Weingarten Realty Reports Same Property NOI Increase of 3.8% and Increases FFO Guidance

HOUSTON--()--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended September 30, 2014. 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 ("FFO") for the quarter increased to $0.53 per diluted share from $0.51 per diluted share a year ago;
  • Same Property Net Operating Income increased 3.8% over the same quarter of the prior year;
  • Occupancy increased 0.5% over the same quarter of the prior year to 94.9%;
  • Rental rates on new leases and renewals were up 20.3% and 9.5%, respectively; and
  • Eleven properties and two land parcels were sold for $120.7 million.

Financial Results

The Company reported net income attributable to common shareholders of $97.6 million or $0.79 per diluted share (hereinafter “per share”) for the third quarter of 2014, as compared to $57.8 million or $0.47 per share for the same period in 2013. The increase is due primarily to significant gains on sales of properties in 2014.

Reported FFO was $64.8 million or $0.52 per share for the third quarter of 2014 compared to $60.5 million or $0.49 per share for 2013. Year-to-date, Reported FFO was $193.4 million or $1.56 per share for 2014 compared to $172.6 million or $1.39 per share for 2013.

Recurring FFO for the quarter ended September 30, 2014 was $0.53 per share or $66.2 million. For the same quarter last year, Recurring FFO was $0.51 per share or $63.3 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 nine months, Recurring FFO was $191.4 million or $1.54 per share for 2014 compared to $183.6 million or $1.48 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 3.8% for the quarter primarily due to increased occupancy and a reduction in merchant fallouts. Year-to-date, SPNOI has increased 3.7%. SPNOI represents over 90% of the total portfolio net operating income.

Occupancy increased to 94.9% in the third quarter, up 0.5% from 94.4% in the same quarter of 2013. Occupancy of small shop space increased to 89.1%, up 0.5% from the prior quarter and 0.4% from the same quarter of 2013. The occupancy of the Company’s Same Property portfolio increased to 95.2%. During the quarter, only 69 merchants ceased operations at the Company’s properties, the lowest such total since the downturn and 27% lower than the third quarter of 2013.

The Company produced strong leasing results during the third quarter with 293 new leases and renewals, totaling 1.1 million square feet. These transactions were comprised of 126 new leases and 167 renewals, which represent annualized revenues of $8.5 million and $9.6 million, respectively. The average rental rate increase on new leases and renewals signed year-to-date was 13.7% and 8.6%, 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 and a great team of associates,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Portfolio Activity

The Company continues to move toward the year-end 2014 conclusion of its highly successful portfolio transformation program. During the quarter, the Company sold eleven properties, three of which were owned in joint ventures, and two land parcels for $120.7 million. Subsequent to quarter-end, the Company sold six additional properties for $56.7 million bringing year-to-date dispositions to $277.7 million. The Company has approximately $192 million of property currently under contract or letter of intent. While there is no assurance that all of these transactions will close, the Company is confident that dispositions will be within the revised guidance of $350 to $450 million.

During the quarter, the Company acquired 18.4 acres of land at Nottingham Commons in White Marsh (Baltimore), Maryland for $21.8 million. Upon completion, the 133,000 square foot development is expected to have an approximate investment of $45.2 million and generate a 7.2% proforma return. This property is well-located in the dense core of White Marsh, Maryland in close proximity to White Marsh Mall. The property is fully entitled and most site work is completed. Leases are in place for four of the ground leases and the Company is far along in lease negotiations on over 75% of the proposed square footage with key value-priced national retailers. Ground leases signed represent an in-place return of 2.7%. The project is projected to reach stabilization in about two years.

“We feel very fortunate to have closed on the Nottingham Commons development property. With all entitlements and site work completed and several leases already signed prior to closing, the majority of the development risk on this project has already been eliminated. As we approach the conclusion of this transformation, 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. On September 15th the Company called for the redemption of its $90 million of 8.1% bonds. Additionally, the net proceeds from the Company’s capital recycling have been used to reduce indebtedness, resulting in further improved credit metrics with Net Debt to Recurring EBITDA at 5.52 times and debt to total market capitalization of 33.2%.

“Our balance sheet remains very strong with reduced leverage driving our strong credit metrics. This deleveraging of our balance sheet through our disposition program has provided us with significant capacity to pursue investment opportunities as they arise,” said Steve Richter, Executive Vice President and Chief Financial Officer.

2014 Guidance

The Company raised its previous guidance for Recurring FFO from a range $1.95 to $2.01 per share to a range of $2.01 to $2.03 per share and increased the range for dispositions from a range of $300 to $400 million to a range of $350 to $450 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 December 15, 2014 to shareholders of record on December 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 December 15, 2014 to shareholders of record on December 8, 2014.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on October 24, 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 # 35533143). 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, 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 251 properties which are located in 21 states spanning the country from coast to coast. These properties represent approximately 47.4 million square feet of which our interests in these properties aggregated approximately 29.0 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,
2014 2013 2014 2013
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited)
Rentals, net $ 127,974 $ 120,361 $ 380,398 $ 353,880
Other Income   2,547     2,941     7,906     9,244  
Total Revenues   130,521     123,302     388,304     363,124  
Depreciation and Amortization 36,694 35,348 113,948 107,039
Operating Expense 23,454 24,430 71,989 70,962
Real Estate Taxes, net 15,412 14,717 46,419 42,696
Impairment Loss - 2,358 - 2,579
General and Administrative Expense   6,146     5,964     17,879     18,812  
Total Expenses   81,706     82,817     250,235     242,088  
Operating Income 48,815 40,485 138,069 121,036
Interest Expense, net (24,373 ) (26,018 ) (73,263 ) (68,482 )
Interest and Other Income, net 96 1,864 2,893 5,787
Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests - 7 1,718 11,599
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net 7,881 5,125 16,331 14,467
Benefit for Income Taxes   284     226     1,885     256  
Income from Continuing Operations   32,703     21,689     87,633     84,663  
Operating Income from Discontinued Operations - 2,323 342 9,925
Gain on Sale of Property from Discontinued Operations   -     38,214     44,582     116,226  
Income from Discontinued Operations - 40,537 44,924 126,151
Gain on Sale of Property   69,496     163     71,407     570  
Net Income 102,199 62,389 203,964 211,384

