Weingarten Realty Increases Recurring FFO Per Share by 5.7%

HOUSTON--()--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended September 30, 2015. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.

Third Quarter Operating and Financial Highlights

  • Recurring Funds from Operations Attributable to Common Shareholders ("FFO") for the quarter increased to $0.56 per diluted share from $0.53 per diluted share a year ago, a 5.7% increase;
  • Same Property Net Operating Income ("SPNOI") increased 3.0% over the same quarter of the prior year. Including all redevelopments, SPNOI increased 5.7%;
  • Rental rates on new leases and renewals were up 19% and 9%, respectively; and
  • Acquisitions totaling $61.0 million and dispositions totaling $43.5 million were completed during the quarter or subsequent to quarter-end.

Financial Results

The Company reported net income attributable to common shareholders of $43.4 million or $0.35 per diluted share (hereinafter “per share”) for the third quarter of 2015, as compared to $97.6 million or $0.79 per share for the same period in 2014. The decrease is due primarily to gains on sales of property totaling $0.56 per share in the third quarter of 2014 compared to $0.10 per share in the current quarter.

Reported FFO, calculated in accordance with the National Association of Real Estate Investment Trust’s definition, was $70.0 million or $0.56 per share for the third quarter of 2015 compared to $64.8 million or $0.52 per share for 2014. Year-to-date, Reported FFO was $188.7 million or $1.50 per share for 2015 compared to $193.4 million or $1.56 per share for 2014. Year-to-date 2015 results include redemption costs for preferred shares and the write-off of debt costs of $15.8 million or $0.13 per share.

Recurring FFO for the quarter ended September 30, 2015 was $0.56 per share or $70.3 million, an increase of 5.7% on a per share basis over $0.53 per share or $66.2 million for the same quarter of last year. The increase in Recurring FFO over the prior year was primarily due to increases in net operating income from our existing portfolio resulting from increases in occupancy and rental rates, incremental income from our new developments and redevelopments, 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 nine months, Recurring FFO was $204.0 million or $1.62 per share for 2015 compared to $191.4 million or $1.54 per share for 2014.

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

Operating Results

Same Property Net Operating Income increased 3.0% for the quarter primarily due to increased occupancy and rental rates. Year-to-date, SPNOI increased a strong 3.7%. Including all redevelopments, SPNOI for the quarter would be 5.7% and year-to-date 4.7%.

Occupancy increased to 95.1% in the third quarter from 94.9% in the same quarter of 2014. Occupancy of small shop space increased to 90.2%, up 1.1% from the same quarter of 2014. Year-to-date, only 235 merchants ceased operations at the Company’s properties, the lowest such total since 2003.

The Company produced steady leasing results during the third quarter with 291 new leases and renewals which represent annualized revenues of $8.0 million and $10.9 million, respectively. The average rental rate increase on new leases and renewals signed during the third quarter was 18.6% and 9.1%, respectively.

“Demand for quality retail space has been consistent all across our footprint. Especially notable is the performance of our Houston portfolio where the decline in oil prices has not caused a significant impact on merchant sales or a decrease in demand for the little space we have available. Year-to-date rental rates increased 17%, a testament to the strength of our Houston portfolio, which primarily serves superzips,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Portfolio Activity

The Company acquired two shopping centers and two outparcels during the quarter, investing $61.0 million. First, Trenton Crossing is a 266,000 square foot Target anchored center in McAllen, Texas with Marshalls, Ross Dress for Less, Hobby Lobby, PetSmart, and Bealls. This is a quality addition to the Company’s highly successful South Texas portfolio that benefits from the steady flow of shoppers from across the border. Second, at the end of the quarter, the Company purchased Wake Forest Crossing I in the greater Raleigh metro. This 88,000 square foot property is anchored by a Lowes Foods supermarket and is adjacent to the Company’s Wake Forest Crossing II new development that will be completed later this year. This addition of a grocery anchor to the development project will increase the value of the combined projects. Year-to-date, the Company has purchased eight properties, investing $234.2 million.

The Company continues to make significant progress on its new development and redevelopment projects. Hilltop Village Center, a 249,000 square foot development in Alexandria, Virginia, anchored by Wegmans and LA Fitness, is 99% leased and will yield around 8% upon completion. At Nottingham Commons, a 176,000 square foot grocery anchored development in White Marsh, Maryland, signed occupancy already stands at over 80% with construction commencing next month.

