Stock Incentive Plan (the "2014 Plan"), which permitted 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 were reserved for issuance, with a maximum number of awards to be granted to a participant in any calendar year of 500,000 shares/units. On May 16, 2019, the common shareholders of WPG Inc. approved the Washington Prime Group, L.P. 2019 Stock Incentive Plan (the "2019 Plan"), which replaced the 2014 Plan with respect to the issuance of new awards. The Board and its Compensation Committee (the "Committee") previously approved and adopted the 2019 Plan, subject to WPG Inc. common shareholder approval, during the Board and Committee's regular meetings in February 2019. An aggregate of 7,290,000 shares of common stock are reserved for issuance, excluding carryover shares from the 2014 Plan. 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 in WPG L.P. The 2019 Plan terminates on May 16, 2029. Long Term Incentive Awards Time Vested LTIP Awards The Company has issued time-vested LTIP units ("Inducement LTIP Units") to certain executive officers and employees, pursuant to LTIP Unit Award Agreements between the Company and each of the grant recipients. These awards will vested and the related fair value was expensed over a four-year vesting period. During the years ended December 31, 2019, 2018 and 2017, the Company did not grant any Inducement LTIP Units. As of December 31, 2019, no Inducement LTIP Units were outstanding. A summary of the Inducement LTIP Units and changes during the year ended December 31, 2019 is listed below: Outstanding unvested at beginning of year Units granted Units vested Units forfeited Outstanding unvested at end of year Activity for the Year Ended December 31, 2019 Inducement LTIP Units Weighted Average Grant Date Fair Value 12,832 $ — $ (12,832) $ — $ — $ 17.53 — 17.53 — — During the year ended December 31, 2018, 25,036 LTIP Units, with a weighted average grant date fair value per share of $17.97, vested. During the year ended December 31, 2017, 29,685 LTIP Units, with a weighted average grant date fair value per share of $18.33, vested. F-42 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) Annual Long-Term Incentive Awards During the years ended December 31, 2019, 2018 and 2017, the Company approved the terms and conditions of the 2019, 2018, and 2017 annual awards (the "2019 Annual Long-Term Incentive Awards," "2018 Annual Long-Term Incentive Awards," and "2017 Annual 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 WPG Inc. to WPG Inc.'s common shareholders for the applicable dividend payment dates. Compensation expense is recognized on a straight-line basis over the three years vesting term, except in instances that result in accelerated vesting due to severance arrangements. With respect to PSUs awarded in connection with the annual awards, actual PSUs earned may range from 0%-150% of the PSUs allocated to the award recipient, based on the WPG Inc.'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 WPG Inc. to WPG Inc.’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, except in instances that result in accelerated amortization due to severance arrangements. The following table summarizes the issuance of the 2019 Annual Long-Term Incentive Awards, 2018 Annual Long-Term Incentive Awards, and 2017 Annual Long-Term Incentive Awards, respectively: Grant Date RSUs issued Grant date fair value per unit PSUs issued Grant date fair value per unit 2019 Annual Long- Term Incentive Awards 2018 Annual Long- Term Incentive Awards 2017 Annual Long- Term Incentive Awards February 20, 2019 February 20, 2018 February 21, 2017 572,163 $5.77 572,163 $4.98 587,000 $6.10 587,000 $4.88 358,198 $9.58 358,198 $7.72 The following table summarizes the assumptions used to value the PSUs under a Monte Carlo simulation model: Risk free rate Volatility Dividend yield 2019 Annual Long- Term Incentive Awards 2018 Annual Long- Term Incentive Awards 2017 Annual Long- Term Incentive Awards 2.45% 26.53% 17.33% 2.39% 24.70% 16.39% 1.49% 20.52% 10.44% F-43 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) During 2016, the Company approved the performance criteria and maximum dollar amount of the 2016 annual awards (the "2016 Annual Long-Term Incentive Awards"), that generally range from 30%-100% of actual base salary, for certain executive officers and employees of the Company. The number of awards was determined by converting the cash value of the award to a number of RSUs (the "Allocated RSUs") based on the closing price of WPG Inc.'s common shares for the final 15 trading days of 2016. Eventual recipients were eligible to receive a percentage of the Allocated RSUs based on the Company's performance on its strategic goals detailed in the Company's 2016 cash bonus plan and the Company's relative TSR compared to a peer group based on companies with similar assets and revenue. Payout for 50% of the Allocated RSUs was based on the Company's performance on the strategic goals and the payout on the remaining 50% was based on the Company's TSR performance. Both the strategic goal component as well as the TSR performance were achieved at target, resulting in a 100% payout. During the year ended December 31, 2017, the Company awarded 324,237 Allocated RSUs, with a grant date fair value of $2.2 million, related to the 2016 Annual Long-Term Incentive Awards, which will vest in one-third installments on each of February 21, 2018, 2019 and 2020, subject to the participant's continued employment with the Company through each vesting date and the participant's continued compliance with certain