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Weingarten Realty Reports Strong Results

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Weingarten Realty (NYSE:WRI) announced today the results of its
operations for the quarter ended June 30, 2018. The supplemental
financial package with additional information can be found on the
Company's website under the Investor Relations tab.

Second Quarter Operating and Financial Highlights

  • Net income attributable to common shareholders ("Net Income") for the
    quarter increased to $0.61 per diluted share (hereinafter "per share")
    from $0.49 per share in the same quarter of 2017;
  • Core Funds From Operations Attributable to Common Shareholders ("Core
    FFO") for the quarter was $0.57 per share compared to $0.61 per share
    a year ago;
  • Same Property Net Operating Income ("SPNOI") including redevelopments
    increased 2.7% over the same quarter of the prior year;
  • Occupancy increased to 94.6% at quarter end from 94.5% in the prior
    year;
  • Rental rates on new leases and renewals for the quarter were up 21.4%
    and 7.1%, respectively; and
  • Dispositions totaled $77 million for the quarter and $358 million
    to-date.

Financial Results

The Company reported Net Income of $78.3 million or $0.61 per share for
the second quarter of 2018, as compared to $63.9 million or $0.49 per
share for the same period in 2017. This increase was due primarily to
higher gains on sales of properties during 2018. Year-to-date, Net
Income was $225.1 million or $1.74 per share for 2018 compared to $94.7
million or $0.74 per share for 2017.

Core FFO for the quarter ended June 30, 2018 was $0.57 per share or
$74.3 million compared to $0.61 per share or $79.2 million for the same
quarter of last year. Dispositions in 2017 and 2018 decreased Core FFO
by $0.08 per share. This was offset by higher operating income driven by
increased base rents, slightly higher expense reimbursements, bad debt
recoveries and reduced interest expense due to the reduction in debt
outstanding with disposition proceeds. For the six months, Core FFO was
$149.1 million or $1.15 per share for 2018 compared to $158.8 million or
$1.22 per share for 2017. Dispositions reduced Core FFO for the six
months by $0.14 per share.

NAREIT FFO was $84.5 million or $0.65 per share for the second quarter
of 2018 compared to $79.4 million or $0.61 per share for 2017. Included
in 2018 is a benefit of $10.0 million, or $0.08 per share, from the
write-off of under market rent intangibles related to terminated Toys R
Us leases. Year-to-date, NAREIT FFO was $162.8 million or $1.25 per
share for 2018 compared to $153.8 million or $1.18 per share for 2017.

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

Operating Results

For the period ending June 30, 2018, the Company's operating highlights
were as follows:

                 
       

Q2 2018

     

YTD 2018

Occupancy (Signed Basis):                
Occupancy - Total       94.6%        
Occupancy - Small Shop Spaces       90.3%        
Occupancy - Same Property Portfolio       95.3%        
                 
Same Property Net Operating Income, with redevelopments       2.7%       2.3%
                 
Rental Rate Growth - Total:       10.2%       7.8%
New Leases       21.4%       13.4%
Renewals       7.1%       6.4%
                 
Leasing Transactions:                
Number of New Leases       79       154
New Leases - Annualized Revenue (in millions)       $5.4       $10.7
Number of Renewals       131       300
Renewals - Annualized Revenue (in millions)       $11.8       $26.7
           

A reconciliation of Net Income to SPNOI is included herein.

"Operations remained strong this quarter, a reflection of our
significantly improved portfolio of properties. With the most
diversified tenant base in our sector, the impact of tenant closures has
been relatively muted. The recent Toys R Us bankruptcy resulted in
minimal impact to SPNOI for the quarter, but will reduce occupancy by
0.7% beginning in the third quarter and reduce revenue by approximately
$0.9 million over the balance of the year. However, we have great
interest in all of these locations and should have rent back on line for
all of them within eighteen months," said Johnny Hendrix, Executive Vice
President and Chief Operating Officer.

