Weingarten Realty (NYSE:WRI) announced today the results of its
third quarter ended September 30, 2009. The Company reported a net
loss of $9.4 million or $0.08 per diluted share compared to net
income of $0.32 per share for the same period of 2008. The net loss
for the third quarter included the effects of a non-cash impairment
charge of $46.1 million or $0.39 per diluted share primarily from
its new development program and a $16.5 million or $0.14 per
diluted share gain from the repurchase of its debt securities, both
of which are non-recurring. The third quarter’s per share results
were also affected by the dilution from the $439 million common
share offering in April of this year, resulting in a significant
increase in the weighted average shares outstanding increasing from
84.3 million shares to 119.4 million shares.
Operating and Financial Highlights
- Funds from Operations (“FFO”)
excluding the non-recurring items mentioned above were $59.3
million or $0.50 per diluted share for the third quarter of 2009,
compared to $59.9 million or $0.71 per share in 2008. Including the
non-recurring items, FFO for the quarter was $29.7 million or $0.25
per diluted share;
- Overall occupancy increased
during the third quarter to 91.1% from 90.9% in the previous
quarter and retail occupancy was flat quarter-over-quarter at
92.1%;
- The Company’s balance sheet and
liquidity has been significantly improved by eliminating or
extending near-term debt maturities. Since December 31, 2008, the
Company has reduced debt maturities through 2011 by approximately
$1 billion;
- In the third quarter, the
Company sold $100 million of ten-year unsecured notes, closed on
two secured loans totaling $128.3 and subsequent to quarter-end,
closed an additional secured loan for $26.6 million;
- Weingarten closed on the tender
of its convertible bonds, resulting in the redemption of $320
million of 3.95% convertible bonds;
- During the quarter, the Company
closed on the sale of one operating property, two land parcels and
a 200,000 square foot building in its expansion of ClayPoint
Distribution Park for $17 million. The ClayPoint transaction
produced a merchant build gain of $0.5 million, net of tax, in the
third quarter and brings total merchant build gains for the year to
$0.13 per share, net of taxes;
- Also, subsequent to quarter-end,
the Company closed on the first phase of the Southeast Retail Joint
Venture which in total includes six properties, with a total value
of approximately $160 million. Weingarten will retain a 20%
ownership interest in the joint venture. With the receipt of these
proceeds, the Company has reduced the balance outstanding under its
$575 million revolving credit facility to zero.
“This has been a very turbulent year. However, I am very proud
of the Weingarten team and the strides the Company has made
throughout 2009. Third quarter operating results were very
successful, especially when you take into account the dilution from
the equity offering, the progress we have made to right size the
balance sheet and the opportunities we have taken this year through
dispositions of non-core assets, all while keeping occupancy
stable,” stated Drew Alexander, President and Chief Executive
Officer.
Dividends
The Board of Trust Managers declared a common dividend of $0.25
per share for the third quarter of 2009. The dividend is payable in
cash on December 15, 2009 to shareholders of record on December 7,
2009.
The Board of Trust Managers also declared dividends on the
Company’s preferred shares. Dividends related to the 6.75% Series D
Cumulative Redeemable Preferred Shares (NYSE:WRIPrD) are $0.421875
per share for the quarter. Dividends on the 6.95% Series E
Cumulative Redeemable Preferred Shares (NYSE:WRIPrE) are $0.434375
per share for the same period. Dividends on the 6.50% Series F
Cumulative Redeemable Preferred Shares (NYSE:WRIPrF) are $0.40625
per share for the quarter. All preferred dividends are also payable
on December 15, 2009 to shareholders of record on December 7,
2009.
Existing Portfolio
Conditions across most of the existing portfolio appear to be
stabilizing as retailers are learning to adapt to current market
conditions by managing inventories. Overall occupancy increased to
91.1% during the third quarter compared to 90.9% during the second
quarter of 2009. Retail occupancy was flat quarter-over-quarter at
92.1%, the second straight quarter retail occupancy has not
declined. Industrial occupancy saw a slight up-tick to 88.0% from
87.7% in the second quarter of 2009. Overall occupancy is expected
to remain at around 91% through the balance of 2009.