applicable covenants, except in instances that result in accelerated vesting due to severance arrangements. The 2016 Annual Long-Term Incentive Awards that are based upon TSR were calculated using a Monte Carlo simulation model. The total amount of compensation to be recognized over the performance period, and the assumptions used to value the 2016 Annual Long-Term Incentive Awards are provided below: Fair value per share of Allocated RSUs/Units Total amount to be recognized over the performance period Risk free rate Volatility Dividend yield $ $ 2016 3.81 2,516 0.44% 31.40% 10.05% WPG Restricted Share Awards The WPG Restricted Shares related to unvested restricted shares held by certain executive employees. During the year ended December 31, 2019, the remaining 9,033 of outstanding WPG Restricted Shares vested. There were no restricted shares granted during the years ended December 31, 2019, 2018 and 2017. The total original fair value of the restricted shares vested during the years ended December 31, 2019, 2018 and 2017 was $33, $391, and $2,182, respectively. Other Compensation Arrangements On August 2, 2019, in connection with the execution of an amended and restated employment agreement, the Committee granted Mr. Louis G. Conforti, the Company's Chief Executive Officer and Director, a retention award of 500,000 RSUs, with a grant date fair value of $1.8 million, and 500,000 PSUs, at target with a grant date fair value of $1.2 million, for his continued service through August 2, 2024. RSUs represent a contingent right to receive one WPG Inc. common share for each vested RSU. Dividend equivalents corresponding to the amount of any regular cash dividends paid by WPG Inc. to WPG Inc.’s common shareholders for the applicable dividend payment dates will accrue and be deemed reinvested in additional RSUs, which themselves will accrue dividend equivalents, and will be paid out if and when the underlying RSU vests. The RSUs will vest in one-third installments on August 2, 2022, 2023, and 2024, subject to Mr. Conforti's continued employment through such applicable date. Compensation expense is recognized on a straight-line basis over the five year vesting term. Actual PSUs earned may range from 0%-200% of the PSUs awarded based on WPG Inc.'s annualized TSR over a three year performance period that commenced on August 2, 2019, provided Mr. Conforti's continued employment through the vesting date. Dividend equivalents corresponding to the amount of any regular cash dividends paid by WPG Inc. to WPG Inc.’s common shareholders for the applicable dividend payment dates will accrue and be deemed reinvested in additional PSUs, which themselves will accrue dividend equivalents, and will be earned when and if the underlying PSU vests. Earned PSUs, if any, vest in one-third installments on August 2, 2022, 2023, and 2024. The PSUs were valued through the use of a Monte Carlo model and the related compensation expense is recognized over the five years term on a graded-vesting basis based on the applicable vesting period of the PSUs. F-44 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The following table summarizes the assumptions used to value the PSUs under a Monte Carlo simulation model: Risk free rate Volatility Dividend yield WPG Performance-Based Stock Unit Awards August 2, 2019 PSU Grant 1.66% 37.27% 27.93% The WPG PSUs primarily relate to the performance-based component of the annual long-term incentive awards issued to certain executive officers and employees of the Company, in addition to awards issued under employment agreements (see "Annual Long-Term Incentive Awards" and "Other Compensation Arrangements" sections above for additional details). A summary of the status of the WPG PSUs at December 31, 2019 and changes during the year are presented below: Outstanding unvested at beginning of year PSUs granted PSUs forfeited Outstanding unvested at end of year WPG RSU Awards Activity for the Year Ended December 31, 2019 Weighted Average Grant Date Fair Value PSUs 883,601 $ 1,072,163 $ (198,561) $ $ 1,757,203 5.90 3.73 5.69 4.60 The Company issues RSUs to certain executive officers, employees, and non-employee directors of the Board. During the years ended December 31, 2019, 2018 and 2017, the Company issued 1,406,455, 812,440, and 843,435 RSUs, respectively. Of the 1,406,455 RSUs issued in 2019, 500,000 RSUs with a fair value of $1.8 million relates to Mr. Conforti's August 2, 2019 special grant and 572,163 RSUs with a fair value of $3.3 million relates to the annual long-term incentive award issuances that occurred in February 2019 (see "Annual Long-Term Incentive Awards" section above). Of the 812,440 RSUs issued in 2018, 587,000 RSUs with a fair value of $3.6 million relates to the annual long-term incentive award issuances that occurred in February 2018 (see "Annual Long-Term Incentive Awards" section above). Of the 843,435 RSUs issued in 2017, 682,435 RSUs with a fair value of $5.6 million relates to the annual long-term incentive award issuances that occurred in February 2017 (see "Annual Long-Term Incentive Awards" section above). The RSUs are service-based awards and the related fair value is expensed over the applicable service periods, except in instances that result in accelerated vesting due to severance arrangements. The amount of compensation related to the unvested RSUs that we expect to recognize in future periods is $6.3 million over a weighted average period of 2.3 years. A summary of the status of the WPG RSUs at December 31, 2019 and changes during the year are presented below: Activity