Two years after emerging from pandemic-induced bankruptcy, an Ohio-based retail real estate investment firm is on the cusp of a huge recapitalization deal that shows how far retail's recovery has come.

Washington Prime Group has lined up a $1B refinancing deal with Goldman Sachs, Citi Real Estate Funding and JPMorgan Chase that involves 38 retail properties encompassing 8.5M SF across 15 states, CoStar reports. The deal is expected to close later this month.

The portfolio was distressed due to the pandemic, but strong consumer spending has helped sales and leasing recover, CoStar reported, citing a report by ratings firm DBRS Morningstar. Known as OPEN 2023-AIR, the new CMBS debt is tied a collection of anchored centers, strip malls and power centers in a diversified geographical footprint with a collection of grocery, pharmacy and big-box retail tenants.

Washington Prime’s pending refinancing is further evidence that the retail real estate market is seen as healthier than other sectors of commercial real estate amid high interest rates. Major retail REITs announced strong third-quarter earnings, with executives expressing a general sense of optimism as retailers pay more for space amid record-low levels of available shop space nationally.

“It is sort of counterintuitive that given what’s going on in the macroeconomic environment and the slowdown in sales that we’re still seeing the demand that we’re seeing,” Macerich Senior Executive Vice President Doug Healey said during Macerich’s earnings call. “We have a very healthy retailer environment out there, and they’re really taking advantage of some opportunities to take down some real good space and some real good properties.”

The refinancing caps a three-year saga for Washington Prime, which filed for Chapter 11 bankruptcy protection in June 2021 to restructure its debt with lender Strategic Value Partners. The firm emerged from bankruptcy four months later, flush with additional capital for investment, CoStar reported.

Strategic Value Partners will continue to hold an undisclosed share of the new loan, and Washington Prime will also use equity to help repay a $1.2B term loan from the bankruptcy facility, according to CoStar.