Weingarten Realty Reports Strong Quarter and Announces $359 Million of Acquisitions

HOUSTON--(BUSINESS WIRE)--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended September 30, 2016. 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

• Net income attributable to common shareholders (“Net Income”) for the quarter increased to $0.40 per diluted share from $0.35 per diluted share in the same quarter of 2015;
• Core Funds From Operations Attributable to Common Shareholders ("Core FFO") for the quarter increased to $0.58 per diluted share from $0.56 per diluted share a year ago;
• Same Property Net Operating Income (“SPNOI”) including redevelopments increased 3.4% over the same quarter of the prior year;
• Rental rates on new leases and renewals were up 19.3% and 7.3%, respectively;
• Acquisitions for the quarter totaled $359 million bringing acquisitions for the nine months to $495 million;
• Dispositions for the quarter totaled $71 million bringing dispositions for the nine months to $198 million; and
• Sold $8 million of common shares during the quarter and $133 million for the nine months ended September 30, 2016.

Financial Results

The Company reported Net Income of $51.9 million or $0.40 per diluted share (hereinafter “per share”) for the third quarter of 2016, as compared to $43.4 million or $0.35 per share for the same period in 2015. This favorable variance was due primarily to higher gains on sales of properties. Year-to-date, Net Income was $194.8 million or $1.53 per share for 2016 compared to $113.6 million or $0.91 per share for 2015.

Funds From Operations attributable to common shareholders in accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”) was $73.1 million or $0.56 per share for the third quarter of 2016 compared to $70.0 million or $0.56 per share for 2015. The increase is primarily due to increased rental rates, incremental income from our new developments and redevelopments, and the significant acquisitions completed in 2016. Reduced interest expense from favorable debt refinancings and the sales of common shares during 2015 and 2016 also contributed to the increase; however, these increases were offset by the dilution resulting from the issuance of shares. Additionally, included in NAREIT FFO were deferred taxes related to gains on property sales, the write-off of new development pursuit costs and costs related to a term loan commitment put in place for the acquisition of Palms at Town & Country. Each of these items is added back in arriving at Core FFO. Year-to-date, NAREIT FFO was $214.7 million or $1.68 per share for 2016 compared to $188.7 million or $1.50 per share for 2015.

Core FFO for the quarter ended September 30, 2016 was $75.6 million or $0.58 per share compared to $70.3 million or $0.56 per share for the same quarter of last year. For the nine months, Core FFO was $221.5 million or $1.73 per share for 2016 compared to $204.0 million or $1.62 per share for 2015.

A reconciliation between Net Income to NAREIT FFO and Core FFO is included herein.

Operating Results

For the period ending September 30, 2016, the Company’s operating highlights were as follows:

A reconciliation between Net Income and SPNOI is included herein.

Portfolio Activity

During the quarter, the Company closed $359 million of acquisitions including:

• The Palms at Town & Country, a 664,000 square foot premier shopping destination in Miami, Florida for $285 million. The center features best-in-class operators including Publix, Kohl’s, Nordstrom Rack, Dick’s Sporting Goods, and Marshalls.
• Scottsdale Waterfront for $52 million. This 93,000 square foot center located immediately across the street from Nordstrom’s at Fashion Square Mall in Scottsdale, Arizona is part of a mixed-use development that includes two high-rise condominium towers with 198 units and 85,000 square feet of class A office. Weingarten purchased only the retail component which is anchored by Urban Outfitters, a strong local gym and high quality restaurants including Olive and Ivy, one of the highest volume restaurants in Phoenix.
• The remaining 50% interest in Lowry Town Center for $13.5 million. This is a shopping center Weingarten developed at the former Lowry Air Force Base that services the affluent Cherry Creek neighborhood in Denver, Colorado.
• The additional retail space at our 2200 Westlake in Seattle, Washington for $8 million.

The highlights of the Company’s new development program are as follows:

• Completed Wake Forest II in North Carolina and sold the property together with a center purchased in 2015 that is adjacent to the development.
• Reached an impasse with the City of Atlanta and have stopped pursuing the Civic Center redevelopment project. It’s a good site with solid supermarket interest but the Company needed more time to make an adequately informed decision. While the Company hopes to rekindle some dialog, the prudent course of action was to write off the pursuit costs and focus elsewhere.
• Currently have two projects under development representing an estimated final investment of $76.4 million and 13 redevelopments underway representing $86.4 of incremental investment.

During the third quarter, the Company sold two land parcels, a shopping center held in a consolidated joint venture and three wholly-owned properties for $71.1 million, bringing the year-to-date dispositions to $197.7 million.

Balance Sheet

During the quarter, the Company sold $250 million of ten-year, 3.250% Notes, using the net proceeds to pay down its $500 million revolving credit facility. The Company also sold $8 million of common shares during the quarter at an average price of $41.67 per share under its At-The-Market (“ATM”) program. Year-to-date, the Company has sold $133 million of common shares. You can see the detail of sales under the ATM program on page 44 of our supplemental.