Less: Net Income Attributable to Noncontrolling Interests

  (1,870 )   (1,847 )   (4,936 )   (41,056 )
Net Income Adjusted for Noncontrolling Interests 100,329 60,542 199,028 170,328

Less: Preferred Share Dividends

(2,710 ) (2,710 ) (8,130 ) (15,463 )

Less: Redemption Costs of Preferred Shares

  -     -     -     (17,944 )
Net Income Attributable to Common Shareholders -- Basic $ 97,619   $ 57,832   $ 190,898   $ 136,921  
Net Income Attributable to Common Shareholders -- Diluted $ 98,074   $ 57,832   $ 192,266   $ 136,921  

 

 

FUNDS FROM OPERATIONS
Numerator:
Net Income Attributable to Common Shareholders $ 97,619 $ 57,832 $ 190,898 $ 136,921
Depreciation and Amortization 35,402 36,088 110,542 112,270
Depreciation and Amortization of Unconsolidated Real Estate
Joint Ventures and Partnerships 3,666 4,443 11,289 13,370
Impairment of Operating Properties and Real Estate Equity Investments - - - 457
Impairment of Operating Properties of Unconsolidated Real Estate
Joint Ventures and Partnerships - - - 366
Gain on Sale of Property and Interests in Real Estate Equity Investments (69,468 ) (38,325 ) (117,643 ) (91,878 )
Gain on Dispositions of Unconsolidated Real Estate Joint Ventures
and Partnerships (2,856 ) (24 ) (3,024 ) (267 )
Other   -     -     (4 )   -  
Funds from Operations -- Basic 64,363 60,014 192,058 171,239
Adjustments for Recurring FFO:
Income Attributable to Operating Partnership Units 455 445 1,368 1,336
Other Impairment Loss, net of tax - 2,387 - 2,387
Redemption Costs of Preferred Shares - - - 18,131
Write-off of Debt Costs, net 1,376 404 1,850 (9,263 )
Acquisition Costs 50 18 68 428
Deferred Tax Benefit, net - - (2,097 ) -
Other, net of tax   -     -     (1,862 )   (673 )
Recurring Funds from Operations -- Diluted $ 66,244   $ 63,268   $ 191,385   $ 183,585  
 
Denominator:
Weighted Average Shares Outstanding -- Basic   121,560     121,359     121,487     121,235  
 
Weighted Average Shares Outstanding -- Diluted   124,440     122,531     124,301     122,441  
 
Weighted Average Shares Outstanding -- Diluted (FFO)   124,440     124,086     124,301     123,996  
 
PER SHARE DATA
Earnings Per Common Share -- Basic $ 0.80   $ 0.48   $ 1.57   $ 1.13  
 
Earnings Per Common Share -- Diluted $ 0.79   $ 0.47   $ 1.55   $ 1.12  
 
FFO -- Per Diluted Share $ 0.52   $ 0.49   $ 1.56   $ 1.39  
 
Recurring FFO -- Per Diluted Share $ 0.53   $ 0.51   $ 1.54   $ 1.48  
   
Weingarten Realty Investors
(in thousands)
Financial Statements
 
 
September 30, December 31,
2014 2013
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)   (Audited)
ASSETS
 
Property $ 4,140,817 $ 4,289,276
Accumulated Depreciation (1,050,027 ) (1,058,040 )
Property Held for Sale, net 30,129 122,614
Investment in Real Estate Joint Ventures and Partnerships, net 266,720 266,158
Notes Receivable from Real Estate Joint Ventures and Partnerships - 13,330
Unamortized Debt and Lease Costs, net 139,754 164,828
Accrued Rent and Accounts Receivable, net 80,714 82,351
Cash and Cash Equivalents 12,975 91,576
Restricted Deposits and Mortgage Escrows 36,230 4,502
Other, net   203,912     247,334  
Total Assets $ 3,861,224   $ 4,223,929  
 
LIABILITIES AND EQUITY
 
Debt, net $ 2,007,755 $ 2,299,844
Accounts Payable and Accrued Expenses 102,692 108,535
Other, net   123,529     127,572  
Total Liabilities   2,233,976     2,535,951  
 
Commitments and Contingencies
 
EQUITY
 
Preferred Shares of Beneficial Interest 2 2
Common Shares of Beneficial Interest 3,693 3,683
Additional Paid-In Capital 1,700,420 1,679,229
Net Income Less Than Accumulated Dividends (228,802 ) (300,537 )
Accumulated Other Comprehensive Loss   (2,378 )   (4,202 )
Shareholders' Equity   1,472,935     1,378,175  
Noncontrolling Interests   154,313     309,803  
Total Liabilities and Equity $ 3,861,224   $ 4,223,929  

Contacts

Weingarten Realty
Michelle Wiggs, (713) 866-6050

Release Summary

Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended September 30, 2014.

Contacts

Weingarten Realty
Michelle Wiggs, (713) 866-6050