for the Year Ended December 31, 2019 Outstanding unvested at beginning of year RSUs granted RSUs vested RSUs forfeited Outstanding unvested at end of year F-45 Weighted Average Grant Date Fair Value 8.07 4.69 8.71 6.84 5.32 RSUs $ 1,569,313 1,406,455 $ (948,072) $ (145,282) $ $ 1,882,414 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The weighted average grant date fair value per share of RSUs granted during the years ended December 31, 2019, 2018 and 2017 was $4.69, $6.28, and $8.07, respectively. The total fair value of the RSUs vested during the years ended December 31, 2019, 2018 and 2017 was $8,254, $3,320, and $1,128, respectively. Stock Options Options granted under the Company's Plan generally vest over a three years period, with options exercisable at a rate of 33.3% per annum beginning with the first anniversary of the grant date. These options were valued using the Black-Scholes pricing model and the expense associated with these options are amortized over the requisite vesting period. There were no options granted during the years ended December 31, 2019, 2018 and 2017. A summary of the status of the Company's option plans at December 31, 2019 and changes during the year are listed below: Outstanding at beginning of year Options granted Options exercised Options forfeited/expired Outstanding at end of year Activity for the Year Ended December 31, 2019 Weighted Average Grant Date Fair Value 2.08 — 14.46 2.64 2.02 Stock Options 679,741 $ — $ (391) $ (78,061) $ $ 601,289 The following table summarizes information regarding the options outstanding at December 31, 2019: Range of Exercise Prices $5.76 $11.97 $12.67 $16.56 $13.10 $14.28 $9.95 Options Outstanding Options Exercisable Number Outstanding at December 31, 2019 13,583 30,415 48,373 94,420 61,498 198,000 155,000 601,289 Weighted Average Remaining Contractual Life 0.2 1.3 2.4 3.4 4.3 5.4 6.4 4.6 Weighted Average Exercise Price $5.76 $11.97 $12.67 $16.56 $13.10 $14.28 $9.95 $12.96 Number Exercisable at December 31, 2019 13,583 30,415 48,373 94,420 61,498 198,000 155,000 601,289 Weighted Average Remaining Contractual Life 0.2 1.3 2.4 3.4 4.3 5.4 6.4 4.6 Weighted Average Exercise Price $5.76 $11.97 $12.67 $16.56 $13.10 $14.28 $9.95 $12.96 The following table summarizes the aggregate intrinsic value of options that are: outstanding, exercisable and exercised. It also depicts the fair value of options that have vested. Aggregate intrinsic value of options outstanding Aggregate intrinsic value of options exercisable Aggregate intrinsic value of options exercised Aggregate fair value of options vested For the Year Ended December 31, 2019 $ $ $ $ — — 1 32 The aggregate intrinsic value of options that exercised and the aggregate fair value of options that vested during the year ended December 31, 2018 was $0 and $154, respectively. The aggregate intrinsic value of options that exercised and the aggregate fair value of options that vested during the year ended December 31, 2017 was $12 and $187, respectively. F-46 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) Share Award Related Compensation Expense During the years ended December 31, 2019, 2018 and 2017, the Company recorded share award related compensation expense pertaining to the award and option plans noted above of $7.8 million, $8.3 million, and $6.4 million 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 Committee may, in its discretion, accelerate the vesting for retiring Board members. Distributions During the years ended December 31, 2019 and 2018, the Board declared common share/unit dividends of $1.00 per common share/unit, respectively. 9. 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 All operations are within the United States and no customer or tenant accounts for 5% or more of our consolidated revenues. Lease Commitments As of December 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 years ended December 31, 2019, 2018 and 2017 of $837, $789 and $2,438, respectively, of which $20, $50 and $100 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 common-area maintenance 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 years ended December 31, 2019, 2018 and 2017 of $2,609, $2,668, and $2,397, 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 8.7% 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 December 31, 2019 are as follows: 2020 2021 2022 2023 2024 Thereafter Total lease payments Less: Discount Present value of lease liabilities F-47 $ $ 2,049 2,069 2,099 1,427 999 20,378 29,021 16,107 12,914 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) The weighted average remaining lease term for our consolidated operating leases was 19.2 years and the weighted average discount rate for determining the lease liabilities was 8.7% at December 31, 2019. We had no financing leases as of December 31, 2019. 