Portfolio Activity

During the quarter, the Company closed $77 million of dispositions and
an additional $13 million subsequent to quarter end. These dispositions
included two centers each in Nevada, North Carolina and Texas, one in
Georgia and a portion of Stoneridge Towne Centre in Moreno Valley,
California. The Company also sold two land parcels.

The Company did not acquire any properties during the quarter.

During the quarter, the Company invested $34 million in new developments
and redevelopments. We are breaking ground on the Driscoll at River
Oaks, a 30-story residential tower to be constructed at the Company's
River Oaks Shopping Center. Details of these projects can be found in
the Company's Supplemental Financial Information package on its website.

"We continue to dispose of assets that are in the bottom portion of our
portfolio where we can sell at or near the properties net asset value.
While conditions can change rapidly, the current environment seems to be
conducive to further disposition activity, leading to an increased
guidance range for 2018," said Drew Alexander, President and Chief
Executive Officer.

Balance Sheet

Proceeds from the Company's 2017 and 2018 dispositions were used to
strengthen its balance sheet. At the beginning of the quarter, the
Company paid down the remaining $100 million outstanding under its $200
million term loan. During the second quarter of 2018, the Company used
additional proceeds to repurchase $0.6 million of its unsecured bonds
and $10.4 million of its common shares at an average price of $26.90 per
share. Year-to date, the Company has repurchased $14.3 million of its
unsecured bonds and $18.5 million of its common shares at an average
price of $27.10 per share. At quarter-end, Net Debt to Core EBITDAre was
a strong 5.1 times and Debt to Total Market Capitalization was 31.4%.

"The use of proceeds from our disposition program has enabled us to
further enhance our financial position through both the pay down and
repurchase of debt. It will further provide funding for our new
development and redevelopment programs, the repurchase of common shares
and a relatively large special dividend at year-end that is required due
to the significant tax gains generated by our disposition program. Our
balance sheet is as strong as it has ever been and positions us to
pursue opportunities as they arise," said Steve Richter, Executive Vice
President and Chief Financial Officer.

2018 Guidance

With respect to 2018 guidance, the Company increased guidance for Net
Income and NAREIT FFO as set forth in the table below. Given the strong
market for quality properties, the Company is cautious with respect to
the pricing of acquisitions, and accordingly, is reducing its
acquisitions guidance for the remainder of the year. Additionally, the
Company has increased the amount of property it is marketing for sale;
therefore, it has increased its guidance for dispositions. Shown below
is the Company's guidance with adjusted items highlighted.

                 
       

Previous Guidance

     

Revised Guidance

Net Income (per share)       $2.26 - $2.34       $2.52 - $2.60
NAREIT FFO (per share)       $2.29 - $2.35       $2.37 - $2.43
Core FFO (per share)       $2.27 - $2.33       $2.27 - $2.33
Acquisitions       $50 - $150 million       $25 - $75 million
Re / New Development       $125 - $175 million       $125 - $175 million
Dispositions       $250 - $450 million       $400 - $550 million
Same Property NOI with redevelopments       2.5% - 3.5%       2.5% - 3.5%
Same Property NOI w/o redevelopments       2.0% - 3.0%       2.0% - 3.0%
           

Dividends

The Board of Trust Managers declared a quarterly cash dividend of $0.395
per common share payable on September 14, 2018 to shareholders of record
on September 7, 2018.

Conference Call Information

The Company also announced that it will host a live webcast of its
quarterly conference call on July 31, 2018 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 #
45774519). 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 June 30, 2018, 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 190 properties which
are located in 17 states spanning the country from coast to coast. These
properties represent approximately 38.4 million square feet of which our
interests in these properties aggregated approximately 24.6 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.

