Weingarten Realty Increases Same Store Net Operating Income by 4.9%
Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended September 30, 2012. 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 totaled $56.2 million or $0.46 per diluted share;
- Same Property Net Operating Income increased a strong 4.9% over the same quarter of the prior year;
- Occupancy of the Company's retail portfolio increased again this quarter by 1.1% to 93.9% from 92.8% for the third quarter of 2011;
- Acquisitions totaling $114 million and dispositions of $89 million were completed during the quarter, and;
- Ten-year notes totaling $300 million were sold subsequent to quarter-end at an attractive yield of 3.42%.
The Company reported net income attributable to common shareholders of $31.4 million or $0.26 per diluted share (hereinafter “per share”) for the third quarter of 2012, as compared to a net loss of $42.1 million or $0.35 per share for the same period in 2011. Included in the 2011 operating results were non-cash impairment charges of $0.44 per share. Net income for the nine months ended September 30, 2012 was $66.3 million or $0.54 per share compared to a net loss of $42.0 million or $0.35 per share for 2011. Included in the 2011 operating results were non-cash impairment charges of $0.63 per share.
Reported FFO was $55.1 million or $0.45 per share for the third quarter of 2012 compared to $30.7 million or $0.25 per share for 2011. Excluded from Reported FFO in 2011 were impairments of $0.25 per share as they related to operating properties. Year-to-date, Reported FFO was $165.6 million or $1.36 per share for 2012 compared to $115.2 million or $0.96 per share for 2011.
Recurring FFO for the quarter ended September 30, 2012 was $0.46 per share or $56.2 million. For the same quarter last year, Recurring FFO was $0.47 per share. The $0.01 per share decrease in Recurring FFO over the prior year was primarily due to dispositions totaling $627 million since September 30, 2011, which includes the sale of the Company's wholly-owned industrial assets in the second quarter of 2012 totaling $382 million. This reduction was offset by an improvement in operating income from increased occupancy in the existing portfolio, reduced interest expense resulting from refinanced debt maturities and acquisitions totaling $235 million. For the nine months, Recurring FFO was $169.6 million or $1.39 per share for 2012 compared to $159.2 million or $1.32 per share for 2011, a 5.3% increase on a per share basis.
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.
Occupancy of the retail portfolio increased to 93.9% in the third quarter from 93.7% in the prior quarter and by a very strong 1.1% from 92.8% in the third quarter of 2011. Occupancy of small shop space increased by 0.5% from the prior quarter and by an impressive 1.6% from the same quarter of the prior year.
Same Property Net Operating Income ("SPNOI") for retail properties increased 4.9% primarily due to continued strength in both renewals and new leases and a reduction in merchant fallouts. Year-to-date, SPNOI has increased 4.1%, which ranks at the top of the Company's shopping center peer group.
The Company produced strong leasing results during the third quarter with 356 new retail leases and renewals, totaling over one million square feet. These transactions were comprised of 152 new leases and 204 renewals, which represent annualized revenues of $5.1 million and $9.8 million, respectively. Year-to-date, the average rental rate increase on retail leases signed was a solid 3.8%.
"Our continued rise in occupancy and excellent Same Property NOI growth is a clear reflection of our best in class operating platform. While economic activity remains sluggish, our local market expertise coupled with our quality portfolio of properties enables us to sustain this improvement in operating results,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.
The Company continued its progress in selling its secondary assets and redeploying that capital into higher quality investments in its target markets. Year-to-date, dispositions have totaled $565 million. During the quarter, the Company sold ten retail assets for $66 million and continued the divestiture of its industrial assets by selling nine properties for $23 million from one of its remaining joint ventures. The Company expects to sell its interest in its other industrial joint venture by year-end. The Company redeployed $114 million with the purchase of two outstanding shopping centers and the opportunistic purchase of its venture partner's interest in another. The Company purchased Roswell Crossing, a 202,000 square foot shopping center in Roswell, Georgia, an affluent suburb of Atlanta. Anchored by Trader Joe's, Walgreens, OfficeMax and PetsMart, the trade area has average household incomes over $128,000 within a three-mile trade area and 66% of the residents are college graduates. The Company also purchased Pike Center, an 81,300 square foot community shopping center in affluent Rockville, Maryland. The center's demographics boast 145,000 people within three miles and average household incomes of $110,000. Year-to-date, the Company has invested $235 million in quality shopping centers in great markets.