During the quarter, the Company was selected as the master developer for the redevelopment of the Atlanta Civic Center. The Company won the competitive process to control this 19 acre infill mixed use development which will have up to 200,000 square feet of retail as well as residential and office components. Planning and underwriting is still in progress including what portion of the project the Company would develop and own, however the investment in the retail portion is currently estimated to be around $70 million with the total project cost around $300 million. It is early in the process and we expect to open in late 2018 or 2019.

The Company also reported 14 active and completed redevelopment projects where it will invest about $76.0 million at a return of around 12%. To date, the Company has invested nearly $41 million in these redevelopment projects.

During the third quarter, the Company completed about $29.2 million of dispositions. Subsequent to quarter end, the Company sold an additional property and a land parcel for $14.3 million, bringing the year-to-date sales to $107.2 million.

“I am extremely pleased with the results of our portfolio activity this quarter, especially in light of the highly competitive environment in which we operate. We were able to complete some unique acquisitions of quality properties and continue to make great progress on our new developments and redevelopments. We are especially excited about the development opportunity in Atlanta that we secured this quarter as it highlights the expertise of our development team,” said Drew Alexander, President and Chief Executive Officer.

2015 Guidance

The Company has updated its guidance as follows:

       
      Previous Guidance     Revised Guidance
Recurring FFO per Common Share – Diluted     $2.14 - $2.18     $2.16 - $2.18
Reported FFO per Common Share – Diluted     $2.02 - $2.06     $2.04 - $2.06
Portfolio Activity ($ in millions)            
Acquisitions     $200 - $250     $200 - $250
New Development     $50 - $100     $50 - $100
Dispositions     $125 - $175     $125 - $175
Operating Information            
Same Property Net Operating Income     +3.0% to +4.0%     +3.0% to +4.0%

Steve Richter, Executive Vice President and Chief Financial Officer added, “The competitive landscape for acquisitions in our targeted markets, the volatility in the capital markets and the continued sluggishness of the overall economy causes us to be cautious on investing new capital as we complete 2015 and enter 2016. This could result in an acceleration of 2016 dispositions in order to take advantage of the strong market today.” Guidance information is included on page 9 of the Company’s supplemental package.

Dividends

The Board of Trust Managers declared a quarterly cash dividend of $0.345 per common share payable on December 15, 2015 to shareholders of record on December 8, 2015.

Share Repurchase Program

Volatility in the stock market has produced swings in the Company’s share price in excess of 15% in the last sixty days. Given the continued uncertainties surrounding interest rates and the overall economy, the Company’s Board of Trust Managers approved a share repurchase program authorizing up to $200 million in common share repurchases. There is no fixed termination date for this repurchase program. Purchases may be made in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions.

The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time, and the Company has no obligation to repurchase any amount of its common shares under the program.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on October 30, 2015 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 (800) 886-4674 (conference ID # 37563665). 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 September 30, 2015, 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 232 properties which are located in 20 states spanning the country from coast to coast. These properties represent approximately 45.9 million square feet of which our interests in these properties aggregated approximately 28.3 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 Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited)
Rentals, net $ 128,254 $ 127,974 $ 375,222 $ 380,398
Other Income   2,533     2,547     7,968     7,906  
Total Revenues   130,787     130,521     383,190     388,304  
Depreciation and Amortization 36,327 36,694 108,929 113,948
Operating Expense 24,291 23,454 69,076 71,989
Real Estate Taxes, net 15,770 15,412 45,895 46,419
Impairment Loss - - 153 -
General and Administrative Expense   6,188     6,146     20,021     17,879  
Total Expenses   82,576     81,706     244,074     250,235  
Operating Income 48,211 48,815 139,116 138,069
Interest Expense, net (20,607 ) (24,373 ) (67,357 ) (73,263 )
Interest and Other (Expense) Income, net (888 ) 96 2,252 2,893
Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests - - 879 1,718
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net 5,096 7,881 13,680 16,331
Benefit (Provision) for Income Taxes   144     284     (291 )   1,885  
Income from Continuing Operations   31,956     32,703     88,279     87,633  
Operating Income from Discontinued Operations - - - 342
Gain on Sale of Property from Discontinued Operations   -     -     -     44,582  
Income from Discontinued Operations - - - 44,924
Gain on Sale of Property   13,232     69,496     43,917     71,407  
Net Income 45,188 102,199 132,196 203,964

Less: Net Income Attributable to Noncontrolling Interests

  (1,787 )   (1,870 )   (5,119 )   (4,936 )
Net Income Adjusted for Noncontrolling Interests 43,401 100,329 127,077 199,028