 
Weingarten Realty Investors
(in thousands, except per share amounts)
Financial Statements
                 
Three Months Ended
June 30,
Six Months Ended
June 30,
2018     2017 2018     2017
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited)
Rentals, net $ 138,520 $ 142,963 $ 267,249 $ 283,781
Other Income 3,566   3,060   7,289   5,905  
Total Revenues 142,086   146,023   274,538   289,686  
Depreciation and Amortization 50,421 42,157 88,516 84,606
Operating Expense 24,104 26,221 47,374 56,131
Real Estate Taxes, net 17,466 21,632 35,105 39,149
Impairment Loss 26 15,012
General and Administrative Expense 6,149   6,418   11,744   13,802  
Total Expenses 98,140   96,454   182,739   208,700  
Operating Income 43,946 49,569 91,799 80,986
Interest Expense, net (17,017 ) (20,473 ) (31,689 ) (41,555 )
Interest and Other Income/Expense 1,355 1,190 2,888 2,812
(Provision) Benefit for Income Taxes (684 ) (747 ) (1,467 ) 2,612

Equity in Earnings of Real Estate Joint Ventures and Partnerships,
net

5,318   7,430   11,311   12,747  
Income from Continuing Operations 32,918 36,969 72,842 57,602
Gain on Sale of Property 46,953   32,224   155,998   47,987  
Net Income 79,871 69,193 228,840 105,589

Less: Net Income Attributable to Noncontrolling Interests

(1,582 ) (5,341 ) (3,727 ) (10,911 )
Net Income Attributable to Common Shareholders -- Basic $ 78,289   $ 63,852   $ 225,113   $ 94,678  
Net Income Attributable to Common Shareholders -- Diluted $ 78,817   $ 64,378   $ 226,169   $ 94,678  
Earnings Per Common Share -- Basic $ .61   $ .50   $ 1.76   $ .74  
Earnings Per Common Share -- Diluted $ .61   $ .49   $ 1.74   $ .74  
 
Weingarten Realty Investors
(in thousands)
Financial Statements
           
June 30,
2018
December 31,
2017
(Unaudited) (Audited)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
Property $ 4,327,010 $ 4,498,859
Accumulated Depreciation (1,141,897 ) (1,166,126 )
Property Held for Sale, net 24,714 54,792
Investment in Real Estate Joint Ventures and Partnerships, net 331,777 317,763
Unamortized Lease Costs, net 155,492 181,047
Accrued Rent, Accrued Contract Receivables and Accounts Receivable,
net
88,840 104,357
Cash and Cash Equivalents 13,096 13,219
Restricted Deposits and Mortgage Escrows 20,603 8,115
Other, net 205,347   184,613  
Total Assets $ 4,024,982   $ 4,196,639  
 
LIABILITIES AND EQUITY
Debt, net $ 1,827,181 $ 2,081,152
Accounts Payable and Accrued Expenses 99,890 116,463
Other, net 173,917   189,182  
Total Liabilities 2,100,988   2,386,797  
 
Commitments and Contingencies
 
EQUITY
Common Shares of Beneficial Interest 3,886 3,897
Additional Paid-In Capital 1,760,957 1,772,066
Net Income Less Than Accumulated Dividends (7,878 ) (137,065 )
Accumulated Other Comprehensive Loss (9,608 ) (6,170 )
Shareholders' Equity 1,747,357   1,632,728  
Noncontrolling Interests 176,637   177,114  
Total Liabilities and Equity $ 4,024,982   $ 4,196,639  
 

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 and their applicable taxes,
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, non-operating and other
transactions or 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.

