Weingarten Realty’s Transformed Portfolio Produces Same Property NOI Increase of 3.5%

Thu Jul 24, 2014 4:05pm EDT

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Weingarten Realty’s Transformed Portfolio Produces Same Property NOI Increase of 3.5%

Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended June 30, 2014. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.

Second Quarter Operating and Financial Highlights

  • Recurring Funds from Operations ("FFO") for the quarter increased to $0.51 per diluted share from $0.49 per diluted share a year ago;
  • Same Property Net Operating Income increased 3.5% over the same quarter of the prior year;
  • Occupancy increased 0.6% over the same quarter of the prior year to 94.8% and 0.3% over the prior quarter; and
  • Rental rates on new leases and renewals were up 10.9% and 8.9%, respectively.

Financial Results

The Company reported net income attributable to common shareholders of $32.7 million or $0.27 per diluted share (hereinafter “per share”) for the second quarter of 2014, as compared to $45.4 million or $0.37 per share for the same period in 2013. The decrease is due primarily to significant gains on sales of properties and partnership interests in 2013.

Reported FFO was $65.5 million or $0.53 per share for the second quarter of 2014 compared to $46.1 million or $0.37 per share for 2013. Included in the 2013 amount was the write-off of preferred redemption costs of $0.13 per share. Year-to-date, Reported FFO was $128.6 million or $1.04 per share for 2014 compared to $112.1 million or $0.90 per share for 2013.

Recurring FFO for the quarter ended June 30, 2014 was $0.51 per share or $63.9 million. For the same quarter last year, Recurring FFO was $0.49 per share or $61.4 million. The increase in Recurring FFO over the prior year was primarily due to increases in net operating income from our existing portfolio, reduced interest expense from favorable debt refinancings and reduced preferred share dividends due to redemptions. These increases were partially offset by the impact of the Company’s disposition program, which reduced Recurring FFO by $0.03 per share year-over-year. For the six months, Recurring FFO was $125.1 million or $1.01 per share for 2014 compared to $120.3 million or $0.97 per share for 2013.

A reconciliation between net income attributable to common shareholders to Reported FFO and Recurring FFO is listed on page 5 of the Company’s supplemental package.

Operating Results

Same Property Net Operating Income ("SPNOI") increased by a strong 3.5% for the quarter primarily due to increased occupancy and a reduction in merchant fallouts. Year-to-date, SPNOI has increased 3.4%. SPNOI represents almost 94% of the total portfolio net operating income.

Occupancy increased to 94.8% in the second quarter, up 0.6% from 94.2% in the same quarter of 2013 and up 0.3% from 94.5% in the prior quarter. Occupancy of small shop space increased by 0.3% from the prior quarter to 88.6%. The occupancy of the Company’s Same Property portfolio increased to 95.2%. During the quarter, only 89 merchants ceased operations at the Company’s properties, the lowest such total since 2005 and 13% lower than the second quarter of 2013.

The Company produced strong leasing results during the second quarter with 278 new leases and renewals, totaling 0.8 million square feet. These transactions were comprised of 98 new leases and 180 renewals, which represent annualized revenues of $5.3 million and $9.2 million, respectively. The average rental rate increase on new leases and renewals signed during the quarter was 10.9% and 8.9%, respectively.

“The dramatic improvements in our portfolio resulting from our sustained transformation program are once again clearly reflected in our operating results. Great Same Property NOI growth, increased occupancy, reduced merchant fallout and very solid rental rate increases are all indicative of a quality portfolio of properties and the benefits of a best-in-class operating platform manned by a great team of associates,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Portfolio Activity

The Company previously reported that it is focused on selling assets which do not meet its investment requirements and redeploying that capital into higher quality assets in its target markets. During the quarter, the Company sold three non-core properties, one of which was owned in a joint venture, and three land parcels for $21.2 million bringing year-to-date dispositions to $100.3 million. The Company has approximately $230 million of properties currently under contract or letter of intent with an additional $330 million being actively marketed. While there is no assurance that all of these transactions will close, the Company is confident that it will meet its 2014 dispositions guidance of $300 to $400 million which will effectively conclude the Company’s transformation process.

The Company also successfully redeployed a portion of its disposition proceeds. During the quarter, the Company closed the purchase of land for Wake Forest Crossing. This is an expansion of an existing 200,000 square foot shopping center in Raleigh which includes Lowes Food Stores and Kohl’s. The Company will develop 108,000 square feet of new buildings anchored by TJ Maxx and Michaels, with two other junior anchors very close to signing leases. The Company’s estimated investment upon completion will be approximately $16 million and should be complete by the third quarter of 2015. The Company also learned that the last significant entitlement hurdle was cleared with the approval of the Master Use Permit at The Whitaker, an exciting infill new development in West Seattle. This six story mixed-use project is being co-developed with Lennar with the Company’s 63,000 square foot retail portion anchored by Whole Foods. The Company’s investment in the project will be approximately $28 million upon completion which is estimated to be the third quarter of 2016.