The Company’s credit metrics remain very strong at quarter end with Net Debt to EBITDA at 6.05 times and Debt to Total Market Cap at 31.5%.

2016 Guidance

The Company adjusted its guidance as noted below by the highlighted items.

Dividends

The Board of Trust Managers declared a quarterly cash dividend of $0.365 per common share payable on December 15, 2016 to shareholders of record on December 8, 2016.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on October 28, 2016 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 # 40193475). 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, 2016, 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 224 properties which are located in 18 states spanning the country from coast to coast. These properties represent approximately 45.2 million square feet of which our interests in these properties aggregated approximately 28.4 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.

Projections involve numerous assumptions such as rental income (including assumptions on percentage rent), interest rates, tenant defaults, occupancy rates, volume and pricing of properties held for disposition, volume and pricing of acquisitions, expenses (including salaries and employee costs), insurance costs and numerous other factors. Not all of these factors are determinable at this time and actual results may vary from the projected results, and may be above or below the ranges indicated. The above ranges represents management’s estimate of results based upon these assumptions as of the date of this press release. Accordingly, there is no assurance that our projections will be realized.

Non-GAAP Financial Measures

Certain aspects of our key performance indicators are considered non-GAAP financial measures. Management uses these measures along with our Generally Accepted Accounting Principles ("GAAP") financial statements in order to evaluate our operating results. Management believes these additional measures provide users of our financial information additional comparable indicators of our industry, as well as, our performance.

Funds from Operations Attributable to Common Shareholders

The National Association of Real Estate Investment Trusts ("NAREIT") defines NAREIT FFO as net income (loss) attributable to common shareholders computed in accordance with GAAP, excluding extraordinary items and gains or losses from sales of operating real estate assets and interests in real estate equity investments, plus depreciation and amortization of operating properties and impairment of depreciable real estate and in substance real estate equity investments, including our share of unconsolidated real estate joint ventures and partnerships. The Company calculates NAREIT FFO in a manner consistent with the NAREIT definition.

Management believes NAREIT FFO is a widely recognized measure of REIT operating performance which provides our shareholders with a relevant basis for comparison among other REITs. Management uses NAREIT FFO as a supplemental internal measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that uses historical cost accounting is insufficient by itself. There can be no assurance that NAREIT FFO presented by the Company is comparable to similarly titled measures of other REITs.

The Company also presents Core FFO as an additional supplemental measure as it is more reflective of the core operating performance of our portfolio of properties. Core FFO is defined as NAREIT FFO excluding charges and gains related to non-cash and non-operating transactions and other events that hinder the comparability of operating results. Specific examples of items excluded from Core FFO include, but are not limited to, gains or losses associated with the extinguishment of debt or other liabilities, impairments of land, transactional costs associated with acquisition and development activities, certain deferred tax provisions/benefits, redemption costs of preferred shares and gains on the disposal of non-real estate assets. NAREIT FFO and Core FFO should not be considered as alternatives to net income or other measurements under GAAP as indicators of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. NAREIT FFO and Core FFO do not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

Same Property Net Operating Income

Management considers SPNOI an important additional financial measure because it reflects only those income and expense items that are incurred at the property level and when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates and operating costs. The Company calculates this most useful measurement by determining our proportional share of SPNOI from all owned properties, including the Company’s share of SPNOI from unconsolidated joint ventures and partnerships, which cannot be readily determined under GAAP measurements and presentation. Although SPNOI (see page 1 of the supplemental disclosure regarding this presentation and limitations thereof) is a widely used measure among REITs, there can be no assurance that SPNOI presented by the Company is comparable to similarly titled measures of other REITs. Additionally, the Company does not control these unconsolidated joint ventures and partnerships, and the assets, liabilities, revenues or expenses of these joint ventures and partnerships, as presented, do not represent its legal claim to such items.

Properties are included in the SPNOI calculation if they are owned and operated for the entirety of the most recent two fiscal year periods, except for properties for which significant redevelopment or expansion occurred during either of the periods presented, and properties classified as discontinued operations. While there is judgment surrounding changes in designations, management moves new development and redevelopment properties once they have stabilized, which is typically upon attainment of 90% occupancy. A rollforward of the properties included in the Company’s same property designation is as follows:

The Company calculates SPNOI using operating income as defined by GAAP excluding property management fees, certain non-cash revenues and expenses such as straight-line rental revenue and the related reversal of such amounts upon early lease termination, depreciation, amortization, impairment losses, general and administrative expenses, acquisition costs and other items such as lease cancellation income, environmental abatement costs and demolition expenses. Consistent with the capital treatment of such costs under GAAP, tenant improvements, leasing commissions and other direct leasing costs are excluded from SPNOI. A reconciliation of Net Income to SPNOI is as follows (in thousands):