10. Related Party Transactions Hannah Laikin During year ended December 31, 2019, an affiliate of WPG L.P. employed Mrs. Hannah Laikin, the daughter-in-law of our Chairman of the Board, Robert J. Laikin, in a non-executive role as Director, Special Projects. Mrs. Laikin's compensation for the year ended December 31, 2019 was approximately $0.2 million. Mrs. Laikin is not an executive officer of the Company or any of its affiliates, but she is included in the Company’s count of its full-time employees as of the December 31, 2019. Mrs. Laikin’s place of employment is the Company’s Indianapolis, Indiana corporate office in the Leasing Department. Ms. Laikin has no direct reports and reports to the Company’s Chief Executive Officer. Mrs. Laikin is an at-will employee. Mrs. Laikin’s employment with the Company was approved by the Board’s Audit Committee after review of her relationship with our Chairman of the Board. Our Audit Committee does not expect this relationship to impair Mr. Laikin’s independence status because Mrs. Laikin is not an executive officer of the Company. Consulting Agreement with Mark S. Ordan Mr. Mark S. Ordan served as a member of the Board until May 18, 2017 at which time his term on the Board expired and he retired from service. During 2017, Mr. Ordan and the Company were parties to a consulting agreement in which Mr. Ordan provided consulting services to the Company for a fee. The agreement was terminated on May 28, 2017, and the Company paid Mr. Ordan approximately $0.2 million during 2017. The Company has no further payment obligations under the agreement. 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. The following table sets forth the computation of WPG Inc.'s basic and diluted (loss) earnings per common share: For the Year Ended December 31, 2019 2018 2017 (Loss) Earnings Per Common Share, Basic: Net (loss) income attributable to common shareholders - basic Weighted average shares outstanding - basic (Loss) earnings per common share, basic (Loss) Earnings Per Common Share, Diluted: Net (loss) income attributable to common shareholders - basic Net (loss) income attributable to common unitholders Net (loss) income attributable to common shareholders - diluted (9,758) $ $ 188,445,434 79,572 187,696,339 183,031 $ 186,829,385 $ $ $ (0.05) $ 0.42 $ 0.98 (9,758) $ (1,799) (11,557) $ 79,572 14,735 94,307 $ $ 183,031 34,222 217,253 Weighted average common shares outstanding - basic 188,445,434 187,696,339 186,829,385 Weighted average operating partnership units outstanding 34,730,014 34,703,770 34,808,890 Weighted average additional dilutive securities outstanding — 603,674 337,508 Weighted average common shares outstanding - diluted (Loss) earnings per common share, diluted 223,175,448 223,003,783 221,975,783 $ (0.05) $ 0.42 $ 0.98 F-48 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) For the years ended December 31, 2019, 2018 and 2017, additional potentially dilutive securities include contingently- issuable outstanding stock options, restricted stock units, and performance based components of annual or special arrangement awards. For the year ended December 31, 2019, the potential dilutive effect of 601,289 contingently-issuable outstanding stock options, 571,074 restricted stock units, and 1,763,265 performance based components of annual or special arrangement awards 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 Year Ended December 31, 2019 2018 2017 (Loss) Earnings Per Common Unit, Basic and Diluted: Net (loss) income attributable to common unitholders - basic and diluted $ (11,557) $ 94,307 $ 217,253 Weighted average common units outstanding - basic 223,175,448 222,400,109 221,638,275 Weighted average additional dilutive securities outstanding — 603,674 337,508 Weighted average shares outstanding - diluted (Loss) earnings per common unit, basic and diluted 223,175,448 223,003,783 221,975,783 $ (0.05) $ 0.42 $ 0.98 For the years ended December 31, 2019, 2018 and 2017, additional potentially dilutive securities include contingently- issuable outstanding stock options, restricted stock units, and performance based components of annual or special arrangement awards. For the year ended December 31, 2019, the potential dilutive effect of 601,289 contingently-issuable outstanding stock options, 571,074 restricted stock units, and 1,763,265 performance based components of annual or special arrangement awards were excluded as their inclusion would be anti-dilutive. We accrue distributions when they are declared. 12. Subsequent Events On January 14, 2020, we completed the sale of Matteson Plaza to an unaffiliated private real estate investor for a purchase price of $1.1 million. The net proceeds of $0.4 million was used for general corporate purposes. On January 24, 2020, we purchased an anchor parcel at Southgate Mall for a purchase price of $10.0 million, which was funded by borrowings on the Revolver. On January 31, 2020, we completed the sale of Dekalb Plaza, located in King of Prussia, Pennsylvania, to an unaffiliated private real estate investor for a purchase price of $13.6 million. The net proceeds of $13.4 million was used to fund ongoing redevelopment efforts and general corporate purposes. On February 25, 2020, the Board declared common share/unit dividends of $0.125 per common share/unit. The dividend is payable on March 16, 2020 to shareholders/unitholders of record on March 9, 2020. F-49 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Consolidated Financial Statements (Continued) (dollars in thousands, except share, unit, per share and per unit amounts and where indicated as in millions or billions) 13. Quarterly Financial Data (Unaudited) Quarterly 2019 and 2018 data is summarized in the table below. Quarterly amounts may not sum to annual amounts due to rounding. 