“I am extremely pleased with the results of our transformative capital recycling program. As we approach the conclusion of this important strategic initiative, we can be proud of the immense positive changes we have made to our portfolio,” said Drew Alexander, President and Chief Executive Officer.

Balance Sheet

The Company continues to improve its balance sheet. The Company’s credit metrics remain very strong with Net Debt to Recurring EBITDA at 5.75 times and debt to total market capitalization of 33.0%. The continued strengthening of the Company’s balance sheet was rewarded in June with a change in outlook from Stable to Positive by Moody’s Investor Services. The Company also noted that subsequent to quarter-end, it called for the redemption of its $90 million of 8.1% bonds.

“Our balance sheet remains very strong with reduced leverage driving our strong credit metrics. We are pleased that our balance sheet transformation was acknowledged with the change in outlook by Moody’s,” said Steve Richter, Executive Vice President and Chief Financial Officer.

2014 Guidance

The Company reaffirms its previous guidance for Recurring FFO of $1.95 to $2.01 per share, but has reduced its assumption for acquisitions to a range of $50 million to $100 million. This guidance and the related assumptions are included on page 9 of the supplemental package.

Dividends

The Board of Trust Managers declared a quarterly cash dividend of $0.325 per common share payable on September 15, 2014 to shareholders of record on September 8, 2014 and dividends on the Company’s 6.50% Series F Cumulative Redeemable Preferred Shares (NYSE:WRIPrF) of $0.40625 per share for the quarter payable on September 15, 2014 to shareholders of record on September 8, 2014.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on July 25, 2014 at 10:00 a.m. Central Time. The live webcast can be accessed via the Company’s website at www.weingarten.com. Alternatively, if you are not able to access the call on the web, you can listen live by phone by calling (888) 771-4371 (conference ID # 35533141). A replay will be available through the Company’s website starting approximately two hours following the live call.

About Weingarten Realty Investors

Weingarten Realty Investors (NYSE: WRI) is a shopping center owner, manager and developer. At June 30, 2014, the Company owned or operated under long-term leases, either directly or through its interest in real estate joint ventures or partnerships, a total of 259 properties which are located in 21 states spanning the country from coast to coast. These properties represent approximately 48.5 million square feet of which our interests in these properties aggregated approximately 29.8 million square feet of leasable area. To learn more about the Company’s operations and growth strategies, please visit www.weingarten.com.

Forward-Looking Statements

Statements included herein that state the Company’s or Management’s intentions, hopes, beliefs, expectations or predictions of the future are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 which by their nature, involve known and unknown risks and uncertainties. The Company’s actual results, performance or achievements could differ materially from those expressed or implied by such statements. Reference is made to the Company’s regulatory filings with the Securities and Exchange Commission for information or factors that may impact the Company’s performance.

 
Weingarten Realty Investors
(in thousands, except per share amounts)
Financial Statements
                           
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited)
Rentals, net $ 127,791 $ 118,292 $ 252,424 $ 233,519
Other Income   2,400     3,703     5,359     6,303  
Total Revenues   130,191     121,995     257,783     239,822  
Depreciation and Amortization 36,630 35,513 77,254 71,691
Operating Expense 23,920 23,498 48,535 46,532
Real Estate Taxes, net 16,358 14,376 31,007 27,979
Impairment Loss - 165 - 221
General and Administrative Expense   5,820     6,184     11,733     12,848  
Total Expenses   82,728     79,736     168,529     159,271  
Operating Income 47,463 42,259 89,254 80,551
Interest Expense, net (24,310 ) (27,025 ) (48,890 ) (42,464 )
Interest and Other Income, net 803 2,097 2,797 3,923
Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests 1,718 83 1,718 11,592
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net 4,048 4,729 8,450 9,342
Benefit (Provision) for Income Taxes   2,081     (147 )   1,601     30  
Income from Continuing Operations   31,803     21,996     54,930     62,974  
Operating Income from Discontinued Operations 63 3,905 342 7,602
Gain on Sale of Property from Discontinued Operations   3,370     78,012     44,582     78,012  
Income from Discontinued Operations 3,433 81,917 44,924 85,614
Gain on Sale of Property   1,748     265     1,911     407  
Net Income 36,984 104,178 101,765 148,995
Less: Net Income Attributable to Noncontrolling Interests   (1,588 )   (37,742 )   (3,066 )   (39,209 )
Net Income Adjusted for Noncontrolling Interests 35,396 66,436 98,699 109,786
Less: Preferred Share Dividends (2,710 ) (5,313 ) (5,420 ) (12,753 )
Less: Redemption Costs of Preferred Shares   -     (15,702 )   -     (17,944 )
Net Income Attributable to Common Shareholders -- Basic $ 32,686   $ 45,421   $ 93,279   $ 79,089  
 