For leases commencing during the quarter, the average rental
rate increased 3.8% on a GAAP basis. Year-to-date rental rates have
increased 8.1%, however this metric is expected to move to a
negative number in the fourth quarter as some of the leases signed
in the first six months of 2009 begin to commence at lower rental
levels.
The Company completed 393 new leases and renewals during the
quarter, totaling 1.2 million square feet and representing $17.5
million of annual revenue. The 393 transactions were comprised of
176 new leases and 217 lease renewals which represent annual
revenue of $7.5 million and $10.0 million, respectively. New leases
and renewals during the quarter were up from third quarter of 2008
where 305 new leases and renewals were completed.
Same Property Net Operating Income (NOI) was down 4.0% overall
during the quarter, with retail properties down 4.0% and industrial
properties down 3.9%. This is in-line with management’s
expectations and the Company continues to believe it will meet the
prior guidance for the full year of -2% to -3%; however it may be
towards the bottom end of the range. The decrease in Same Property
NOI was primarily a result of lower average occupancy for the
quarter compared to the same period in 2008.
“Operations seem to have stabilized and we can see an improving
future. The leasing team is continuing its forward momentum of
leasing space, especially in the big box arena. In addition, we are
encouraged that Weingarten’s anchors including supermarkets,
general merchandise stores, discount clothing and restaurants
continue to outperform other categories,” said Johnny Hendrix,
Executive Vice President of Asset Management.
Balance Sheet
The Company continued to strengthen its balance sheet during
2009 with several significant financings and other transactions.
These transactions allowed the Company to reduce its revolving
credit agreement to zero subsequent to quarter-end and
significantly reduced near term maturities.
Weingarten completed the tender of its convertible bonds,
resulting in a total of $320 million of principal being retired
during the third quarter.
Also, during the quarter and subsequent to quarter-end, the
Company reported it closed three secured loans. First, the Company
completed a $71 million secured loan with a major life insurance
company. The loan has a seven-year term and is secured by five
retail shopping centers with an interest rate of 7.4%. Secondly,
the Company closed a $58 million secured loan with another life
company. This loan has a ten-year term at a 7% interest rate, and
is secured by ten industrial properties. Subsequent to quarter-end,
the Company closed the final secured loan for $27 million with a
major bank. With the addition of these loans, Weingarten has closed
$268 million of secured financings year-to-date.
Additionally, the Company sold $100 million of ten-year
unsecured notes with a five-year call option and an interest rate
of 8.1%. The notes had a par value of $20 and were sold in the
retail market. The notes are listed on the NYSE under the ticker
symbol “WRD”.
“Despite the turbulent economy and difficult financial markets,
we have executed the liquidity plan that we outlined at the
beginning of the year very effectively. The team has reduced
leverage to around 46%, significantly reduced total debt maturities
through 2011 to only $485 million and provided adequate liquidity
allowing the Company to focus on growth opportunities,” stated
Steve Richter, Executive Vice President and Chief Financial
Officer.
New Joint Venture
The Company also reported that subsequent to quarter-end, it
closed on the first phase of the Southeast Retail Joint Venture,
which in total includes six properties for a total value of $160
million. The first phase, which includes four unencumbered
properties, was sold to the Joint Venture for $114 million under an
all equity arrangement. The Joint Venture is currently in the
secured market to leverage these assets and anticipates closing the
loan before the end of the year. The two remaining properties,
which have existing mortgages, will close upon the Joint Venture’s
assumption of the loans. The new Joint Venture is targeting 60%
leverage and Weingarten will retain a 20% interest in the
assets.
“We are very pleased to partner with Jamestown, a highly
respected German manager of real estate funds, founded in 1983 with
almost $8 billion invested in US assets. Weingarten has a long,
successful history of performing well for its partners and we are
pleased to have Jamestown in this group,” stated Drew
Alexander.
New Development
The Company performed a thorough analysis of each property in
the New Development program during the third quarter, resulting in
an impairment of $43 million, after tax. Additionally, the Company
stabilized seven properties, some earlier than normal (this
resulted in moving the project from its New Development program
into operating properties) and transferred $107 million of total
investment on projects where buildings had yet to commence to Land
Held for Development.