2019 Total revenue Net (loss) income Washington Prime Group Inc.: Net (loss) income attributable to the Company Net (loss) income attributable to common shareholders (Loss) earnings per common share—basic and diluted Washington Prime Group, L.P.: Net (loss) income attributable to unitholders Net (loss) income attributable to common unitholders (Loss) earnings per common unit—basic and diluted 2018 Total revenue Net income Washington Prime Group Inc.: Net income attributable to the Company Net income attributable to common shareholders Earnings per common share—basic and diluted Washington Prime Group, L.P.: Net income attributable to unitholders Net income attributable to common unitholders Earnings per common unit—basic and diluted First Quarter Second Quarter Third Quarter Fourth Quarter $ 168,823 $ 161,434 $ 161,204 $ 170,023 $ $ $ $ $ $ $ (2,563) $ (16,880) $ (1,665) $ 23,868 (1,667) $ (13,754) $ (5,175) $ (17,262) $ (0.09) $ (0.03) $ (913) $ (4,421) $ (0.02) $ (2,563) $ (16,880) $ (6,131) $ (20,448) $ (0.09) $ (0.03) $ (1,665) $ (5,233) $ (0.02) $ 20,608 17,100 0.09 23,868 20,255 0.09 $ 176,994 20,185 $ $ 178,117 15,519 $ $ 179,419 4,115 $ $ 182,949 68,836 $ $ $ $ $ $ $ 17,524 14,016 0.07 20,185 16,617 0.07 $ $ $ $ $ $ 13,594 10,086 0.05 15,519 11,951 0.05 $ $ $ $ $ $ 3,971 463 0.00 4,115 547 0.00 $ $ $ $ $ $ 58,515 55,007 0.29 68,836 65,192 0.29 F-50 Washington Prime Group Inc. and Washington Prime Group, L.P. Real Estate and Accumulated Depreciation December 31, 2019 (dollars in thousands) Initial Cost Cost Capitalized Subsequent to Construction or Acquisition Gross Amounts At Which Carried at Close of Period Location Encumbrances (3) Land Buildings and Improvements Land Buildings and Improvements Land Buildings and Improvements Total(1) Accumulated Depreciation(2) Date of Construction or Acquisition SCHEDULE III $ 17,307 $ 1,712 $ 15,227 $ 851 $ 20,033 $ 2,563 $ 35,260 $ 37,823 $ Name Enclosed Retail Properties Anderson Mall Ashland Town Center Anderson, SC Ashland, KY Bowie Town Center Bowie (Wash, D.C.), MD Boynton Beach Mall Boynton Beach (Miami), FL Brunswick Square East Brunswick (New York), NJ Charlottesville Fashion Square Charlottesville, VA Chautauqua Mall Lakewood, NY Chesapeake Square Theater Chesapeake (VA Beach), VA Clay Terrace Cottonwood Mall Dayton Mall Edison Mall(4) Georgesville Square Grand Central Mall Great Lakes Mall(4) Indian Mound Mall Irving Mall(4) Carmel (Indianapolis), IN Albuquerque, NM Dayton, OH Fort Myers, FL Columbus, OH Parkersburg, WV Mentor (Cleveland), OH Newark, OH Irving (Dallas), TX Jefferson Valley Mall(4) Yorktown Heights (New York), NY Lima Mall Lima, OH Lincolnwood Town Center Lincolnwood (Chicago), IL 47,524 Lindale Mall Longview Mall Cedar Rapids, IA Longview, TX Mall at Fairfield Commons, The Maplewood Mall Markland Mall Melbourne Square Mesa Mall Beavercreek, OH St. Paul (Minneapolis), MN Kokomo, IN Melbourne, FL Grand Junction, CO — — — — — — — 35,954 — — 69,737 45,146 — — — 95,283 79,092 — — 38,748 — — — — — 13,462 2,479 22,240 8,436 — 3,116 628 39,030 10,122 10,899 11,529 720 18,956 12,302 7,109 6,737 4,868 7,659 7,834 14,106 259 18,194 17,119 — 15,762 12,784 (396) 236 6,977 — — (2,171) — 43 5,042 3,607 — — — (121) (252) 2,533 — — — (1,243) 3,319 (687) — 2,883 3,650 (1,717) 68,367 60,322 78,804 55,838 54,738 9,641 9,536 115,207 69,958 160,723 107,350 — 89,736 100,362 19,205 17,479 30,304 35,338 63,480 58,286 3,567 175,426 80,758 7,568 55,891 80,639 F-51 4,591 10,245 33,867 35,675 10,617 13,455 (738) 11,686 25,803 12,092 35,306 — 23,410 54,357 2,938 45,472 71,433 16,805 20,627 14,674 22,454 33,947 27,121 30,399 38,206 9,084 13,066 2,715 29,217 8,436 — 945 628 39,073 15,164 14,506 11,529 720 18,956 12,181 6,857 9,270 4,868 7,659 7,834 12,863 3,578 17,507 17,119 2,883 19,412 11,067 72,958 70,567 86,024 73,282 112,671 141,888 91,513 65,355 23,096 8,798 126,893 95,761 172,815 142,656 — 113,146 154,719 22,143 62,951 99,949 65,355 24,041 9,426 165,966 110,925 187,321 154,185 720 132,102 166,900 29,000 72,221 101,737 106,605 52,143 84,107 72,960 26,021 209,373 107,879 37,967 94,097 89,723 59,802 91,941 85,823 29,599 226,880 124,998 40,850 113,509 100,790 25,221 15,825 41,583 77,075 60,201 45,883 18,336 2,466 26,861 52,330 27,557 85,118 — 33,126 84,271 5,796 44,971 52,653 34,495 58,657 26,923 9,567 37,854 57,521 13,690 56,346 37,383 1972 2015 2001 1996 1996 1997 1996 1996 2014 1996 2015 1997 2015 2015 1996 2015 1971 1983 1996 1990 1998 1978 2015 2002 1968 1996 1998 Initial Cost Cost Capitalized Subsequent to Construction or Acquisition Gross Amounts At Which Carried at Close of Period Name Morgantown Mall Muncie Mall New Towne Mall Northtown Mall Northwoods Mall Oak Court Mall Location Morgantown, WV Muncie, IN New Philadelphia, OH Blaine, MN Peoria, IL Memphis, TN Orange Park Mall Outlet Collection® | Seattle, The Orange Park (Jacksonville), FL Auburn (Seattle), WA Paddock Mall Ocala, FL Port Charlotte Town Center Port Charlotte, FL Rolling Oaks Mall Southern Hills Mall Southern Park Mall Southgate Mall Sunland Park Mall Town Center at Aurora® San Antonio, TX Sioux City, IA Youngstown, OH Missoula, MT El Paso, TX Aurora (Denver), CO Waterford Lakes Town Center Orlando, FL Weberstown Mall Westminster Mall WestShore Plaza Open Air Properties Bloomingdale Court Stockton, CA Westminster (Los Angeles), CA Tampa, FL Bloomingdale (Chicago), IL Bowie Town Center Strip Bowie (Wash, D.C.), MD Canyon View Marketplace Grand Junction, CO Chesapeake Center Chesapeake (Virginia Beach), VA Concord Mills Marketplace Concord (Charlotte), NC Countryside Plaza Countryside (Chicago), IL Dare Centre DeKalb Plaza Empire East Fairfax Court Fairfield Town Center Forest Plaza Gaitway Plaza Greenwood Plus Kill Devil Hills, NC King of Prussia (Philadelphia), PA Sioux Falls, SD Fairfax (Wash, D.C.), VA Houston, TX Rockford, IL Ocala, FL Greenwood (Indianapolis), IN Encumbrances (3) Land Buildings and Improvements Land Buildings and Improvements — 10,219 33,132 — — — 36,260 — — — 41,207 — — — 35,000 — 51,250 178,526 65,000 76,776 — — — 5,120 — 16,000 — — — — — — 30,250 — — 172 3,172 18,603 1,185 