NAREIT FFO and Core FFO is calculated as follows (in thousands):

       
Three Months Ended
June 30,
Six Months Ended
June 30,
2018     2017 2018     2017
(Unaudited) (Unaudited)
Net income attributable to common shareholders $ 78,289   $ 63,852 $ 225,113   $ 94,678
Depreciation and amortization of real estate 50,110 41,951 87,875 84,139
Depreciation and amortization of real estate of unconsolidated real
estate joint ventures and partnerships
3,261 3,548 6,445 7,187
Impairment of operating properties and real estate equity investments 2 12,007
(Gain) on sale of property and interests in real estate equity
investments
(46,701 ) (31,970 ) (155,739 ) (47,718 )
(Gain) on dispositions of unconsolidated real estate joint ventures
and partnerships
(1,219 ) (1,950 ) (3,582 ) (1,950 )
Provision (benefit) for income taxes (1) 322 378 483 (2,014 )
Noncontrolling interests and other (2) (85 ) 3,037   1,125   6,406  
NAREIT FFO – basic 83,977 78,848 161,720 152,735
Income attributable to operating partnership units 528   526   1,056   1,052  
NAREIT FFO – diluted 84,505   79,374   162,776   153,787  
Adjustments to Core FFO:
Other impairment loss 12 3,029
Provision (benefit) for income taxes (952 )
Loss (gain) on extinguishment of debt including related swap activity 99 (3,458 )
Severance costs
Storm damage costs
Recovery of Pre-development costs
Lease terminations (10,023 ) (10,023 )
Other (240 ) (162 ) (240 ) 2,904  
Core FFO – diluted $ 74,341   $ 79,224   $ 149,055   $ 158,768  
 
FFO weighted average shares outstanding – basic 127,505 127,788 127,714 127,700
Effect of dilutive securities:
Share options and awards 813 848 799 894
Operating partnership units 1,432   1,459   1,432   1,460  
FFO weighted average shares outstanding – diluted 129,750   130,095   129,945   130,054  
 
NAREIT FFO per common share – basic $ .66   $ .62   $ 1.27   $ 1.20  
 
NAREIT FFO per common share – diluted $ .65   $ .61   $ 1.25   $ 1.18  
 
Core FFO per common share – diluted $ .57   $ .61   $ 1.15   $ 1.22  
______________
(1) The applicable taxes related to gains and impairments of
operating properties.
(2) Related to gains, impairments and depreciation on operating
properties and unconsolidated real estate joint ventures, where
applicable.
 

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 that
have been sold. 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:

           
Three Months Ended
June 30, 2018
Six Months Ended
June 30, 2018
Beginning of the period 184 183
Properties added:
Acquisitions 6
New Developments 1
Redevelopments 2
Properties removed:
Dispositions (5) (13)
End of the period 179 179
 

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, demolition expenses and lease termination
fees. 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 Attributable to
Common Shareholders to SPNOI is as follows (in thousands):

         
Three Months Ended
June 30,
Six Months Ended
June 30,
2018       2017 2018       2017
(Unaudited) (Unaudited)
Net income attributable to common shareholders $ 78,289       $ 63,852 $ 225,113       $ 94,678
Add:
Net income attributable to noncontrolling interests 1,582 5,341 3,727 10,911
Provision (benefit) for income taxes 684 747 1,467 (2,612 )
Interest expense, net 17,017 20,473 31,689 41,555
Less:
Gain on sale of property (46,953 ) (32,224 ) (155,998 ) (47,987 )
Equity in earnings of real estate joint ventures and partnership
interests
(5,318 ) (7,430 ) (11,311 ) (12,747 )
Interest and other income/expense (1,355 ) (1,190 ) (2,888 ) (2,812 )
Operating Income 43,946 49,569 91,799 80,986
Less:
Revenue adjustments (1) (14,108 ) (4,111 ) (18,040 ) (8,220 )
Add:
Property management fees 630 655 1,497 1,580
Depreciation and amortization 50,421 42,157 88,516 84,606
Impairment loss 26 15,012
General and administrative 6,149 6,418 11,744 13,802
Acquisition costs 1
Other (2) (401 ) 164   (312 ) 3,281  
Net Operating Income 86,637 94,878 175,204 191,048
Less: NOI related to consolidated entities not defined as same
property and noncontrolling interests
(2,869 ) (13,742 ) (8,038 ) (28,637 )
Add: Pro rata share of unconsolidated entities defined as same
property
8,366   8,599   16,740   17,286  
Same Property Net Operating Income 92,134 89,735 183,906 179,697
Less: Redevelopment Net Operating Income (6,951 ) (6,324 ) (14,084 ) (13,017 )
Same Property Net Operating Income excluding Redevelopments $ 85,183         $ 83,411         $ 169,822         $ 166,680  
___________________
(1) Revenue adjustments consist primarily of straight-line rentals,
lease cancellation income and fee income primarily from real estate
joint ventures and partnerships.
(2) Other includes items such as environmental abatement costs,
demolition expenses and lease termination fees.
 