Net Income Attributable to Common Shareholders -- Diluted $ 32,686   $ 45,421   $ 93,279   $ 79,089  

 

 

FUNDS FROM OPERATIONS
Numerator:
Net Income Attributable to Common Shareholders $ 32,686 $ 45,421 $ 93,279 $ 79,089
Depreciation and Amortization 35,420 37,511 75,140 76,182
Depreciation and Amortization of Unconsolidated Real Estate
Joint Ventures and Partnerships 3,923 4,434 7,623 8,927
Impairment of Operating Properties and Real Estate Equity Investments - 165 - 457
Impairment of Operating Properties of Unconsolidated Real Estate
Joint Ventures and Partnerships - 3 - 366
Gain on Sale of Property and Interests in Real Estate Equity Investments (6,804 ) (41,906 ) (48,175 ) (53,553 )
Gain on Dispositions of Unconsolidated Real Estate Joint Ventures
and Partnerships (159 ) - (168 ) (243 )
Other   (4 )   -     (4 )   -  
Funds from Operations -- Basic 65,062 45,628 127,695 111,225
Adjustments for Recurring FFO:
Income Attributable to Operating Partnership Units 457 446 913 891
Redemption Costs of Preferred Shares - 15,889 - 18,131
Write-off of Debt Costs, net 474 - 474 (9,667 )
Acquisition Costs 1 125 18 410
Deferred Tax Benefit, net (2,097 ) - (2,097 ) -
Other, net of tax   -     (673 )   (1,862 )   (673 )
Recurring Funds from Operations -- Diluted $ 63,897   $ 61,415   $ 125,141   $ 120,317  
 
Denominator:
Weighted Average Shares Outstanding -- Basic   121,497     121,286     121,449     121,172  
 
Weighted Average Shares Outstanding -- Diluted   122,834     122,574     122,741     122,395  
 
Weighted Average Shares Outstanding -- Diluted (FFO)   124,333     124,129     124,240     123,951  
 
PER SHARE DATA
Earnings Per Common Share -- Basic $ 0.27   $ 0.37   $ 0.77   $ 0.65  
 
Earnings Per Common Share -- Diluted $ 0.27   $ 0.37   $ 0.76   $ 0.65  
 
FFO -- Per Diluted Share $ 0.53   $ 0.37   $ 1.04   $ 0.90  
 
Recurring FFO -- Per Diluted Share $ 0.51   $ 0.49   $ 1.01   $ 0.97  
 
 
Weingarten Realty Investors
(in thousands)
Financial Statements
         
June 30, December 31,
2014 2013

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (Audited)
ASSETS
 
Property $ 4,241,257 $ 4,289,276
Accumulated Depreciation (1,098,338 ) (1,058,040 )
Property Held for Sale, net - 122,614
Investment in Real Estate Joint Ventures and Partnerships, net 268,490 266,158
Notes Receivable from Real Estate Joint Ventures and Partnerships 2,652 13,330
Unamortized Debt and Lease Costs, net 144,205 164,828
Accrued Rent and Accounts Receivable, net 77,852 82,351
Cash and Cash Equivalents 16,035 91,576
Restricted Deposits and Mortgage Escrows 6,711 4,502
Other, net   204,537     247,334  
Total Assets $ 3,863,401   $ 4,223,929  
 
LIABILITIES AND EQUITY
 
Debt, net $ 2,073,465 $ 2,299,844
Accounts Payable and Accrued Expenses 100,203 108,535
Other, net   122,720     127,572  
Total Liabilities   2,296,388     2,535,951  
 
Commitments and Contingencies
 
EQUITY
 
Preferred Shares of Beneficial Interest 2 2
Common Shares of Beneficial Interest 3,691 3,683
Additional Paid-In Capital 1,697,783 1,679,229
Net Income Less Than Accumulated Dividends (286,685 ) (300,537 )
Accumulated Other Comprehensive Loss   (2,912 )   (4,202 )
Shareholders' Equity   1,411,879     1,378,175  
Noncontrolling Interests   155,134     309,803  
Total Liabilities and Equity $ 3,863,401   $ 4,223,929  

Weingarten Realty
Michelle Wiggs, (713) 866-6050

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