“We have delivered on every facet of the five-year strategic plan we laid out back in 2011. We continue to reduce the size of our secondary portfolio and recycle that capital into outstanding new properties while using some of the proceeds to reduce our leverage. We are not finished repositioning our portfolio, but our progress has been substantial,” said Drew Alexander, President and Chief Executive Officer.
On October 9, 2012, the Company closed on the sale of $300 million of 3.375% notes due in October 2022. The notes yield interest at 3.42% and were sold at a discount to par value. The proceeds from the transaction were used to pay down all amounts outstanding under the Company's $500 million revolving credit facility and to redeem $54 million of its 3.95% Convertible Notes.
Subsequent to this transaction, the Company also called for the redemption of $72.5 million of its 6.95% Series E Preferred Shares.
“The $300 million notes offering was exceptionally well received by the market as the transaction was more than six times over-subscribed with $1.2 billion of demand. The sale of these notes allowed us to lock in very favorable long-term rates for ten years and pay off our revolving credit facility to provide liquidity for future debt maturities and growth opportunities,” said Steve Richter, Executive Vice President and Chief Financial Officer.
Recurring FFO Guidance
With respect to 2012 guidance, the Company once again raised the lower end of guidance for Recurring FFO from $1.78 to $1.84 per share to $1.80 to $1.84 per share and also improved its rental growth assumption from -1% to +2% to +2% to +4%. Recurring FFO guidance for 2013 is a range from $1.84 to $1.90 per share. The Company's guidance for 2012 and 2013 and assumptions for 2012 are provided in its supplemental package.
The Board of Trust Managers declared a common dividend of $0.29 per share for the third quarter of 2012. The dividend is payable in cash on December 14, 2012 to shareholders of record on December 6, 2012.
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 6.50% Series F Cumulative Redeemable Preferred Shares (NYSE:WRIPrF) are $0.40625 per share for the quarter. All preferred dividends are payable on December 14, 2012 to shareholders of record on December 6, 2012.
Conference Call Information
The Company also announced that it will host a live webcast of its quarterly conference call on October 29, 2012 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 # 32594657). 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, 2012, 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 301 developed income-producing properties and 11 properties under various stages of construction and development. The total number of properties includes 295 neighborhood and community shopping centers and 17 other operating properties located in 22 states spanning the country from coast to coast representing approximately 59.8 million square feet. To learn more about the Company's operations and growth strategies, please visit www.weingarten.com.
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)
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME||(Unaudited)||(Unaudited)|
|Depreciation and Amortization||36,623||33,487||103,909||98,489|
|Real Estate Taxes, net||15,259||14,658||43,557||42,054|
|General and Administrative Expense||6,421||5,762||21,105||18,898|
|Interest Expense, net||(28,109||)||(35,475||)||(88,587||)||(108,268||)|
|Interest and Other Income (Loss), net||1,818||(494||)||4,786||2,984|
|Gain on Sale of Real Estate Joint Venture and Partnership Interests||-||-||5,562||-|
|Equity in Earnings (Losses) of Real Estate Joint Ventures and Partnerships, net||4,905||(3,034||)||(6,715||)||3,942|
|Gain on Acquisition||1,869||-||1,869||-|
|(Provision) Benefit for Income Taxes||(733||)||(471||)||(462||)||67|
|Income (Loss) from Continuing Operations||24,250||(24,664||)||37,100||(19,807||)|
|Operating Income (Loss) from Discontinued Operations||2,636||(12,272||)||9,763||1,802|