After transferring the properties to Land Held for Development
and recognizing stabilizations during the third quarter, the new
development pipeline now includes 13 properties at various stages
of development with an estimated Weingarten investment of $242
million when completed. Each of the remaining 13 projects
stabilizing in 2010 and beyond have anchor tenants secured, with
the overall pipeline 83% leased, including tenant-owned square
footage.
The Company reported that through third quarter, they delivered
$110 million in completions which meets its 2009 guidance of $100 -
130 million.
Seven properties were stabilized during the third quarter,
representing a total investment of $79 million with a current
return on investment of 7.0%. These seven properties averaged 93%
leased at quarter-end, including tenant-owned square footage.
Portfolio Enhancements
Weingarten disposed of $17 million of assets in the third
quarter at an average cap rate of 8.4%. Subsequent to quarter-end,
an additional $47 million of assets were sold, bringing
year-to-date dispositions to $163 million at an average cap rate of
8.1%. During the third quarter the Company slowed the disposition
program due to successfully eliminating any liquidity issues.
Therefore, the Company is reducing its previous guidance of $300
million in one-off dispositions to a range that falls closer to
$200 to $250 million in total one-off dispositions for 2009. This
guidance does not include the sale to the Southeast Retail Joint
Venture which closed subsequent to quarter-end.
Outlook
The Company, based on the performance of its quality portfolio,
increased full year 2009 FFO guidance from a range of $1.88 to
$2.12 per share to a range of $2.08 to $2.16 per share, excluding
the $0.39 per share effect of the non-cash impairment charge and
$0.23 per share of gains from the retirement of debt.
The Company reported that its 2010 budget process is not
finalized, however management anticipates full year 2010 FFO to be
in the range of $1.54 to $1.78 per share.
“As I have discussed many times before, Weingarten has a
seasoned and experience management team that worked diligently to
ensure maximum value be created through each transaction during the
third quarter, as well as, throughout the year,” said Drew
Alexander. “We are optimistic that operating fundamentals will
continue to improve and we will begin to grow the portfolio and
FFO. While acquisition opportunities have been limited thus far, we
do believe we are entering a period of opportunity for creating
shareholder value through acquiring assets in this turbulent real
estate market.”
Conference Call Information
The Company also announced that it will host a live webcast of
its quarterly conference call on October 26, 2009 at 10:00 a.m.
Central Time. The live webcast can be accessed via the Company’s
Web site 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 (877) 763-1324 (no confirmation code). A replay and Podcast
will also be available through the Company’s Web site starting
approximately two hours following the live call or can be heard by
calling (800) 642-1687, identification number 29020017 until 11:59
PM Central Time on October 27, 2009.
About Weingarten Realty Investors
Weingarten Realty Investors (NYSE: WRI) is a commercial real
estate owner, manager and developer. At September 30, 2009, 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 385 developed income-producing properties
and 13 properties under various stages of construction and
development. The total number of properties includes 315
neighborhood and community shopping centers located in 22 states
spanning the country from coast to coast. The company also owns 80
industrial projects located in California, Florida, Georgia,
Tennessee, Texas and Virginia and three other operating properties
located in Arizona and Texas. At September 30, 2009, the company’s
portfolio of properties was approximately 72.3 million square
feet.
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.
