Markland Mall owner faces lawsuit alleging it misled investors

·3 min read

May 26—A class-action lawsuit has been filed against the owner of Markland Mall alleging the company misled investors about its deteriorating financial situation.

The lawsuit was filed Monday against Washington Prime Group by California law firm Glancy Prongay & Murray LLP in the U.S. District Court for the Southern District of Ohio.

The law firm said the suit was filed on behalf of persons and entities that purchased or acquired the company's securities between Nov. 5 and March 4.

On Feb. 16, the company, which owns around 100 malls in the U.S., disclosed it had elected to withhold an interest payment of $23.2 million due the day before on outstanding senior notes due in 2024.

The company further advised that, in an event of default, certain counterparties to the senior notes "could accelerate the outstanding indebtedness due ... making such indebtedness due and payable," which would result in a cross-default with respect to some of the company's other debt, according to a release.

On that news, the company's stock price fell $4.59, or 38%, to close at $7.49 per share.

On March 4, Bloomberg reported that the company was preparing a potential bankruptcy filing to avert default after skipping the interest payment on its debt.

The news led Washington Prime's stock to fall $3.77, or 60%, to close at $2.51 per share on March 4.

The class action lawsuit alleges that from November to March, the company made materially false or misleading statements, as well as failed to disclose material adverse facts about the company's business, operations and prospects.

Specifically, the suit says, Washington Prime failed to disclose to investors that its financial condition was substantially deteriorating, leading to substantial uncertainty about the company's ability to meet its capital structure obligations as they became due.

As a result, the company's positive statements about its business and financial prospects was "misleading and/or lacked a reasonable basis," according to the release.

The lawsuit comes as Washington Prime continues talks to restructure its debt and avoid filing for Chapter 11 bankruptcy. The deadline to avoid bankruptcy was first set for March 31, but has been extended six times since then.

Bloomberg reported that the company's creditors are having difficulty advancing discussions over the bankruptcy filing due to disagreements on dividing the mall owner's assets, according to people familiar with the talks.

The extensions come after Washington Prime reported earlier this month it lost $55 million during the first three months of the year. The company said the loss came primarily from "significant impacts" of the pandemic, including tenets modifying leases and missing payments.

However, the company considers Markland Mall a "Tier 1" property, and the mall currently has no debt, according to the earnings report.

For comparison, five other Tier 1 properties were reclassified as non-core properties during the first quarter, and those malls carry a total mortgage balance of approximately $326 million.

Since 2018, the company has invested millions into Markland Mall to demolish the former Sears store and build space for seven new tenants. Those new spaces are now filled by Aldi, PetSmart, OshKosh B'gosh, Carter's and Prodigy Bar & Grill, Party City and Ross Dress for Less.

Washington Prime owns 12 properties in Indiana, including shopping areas in Muncie, Indianapolis, Lafayette and Mishawaka and Anderson.

Carson Gerber can be reached at 765-854-6739, or on Twitter @carsongerber1.