Less: Preferred Share Dividends

- (2,710 ) (3,830 ) (8,130 )

Less: Redemption Costs of Preferred Shares

  -     -     (9,687 )   -  
Net Income Attributable to Common Shareholders -- Basic $ 43,401   $ 97,619   $ 113,560   $ 190,898  
Net Income Attributable to Common Shareholders -- Diluted $ 43,873   $ 98,074   $ 113,560   $ 192,266  
 
FUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS (FFO)
Numerator:
Net Income Attributable to Common Shareholders $ 43,401 $ 97,619 $ 113,560 $ 190,898
Depreciation and Amortization 35,687 35,402 106,717 110,542
Depreciation and Amortization of Unconsolidated Real Estate
Joint Ventures and Partnerships 3,624 3,666 10,602 11,289
Impairment of Operating Properties and Real Estate Equity Investments - - 153 -
Impairment of Operating Properties of Unconsolidated Real Estate
Joint Ventures and Partnerships - - 1,497 -
Gain on Sale of Property and Interests in Real Estate Equity Investments (13,214 ) (69,468 ) (44,684 ) (117,643 )
Gain on Dispositions of Unconsolidated Real Estate Joint Ventures
and Partnerships - (2,856 ) (615 ) (3,024 )
Other   -     -     (4 )   (4 )
FFO -- Basic 69,498 64,363 187,226 192,058
Adjustments for Recurring FFO:
Income Attributable to Operating Partnership Units 472 455 1,432 1,368
Redemption Costs of Preferred Shares - - 9,749 -
Write-off of Debt Costs, net - 1,376 6,100 1,850
Acquisition Costs 356 50 702 68
Deferred Tax Benefit, net - - - (2,097 )
Other, net of tax   -     -     (1,161 )   (1,862 )
Recurring FFO -- Diluted $ 70,326   $ 66,244   $ 204,048   $ 191,385  
Denominator:
Weighted Average Shares Outstanding -- Basic   123,349     121,560     122,929     121,487  
Weighted Average Shares Outstanding -- Diluted   126,033     124,440     124,232     124,301  
Weighted Average Shares Outstanding -- Diluted (FFO)   126,033     124,440     125,708     124,301  
 
PER SHARE DATA
Earnings Per Common Share -- Basic $ 0.35   $ 0.80   $ 0.92   $ 1.57  
Earnings Per Common Share -- Diluted $ 0.35   $ 0.79   $ 0.91   $ 1.55  
FFO Per Common Share -- Diluted $ 0.56   $ 0.52   $ 1.50   $ 1.56  
Recurring FFO Per Common Share -- Diluted $ 0.56   $ 0.53   $ 1.62   $ 1.54  
         
Weingarten Realty Investors
(in thousands)
Financial Statements
 
 
September 30, December 31,
2015 2014
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Audited)
ASSETS
Property $ 4,277,134 $ 4,076,094
Accumulated Depreciation (1,088,821 ) (1,028,619 )
Property Held for Sale, net 2,497 3,670
Investment in Real Estate Joint Ventures and Partnerships, net 267,999 257,156
Unamortized Debt and Lease Costs, net 151,476 141,122
Accrued Rent and Accounts Receivable, net 82,686 77,781
Cash and Cash Equivalents 12,267 23,189
Restricted Deposits and Mortgage Escrows 10,252 79,998
Other, net   179,847     183,703  
Total Assets $ 3,895,337   $ 3,814,094  
 
LIABILITIES AND EQUITY
Debt, net $ 2,114,145 $ 1,938,188
Accounts Payable and Accrued Expenses 112,532 112,479
Other, net   131,296     124,484  
Total Liabilities   2,357,973     2,175,151  
 
Commitments and Contingencies
 
EQUITY
Preferred Shares of Beneficial Interest - 2
Common Shares of Beneficial Interest 3,744 3,700
Additional Paid-In Capital 1,615,308 1,706,880
Net Income Less Than Accumulated Dividends (227,393 ) (212,960 )
Accumulated Other Comprehensive Loss   (9,029 )   (12,436 )
Shareholders' Equity   1,382,630     1,485,186  
Noncontrolling Interests   154,734     153,757  
Total Liabilities and Equity $ 3,895,337   $ 3,814,094  

Contacts

Weingarten Realty
Michelle Wiggs, (713) 866-6050

Release Summary

Weingarten Realty announced results of its operations for the quarter ended September 30, 2015. The supplemental financial package with additional information can be found on the Company's website.

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Contacts

Weingarten Realty
Michelle Wiggs, (713) 866-6050