Earnings Before Interest, Taxes, Depreciation
and Amortization for Real Estate

NAREIT defines EBITDAre as net income computed in accordance with GAAP,
plus interest expense, income tax expense (benefit), depreciation and
amortization and impairment of depreciable real estate and in substance
real estate equity investments; plus or minus gains or losses from sales
of operating real estate assets and interests in real estate equity
investments; and adjustments to reflect our share of unconsolidated real
estate joint ventures and partnerships for these items. The Company
calculates EBITDAre in a manner consistent with the NAREIT definition.

As mentioned above, NAREIT FFO is a widely recognized measure of REIT
operating performance which provides our shareholders with a relevant
basis for comparing earnings performance among other REITs based upon
the unique capital structure of each REIT. However as a basis of
comparability that is independent of a company's capital structure,
management believes that since EBITDA is a widely known and understood
measure of performance, EBITDAre will represent an additional
supplemental non-GAAP performance measure that will provide investors
with a relevant basis for comparing REITs. There can be no assurance
that EBITDAre as presented by the Company is comparable to similarly
titled measures of other REITs.

The Company also presents Core EBITDAre as an additional supplemental
measure as it is more reflective of the core operating performance of
our portfolio of properties. Core EBITDAre is defined as NAREIT EBITDAre
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 EBITDAre include,
but are not limited to, gains or losses associated with the
extinguishment of debt or other liabilities, and transactional costs
associated with development activities. EBITDAre and Core EBITDAre
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. EBITDAre and Core EBITDAre do not reflect working capital
changes, cash expenditures for capital improvements or principal
payments on indebtedness.

EBITDAre and Core EBITDAre is calculated as follows (in thousands):

       
Three Months Ended
June 30,
Six Months Ended
June 30,
2018     2017 2018     2017
Earnings Before Interest, Taxes, Depreciation and Amortization
for Real Estate (EBITDAre):
Net income $ 79,871 $ 69,193 $ 228,840 $ 105,589
Interest expense, net (1) 17,017 20,473 31,689 41,555
Provision (benefit) for income taxes 684 747 1,467 (2,612 )
Depreciation and amortization of real estate 50,421 42,157 88,516 84,606
Impairment loss on operating properties and real estate equity
investments
26 15,012
Gain on sale of property (2) (46,953 ) (32,224 ) (155,998 ) (47,987 )
EBITDAre adjustments of unconsolidated real estate joint ventures
and partnerships, net (3)
3,319   2,923   5,807   7,804  
Total EBITDAre 104,359 103,295 200,321 203,967
Adjustments for Core EBITDAre:
Lease terminations (10,023 ) (10,023 )
Other   86     3,154  
Total Core EBITDAre $ 94,336   $ 103,381   $ 190,298   $ 207,121  
(1)   Includes a $.001 million and $3.8 million gain on extinguishment of
debt including related swap activity for the three and six months
ended June 30, 2018, respectively.
(2) Includes a $.2 million gain on sale of non-operating assets for both
the three and six months ended June 30, 2018 and 2017.
(3) Includes a $.1 million and $.3 million loss on extinguishment of
debt for the three and six months ended June 30, 2018, respectively.

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