|Gain on Sale of Property from Discontinued Operations||14,826||586||49,724||586|
|Income (Loss) from Discontinued Operations||17,462||(11,686||)||59,487||2,388|
|Gain on Sale of Property||335||392||859||1,588|
|Net Income (Loss)||42,047||(35,958||)||97,446||(15,831||)|
Less: Net (Income) Loss Attributable to Noncontrolling Interests
|Net Income (Loss) Adjusted for Noncontrolling Interests||40,273||(33,220||)||92,889||(15,421||)|
Less: Preferred Share Dividends
|Net Income (Loss) Attributable to Common Shareholders -- Basic||$||31,404||$||(42,089||)||$||66,282||$||(42,028||)|
|Net Income (Loss) Attributable to Common Shareholders -- Diluted||$||31,404||$||(42,089||)||$||66,282||$||(42,028||)|
|FUNDS FROM OPERATIONS|
|Net Income (Loss) Attributable to Common Shareholders||$||31,404||$||(42,089||)||$||66,282||$||(42,028||)|
|Depreciation and Amortization||35,611||38,470||106,551||113,397|
|Depreciation and Amortization of Unconsolidated Real Estate|
|Joint Ventures and Partnerships||5,254||5,689||16,261||17,282|
|Impairment of Operating Properties and Real Estate Equity Investments||177||24,341||15,007||27,576|
|Impairment of Operating Properties of Unconsolidated Real Estate|
|Joint Ventures and Partnerships||57||5,253||19,946||5,664|
|Gain on Acquisition||(1,869||)||-||(1,869||)||(4,559||)|
|Gain on Sale of Property and Interests in Real Estate Equity Investments||(15,140||)||(979||)||(56,047||)||(2,129||)|
|(Gain) Loss on Sale of Property of Unconsolidated Real Estate|
|Joint Ventures and Partnerships||(435||)||-||(558||)||10|
|Funds from Operations -- Basic||55,059||30,685||165,573||115,213|
|Funds from Operations Attributable to Operating Partnership Units||-||-||-||-|
|Funds from Operations -- Diluted||55,059||30,685||165,573||115,213|
|Adjustments for Recurring FFO:|
|Other Impairment Loss, net of tax||159||23,048||403||42,062|
|Litigation Settlement, net of tax||-||-||-||(1,040||)|
|Extinguishment of Debt Costs, net of tax||-||2,429||-||2,679|
|Recurring Funds from Operations -- Diluted||$||56,199||$||56,174||$||169,572||$||159,190|
|Weighted Average Shares Outstanding -- Basic||120,766||120,413||120,637||120,301|
|Weighted Average Shares Outstanding -- Diluted||121,844||120,413||121,653||120,301|
|PER SHARE DATA|
|Earnings Per Common Share -- Basic||$||0.26||$||(0.35||)||$||0.55||$||(0.35||)|
|Earnings Per Common Share -- Diluted||$||0.26||$||(0.35||)||$||0.54||$||(0.35||)|
|FFO -- Per Diluted Share|
|Net Income (Loss) Attributable to Common Shareholders per Share||$||0.26||$||(0.35||)||$||0.54||$||(0.35||)|
|Adjustments for Reported FFO:|
|Impairment of Operating Properties||0.00||0.24||0.29||0.28|
|Depreciation, Amortization and Other Adjustments||0.19||0.36||0.53||1.03|
|Reported Funds from Operations -- Diluted per Share||$||0.45||$||0.25||$||1.36||$||0.96|
|Adjustments for Recurring FFO:|
|Other Impairment Loss, net of tax||0.00||0.20||0.00||0.35|
|All Other Adjustments||0.01||0.02||0.03||0.01|
|Recurring Funds from Operations -- Diluted per Share||$||0.46||$||0.47||$||1.39||$||1.32|
Weingarten Realty Investors
|September 30,||December 31,|
|CONDENSED CONSOLIDATED BALANCE SHEETS||(Unaudited)||(Audited)|
|Property Held for Sale, net||73,404||73,241|
|Investment in Real Estate Joint Ventures and Partnerships, net||300,471||341,608|
|Notes Receivable from Real Estate Joint Ventures and Partnerships||90,385||149,204|
|Unamortized Debt and Lease Costs, net||138,718||115,191|
|Accrued Rent and Accounts Receivable, net||77,741||86,530|
|Cash and Cash Equivalents||19,089||13,642|
|Restricted Deposits and Mortgage Escrows||13,813||11,144|
|LIABILITIES AND EQUITY|
|Accounts Payable and Accrued Expenses||117,956||124,888|
|Commitments and Contingencies|
|Preferred Shares of Beneficial Interest||8||8|
|Common Shares of Beneficial Interest||3,658||3,641|
|Additional Paid-In Capital||1,997,230||1,983,978|
|Net Income Less Than Accumulated Dividends||(343,688||)||(304,504||)|
|Accumulated Other Comprehensive Loss||(25,939||)||(27,743||)|
|Total Liabilities and Equity||$||4,262,659||$||4,588,226|
Michelle Wiggs, (713) 866-6050