15,673 12,998 38,751 11,198 5,471 1,929 15,025 16,982 17,040 2,896 9,959 8,679 9,909 43,464 53,904 8,422 231 1,370 4,410 8,036 332 — 1,955 3,350 8,078 4,745 4,132 5,445 1,129 77,599 5,776 33,112 57,341 12,779 57,304 65,121 107,094 39,727 58,570 38,609 75,984 77,767 35,896 28,900 56,832 72,836 92,589 84,709 120,191 — 48 (2,046) — 3,021 — (267) — — — — 3,825 (236) — (524) 9,975 — — (180) 3,668 3,017 29,111 (9,517) 7,864 55,438 14,347 49,366 17,496 24,741 19,099 17,074 7,149 41,669 1,526 7,129 60,151 29,984 5,164 43,343 13,509 26,184 (551) 18,925 — — — — 1,063 120 1,639 1,043 2,554 12,403 — — — (647) 3,371 453 — (57) 2,700 1,512 4,115 2,124 46,115 13,099 3,681 4,970 4,597 9,570 11,241 21,167 8,507 5,702 3,405 10,552 34,997 5,044 16,818 26,687 1,792 F-52 Land 10,219 220 1,126 18,603 4,206 15,673 12,731 38,751 11,198 5,471 1,929 18,850 16,746 17,040 2,372 19,934 8,679 9,909 43,284 57,572 7,871 231 1,370 4,410 8,036 2,886 — 1,955 3,350 7,431 8,116 4,585 5,445 1,072 Buildings and Improvements Total(1) Accumulated Depreciation(2) Date of Construction or Acquisition 80,616 34,887 23,595 65,205 68,217 71,651 90,835 35,107 24,721 83,808 72,423 87,324 114,487 127,218 124,590 163,341 64,468 77,669 55,683 83,133 119,436 37,422 36,029 116,983 102,820 97,753 128,052 133,700 45,109 5,660 9,690 12,880 22,210 20,910 8,402 4,917 14,667 37,121 51,159 29,917 30,368 6,762 75,666 83,140 57,612 101,983 136,182 54,462 38,401 136,917 111,499 107,662 171,336 191,272 52,980 5,891 11,060 17,290 30,246 23,796 8,402 6,872 18,017 44,552 59,275 34,502 35,813 7,834 17,211 24,981 10,827 16,094 41,792 54,577 73,955 26,508 37,789 53,247 40,334 31,943 77,358 2,985 29,627 86,012 62,449 18,306 72,662 21,665 31,347 2,952 1,379 10,830 6,676 14,182 4,632 2,928 4,210 8,348 5,921 19,004 7,096 4,852 2015 1970 2015 2015 1983 1997 1994 2015 1996 1996 1988 1998 1996 2018 1988 1998 1999 2015 1998 2015 1987 2001 2015 1996 2007 1977 2004 2003 1998 2014 2014 1985 2014 1979 Initial Cost Cost Capitalized Subsequent to Construction or Acquisition Gross Amounts At Which Carried at Close of Period Name Henderson Square Keystone Shoppes Lake Plaza Lake View Plaza Lakeline Plaza Lima Center Lincoln Crossing MacGregor Village Location Encumbrances (3) Land Buildings and Improvements King of Prussia (Philadelphia), PA Indianapolis, IN Waukegan (Chicago), IL Orland Park (Chicago), IL Cedar Park (Austin), TX Lima, OH O'Fallon (St. Louis), IL Cary, NC — — — — 49,710 — — — 4,223 — 2,487 4,702 5,822 1,781 674 502 Mall of Georgia Crossing Buford (Atlanta), GA 21,680 9,506 Markland Plaza Martinsville Plaza Matteson Plaza Kokomo, IN Martinsville, VA Matteson (Chicago), IL Muncie Towne Plaza Muncie, IN North Ridge Shopping Center Raleigh, NC Northwood Plaza Fort Wayne, IN Plaza at Buckland Hills, The Manchester, CT Richardson Square Richardson (Dallas), TX Rockaway Commons Rockaway (New York), NJ Rockaway Town Plaza Rockaway (New York), NJ Royal Eagle Plaza Coral Springs (Miami), FL Shops at North East Mall, The Hurst (Dallas), TX St. Charles Towne Plaza Waldorf (Wash, D.C.), MD Tippecanoe Plaza University Center University Town Plaza Village Park Plaza Washington Plaza West Ridge Outlots West Town Corners Lafayette, IN Mishawaka, IN Pensacola, FL Carmel (Indianapolis), IN Indianapolis, IN Topeka, KS Altamonte Springs (Orlando), FL Westland Park Plaza Orange Park (Jacksonville), FL White Oaks Plaza Whitehall Mall Wolf Ranch Other Developments Springfield, IL Whitehall, PA Georgetown (Austin), TX — — — 10,550 11,500 — — — — — — — — — — — — — — — — 26,490 — — — 206 — 1,771 267 385 148 17,355 6,285 5,149 — 2,153 12,541 8,216 — 2,119 6,009 19,565 263 1,376 6,821 5,576 3,169 8,500 21,999 — 15,124 4,232 6,420 17,543 30,875 5,151 2,192 8,891 32,892 738 584 Land — 2,118 — (89) — — — — — — — 9,737 (1,152) 10,509 12,826 1,414 43,900 — 26,435 18,698 24,216 28,177 18,993 745 8,365 26,945 51,873 1,833 4,560 24,603 8,775 14,267 28,512 51,547 — 86 — — (281) 990 (117) 2,225 (152) 402 (62) 234 — (579) (935) — 39 (174) — 63 — (186) — Buildings and Improvements Land Buildings and Improvements Total(1) Accumulated Depreciation(2) Date of Construction or Acquisition 1,277 5,630 2,736 18,812 15,906 10,060 9,792 11,374 3,396 8,374 3,070 202 3,931 7,926 3,955 8,901 14,672 16,960 5,583 11,955 7,989 10,907 5,857 5,178 773 2,643 3,329 (2,845) 8,355 276 10,713 5,037 16,604 9,953 4,223 2,118 2,487 4,613 5,822 1,781 674 502 9,506 206 — 619 353 385 148 17,074 7,275 5,032 2,225 2,001 12,943 8,154 234 2,119 5,430 18,630 263 1,415 6,647 5,576 3,232 8,500 21,813 — 16,401 9,862 9,156 36,355 46,781 15,211 11,984 20,265 36,288 9,112 3,654 9,939 14,440 20,752 5,369 52,801 14,672 43,395 24,281 36,171 36,166 29,900 6,602 13,543 27,718 54,516 5,162 1,715 32,958 9,051 24,980 33,549 68,151 9,953 20,624 11,980 11,643 40,968 52,603 16,992 12,658 20,767 45,794 9,318 3,654 10,558 14,793 21,137 5,517 69,875 21,947 48,427 26,506 38,172 49,109 38,054 6,836 15,662 33,148 73,146 5,425 3,130 39,605 14,627 28,212 42,049 89,964 9,953 7,793 4,671 6,165 24,658 26,549 10,964 4,348 5,246 21,447 5,245 546 9,939 8,940 8,016 3,389 8,844 6,691 21,855 10,897 8,019 25,566 19,065 4,425 10,795 10,173 15,896 4,403 1,247 7,705 2,520 14,589 9,728 33,695 — 2003 1997 1986 1986 1998 1996 1990 2004 1999 1974 1967 1988 1998 2004 1974 2014 1996 1998 2004 2014 1999 1987 1974 1996 2013 2014 1996 1988 2014 2014 1986 2014 2005 $ 1,117,242 $ 776,496 $ 3,550,321 $ 47,391 $ 1,424,009 $ 823,887 $ 4,974,330 $5,798,217 $ 2,320,417 F-53 Washington Prime Group Inc. and Washington Prime Group, L.P. Notes to Schedule III December 31, 2019 (dollars in