Financial Statements Weingarten Realty Investors (in
thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30,
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 2009 2008 2009
2008
AND FUNDS FROM OPERATIONS (Unaudited) (Unaudited)
Rentals, net $ 139,636 $ 149,725 $ 422,106 $ 441,288 Other Income
4,908 4,242 12,321
10,310 Total Revenues 144,544 153,967
434,427 451,598 Depreciation and
Amortization 37,159 35,368 112,836 115,281 Operating Expense 25,733
26,045 76,014 77,151 Ad Valorem Taxes, net 18,275 19,967 55,012
54,620 Impairment Loss 32,774 32,774 General and Administrative
Expense 6,178 5,816 19,198
19,774 Total Expenses 120,119
87,196 295,834 266,826
Operating Income 24,425 66,771 138,593 184,772 Interest Expense,
net (36,431 ) (40,878 ) (115,247 ) (118,724 ) Interest and Other
Income, net 3,596 1,171 8,504 3,919 Equity in (Loss) Earnings of
Real Estate Joint Ventures and Partnerships, net (4,763 ) 5,151
2,783 15,537 Gain on Redemption of Convertible Senior Unsecured
Notes 16,453 25,311 Gain on Merchant Development Sales 491 1,418
18,619 8,240 Provision for Income Taxes (4,364 ) (701
) (7,071 ) (2,991 ) (Loss) Income from Continuing
Operations (593 ) 32,932 71,492
90,753 Operating (Loss) Income from Discontinued
Operations (1,294 ) 2,016 1,250 8,398 Gain on Sale of Property from
Discontinued Operations 398 4,520
7,385 53,983 (Loss) Income from
Discontinued Operations (896 ) 6,536
8,635 62,381 Gain (Loss) on Sale of Property
994 (43 ) 12,374 101
Net (Loss) Income (495 ) 39,425 92,501 153,235 Less: Net
Income Attributable to Noncontrolling Interests (20 )
(2,515 ) (2,894 ) (6,968 ) Net (Loss) Income Adjusted
for Noncontrolling Interests (515 ) 36,910 89,607 146,267
Less: Preferred Share
Dividends
(8,869 ) (9,114 ) (26,607 ) (25,842 ) Redemption Costs of Preferred
Shares (860 ) (1,850 ) Net (Loss)
Income Available to Common Shareholders--Basic ($9,384 ) $
26,936 $ 63,000 $ 118,575 Earnings Per Common
Share--Basic ($0.08 ) $ 0.32 $ 0.59 $ 1.42
Net (Loss) Income Available to Common Shareholders--Diluted
($9,384 ) $ 26,936 $ 63,000 $ 118,575
Earnings Per Common Share--Diluted ($0.08 ) $ 0.32 $
0.59 $ 1.41 Funds from Operations: Net (Loss)
Income Available to Common Shareholders ($9,384 ) $ 26,936 $ 63,000
$ 118,575 Depreciation and Amortization 35,646 34,282 109,446
114,535 Depreciation and Amortization of Unconsolidated Joint
Ventures 4,850 3,137 13,415 8,698 Gain on Sale of Property (1,383 )
(4,470 ) (19,736 ) (53,437 ) (Gain) Loss on Sale of Property of
Unconsolidated Joint Ventures 2 (4 )
(12 ) Funds from Operations--Basic $ 29,729 $ 59,887
$ 166,121 $ 188,359 Funds from Operations Per
Common Share--Basic $ 0.25 $ 0.71 $ 1.56 $
2.25 Funds from Operations--Diluted $ 29,729 $ 59,887
$ 166,121 $ 188,359 Funds from Operations Per
Common Share--Diluted $ 0.25 $ 0.71 $ 1.56 $
2.23 Weighted Average Shares Outstanding--Basic
119,384 83,795 106,186
83,739 Weighted Average Shares Outstanding--Diluted
119,384 84,316 106,745
84,288 September 30, December 31, 2009 2008
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Audited)
Property $ 4,806,661 $ 4,915,472 Accumulated Depreciation (861,547
) (812,323 ) Property Held for Sale, net 51,007 Investment in Real
Estate Joint Ventures and Partnerships, net 311,353 357,634 Notes
Receivable from Real Estate Joint Ventures and Partnerships 323,141
232,544 Unamortized Debt and Lease Costs, net 109,661 119,464
Accrued Rent and Accounts Receivable, net 84,948 103,873 Cash and
Cash Equivalents 104,694 58,946 Restricted Deposits and Mortgage
Escrows 14,526 33,252 Other, net 92,854
105,350 Total Assets $ 5,037,298 $ 5,114,212
Debt, net $ 2,724,888 $ 3,148,636 Accounts Payable and
Accrued Expenses 152,022 179,432 Other, net 98,791
90,461 Total Liabilities 2,975,701
3,418,529 Commitments and Contingencies
41,000 Preferred Shares of Beneficial
Interest 8 8 Common Shares of Beneficial Interest 3,605 2,625
Accumulated Additional Paid-In Capital 1,949,308 1,514,940 Net
Income Less Than Accumulated Dividends (80,015 ) (37,245 )
Accumulated Other Comprehensive Loss (27,814 )
(29,676 ) Shareholders' Equity 1,845,092
1,450,652 Noncontrolling Interest 216,505
204,031 Total Liabilities, Shareholders' Equity and
Noncontrolling Interest $ 5,037,298 $ 5,114,212
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