thousands) (1) Reconciliation of Real Estate Properties: The changes in real estate assets (which excludes furniture, fixtures and equipment) for the years ended December 31, 2019, 2018 and 2017 are as follows: Balance, beginning of year Acquisitions Improvements Disposals* Balance, end of year 2019 2018 2017 $ 5,817,153 $ 5,715,996 $ 6,205,387 10,899 178,669 (208,504) 5,798,217 $ 72,647 143,123 (114,613) 5,817,153 $ 14,366 135,713 (639,470) 5,715,996 $ *Primarily represents properties that have been deconsolidated upon sale of controlling interest, sold properties and fully depreciated assets which have been disposed. Further, includes impairment charges of $35,256, $0, and $66,925 for the years ended December 31, 2019, 2018 and 2017, respectively. The following reconciles investment properties at cost per the consolidated balance sheet to the balance per Schedule III as of December 31, 2019: Investment properties at cost Less: furniture, fixtures and equipment Total cost per Schedule III 2019 $ 5,902,406 (104,189) $ 5,798,217 The unaudited aggregate cost for federal income tax purposes of real estate assets presented was $4,665,380 as of December 31, 2019. (2) Reconciliation of Accumulated Depreciation: The changes in accumulated depreciation and amortization for the years ended December 31, 2019, 2018 and 2017 are as follows: Balance, beginning of year Depreciation expense Disposals Balance, end of year 2019 2018 2017 $ 2,212,476 $ 2,076,948 $ 2,063,107 226,696 (118,755) 2,320,417 $ 205,724 (70,196) 2,212,476 $ 205,078 (191,237) 2,076,948 $ The following reconciles accumulated depreciation per the consolidated balance sheet to the balance per Schedule III as of December 31, 2019: Accumulated depreciation Less: furniture, fixtures and equipment Total accumulated depreciation per Schedule III 2019 $ 2,397,736 (77,319) $ 2,320,417 Depreciation of our investment in buildings and improvements reflected in the consolidated statements of operations is generally calculated over the estimated original lives of the assets as noted below: • Buildings and Improvements—typically 10-40 years for the structure, 15 years for landscaping and parking lot, and 10 years for HVAC equipment. • Tenant Allowances and Improvements—shorter of lease term or useful life. (3) Encumbrances represent face amount of mortgage debt and exclude any fair value adjustments and debt issuance costs. (4) Land is subject to a ground lease. See Note 6 - "Indebtedness" for additional details. F-54 Exhibit 4 Common Shares Description of WPG Securities Each holder of Washington Prime Group Inc. (“WPG”) common shares will be entitled to one vote for each share on all matters to be voted upon by the common shareholders, and there will be no cumulative voting rights. Subject to any preferential rights of any outstanding preferred shares, holders of WPG common shares will be entitled to receive ratably the dividends, if any, as may be declared from time to time by its board of directors out of funds legally available for that purpose. If there is a liquidation, dissolution or winding up of WPG, holders of its common shares would be entitled to ratable distribution of its assets remaining after the payment in full of liabilities and any preferential rights of any then outstanding preferred shares. Holders of WPG common shares will have no preemptive or conversion rights or other subscription rights, and there are no redemption or sinking fund provisions applicable to the common shares. After the distribution, all outstanding WPG common shares will be fully paid and non-assessable. The rights, preferences and privileges of the holders of WPG common shares are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred equity that WPG may designate and issue in the future. Our common shares trade on the NYSE under the symbol "WPG." Computershare, Inc. is the transfer agent and registrar for our common shares. For more information on the common shares, including the votes necessary for the common shareholders to take action, see the Amended and Restated Bylaws of WPG, effective August 30, 2016, and incorporated herein by reference to Exhibit 3.2 of Form 8-K filed by WPG with the SEC on August 19, 2016. 7.5% Series H Cumulative Redeemable Preferred Stock (“Series H Preferred Stock”) The terms for the Series H Preferred Stock are incorporated herein by reference to Exhibit A-1 of Exhibit 3.2 of the Form 8-K filed by WPG with the SEC on May 22, 2017. 6.875% Series I Cumulative Redeemable Preferred Stock (“Series I Preferred Stock”) The terms for the Series I Preferred Stock are incorporated herein by reference to Exhibit B-1 of Exhibit 3.2 of the Form 8-K filed by WPG with the SEC on May 22, 2017. $750 Million of 5.950% Notes due 2024 and sold August 4, 2017: The terms for these securities are incorporated herein by reference to the Second Supplemental Indenture, dated as of August 4, 2017, between Washington Prime Group, L.P. and U.S. Bank National Association, as Trustee which is filed as Exhibit 4.1 of the Form 8-K filed by WPG with the SEC on August 4, 2017. Stock Options The description of the outstanding stock options issued from the Glimcher Realty Trust Amended and Restated 2004 Incentive Compensation Plan and Glimcher Realty Trust 2012 Incentive Compensation Plan are incorporated herein by reference to Exhibits 4.3 and 4.4 of the Form S-8 filed by WPG with the SEC on January 15, 2015. The description of the outstanding stock options issued from the Washington Prime Group, L.P. 2014 Stock Incentive Plan are incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed by WPG with the SEC on May 29, 2014. Restricted Stock Units The description of the outstanding restricted stock units issued from the Washington Prime Group, L.P. 2014 Stock Incentive Plan are incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed by WPG with the SEC on May 29, 2014. The description of the outstanding restricted stock units issued from the 2019 Washington Prime Group, L.P. Stock Incentive Plan are incorporated herein by reference to Exhibit 4.1 of the Form 8-K filed by WPG with the SEC on May 20, 2019. Exhibit 4 Performance Share Units The description of the allocated performance share units awarded from the Washington Prime Group, L.P. 2014 Stock Incentive Plan are incorporated herein by reference to Exhibit 10.1 of the Form 8-K filed by WPG with the SEC on May 29, 2014. The description of the allocated performance share units awarded from the 2019 Washington Prime Group, L.P. Stock Incentive Plan are incorporated herein by reference to Exhibit 4.1 of the Form 8-K filed by WPG with the SEC on May 20, 2019. Washington Prime Group Inc. and Washington Prime Group, L.P. List of Subsidiaries* As of December 31, 2019 Exhibit 21.1 Washington Prime Group Inc. has the following subsidiaries: Washington Prime Group, L.P. Washington Prime Group, L.P. has the following subsidiaries: Washington Prime Management Associates, LLC WPG Management Associates, Inc. WPG-OC General Partner, LLC WPG-OC Limited Partner, LLC WPG-OC New Limited Partner, L.P. WPG Management Associates, Inc. has the following subsidiaries: WPG-OC General Partner II, LLC WPG-OC Limited Partner II, LLC WPG-OC General Partner, LLC has the following subsidiaries: WPG-OC New Limited Partner, L.P. WPG-OC New Limited Partner, L.P. has the following subsidiaries: WPG-OC General Partner III, LLC Jurisdiction Indiana Indiana Indiana Delaware Delaware Delaware Delaware Delaware Delaware Delaware *Omits name and subsidiaries that as of December 31, 2019 were not, in the aggregate, “significant subsidiaries.” Exhibit 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: • Registration statement (Form S-3ASR No. 333-224089) of Washington Prime Group Inc., • Registration statement (Form S-8 No. 333-201531) pertaining to Glimcher Realty Trust Amended and Restated 2004 Incentive Compensation Plan and Glimcher Realty Trust 2012 Incentive Compensation Plan, and • Registration statement (Form S-8 No. 333-231620) pertaining to Washington Prime Group, L.P. 2019 Stock Incentive Plan of our reports dated February 27, 2020, with respect to the consolidated financial statements and schedule of Washington Prime Group Inc. and the effectiveness of internal control over financial reporting of Washington Prime Group Inc. included in this Annual Report (Form 10-K) of Washington Prime Group Inc. for the year ended December 31, 2019. /s/ Ernst & Young LLP Indianapolis, Indiana February 27, 2020 Consent of Independent Registered Public Accounting Firm Exhibit 23.2 We consent to the incorporation by reference in the Registration Statement (Form S-3ASR No. 333-224089-01) of Washington Prime Group, L.P. and in the related Prospectus of our reports dated February 27, 2020, with respect to the consolidated financial statements and schedule of Washington Prime Group, L.P. and the effectiveness of internal control over financial reporting of Washington Prime Group, L.P. included in this Annual Report (Form 10-K) for the year ended December 31, 2019. /s/ Ernst & Young LLP Indianapolis, Indiana February 27, 2020 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 EXHIBIT 31.1 I, Louis G. Conforti, certify that: 1. I have reviewed this Annual Report on Form 10-K 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: February 27, 2020 /s/ Louis G. Conforti Louis G. Conforti Chief Executive Officer and Director 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 EXHIBIT 31.2 I, Mark E. Yale, certify that: 1. I have reviewed this Annual Report on Form 10-K 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: February 27, 2020 /s/ Mark E. Yale Mark E. Yale Executive Vice President and Chief Financial Officer 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 EXHIBIT 31.3 I, Louis G. Conforti, certify that: 1. I have reviewed this Annual Report on Form 10-K 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: February 27, 2020 /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. 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 EXHIBIT 31.4 I, Mark E. Yale, certify that: 1. I have reviewed this Annual Report on Form 10-K 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: February 27, 2020 /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. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT of 2002 EXHIBIT 32.1 In connection with the Annual Report of Washington Prime Group Inc. (the “Company”) on Form 10-K for the period ended December 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: February 27, 2020 /s/ Louis G. Conforti Louis G. Conforti Chief Executive Officer and Director Date: February 27, 2020 /s/ Mark E. Yale Mark E. Yale Executive Vice President and Chief Financial Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT of 2002 EXHIBIT 32.2 In connection with the Annual Report of Washington Prime Group, L.P. (the “Partnership”) on Form 10-K for the period ended December 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: February 27, 2020 Date: February 27, 2020 /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. /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. 

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