HOUSTON--(BUSINESS WIRE)--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended March 31, 2017. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.
First Quarter Operating and Financial Highlights
- Net income attributable to common shareholders (“Net Income”) for the quarter was $0.24 per diluted share (hereinafter “per share”) compared to $0.85 per share in the same quarter of 2016;
- Core Funds From Operations Attributable to Common Shareholders ("Core FFO") for the quarter increased 7% to $0.61 per share from $0.57 per share a year ago;
- Same Property Net Operating Income (“SPNOI”) including redevelopments increased 3.7% over the same quarter of the prior year;
- Rental rates on new leases and renewals were up 9.5%; and
- Dispositions for the quarter totaled $47.4 million and transactions closed after quarter-end totaled an additional $52.2 million.
The Company reported Net Income of $30.8 million or $0.24 per share for the first quarter of 2017, as compared to $107.1 million or $0.85 per share for the same period in 2016. This variance was due primarily to higher gains on sales of properties and a gain on the acquisition of partnership interests during 2016.
Funds From Operations attributable to common shareholders in accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”) was $74.4 million or $0.57 per share for the first quarter of 2017 compared to $66.3 million or $0.52 per share for 2016. 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 proceeds from the 2016 issuance of shares also contributed to the increase; however, these increases were offset by the dilution resulting from the issuance of shares on a per share basis. Additionally, reducing NAREIT FFO for 2017 by $.04 per share were lease termination payments and impairments of non-operating property, net of the related tax benefit. In 2016, NAREIT FFO included $.05 per share of non-cash tax expense related to a gain in its taxable REIT subsidiary. These items were added back in arriving at Core FFO. Core FFO for the quarter ended March 31, 2017 was $79.5 million or $0.61 per share compared to $72.3 million or $0.57 per share for the same quarter of last year, a 7% increase.
A reconciliation of Net Income to NAREIT FFO and Core FFO is included herein.
For the period ending March 31, 2017, the Company’s operating highlights were as follows:
|Occupancy (Signed Basis):|
|Occupancy - Total||93.7%|
|Occupancy - Small Shop Spaces||90.5%|
|Occupancy - Same Property Portfolio||94.8%|
|Same Property Net Operating Income, with redevelopments||3.7%|
|Rental Rate Growth - Total:||9.5%|
|Number of New Leases||89|
|New Leases - Annualized Revenue (in millions)||$5.1|
|Number of Renewals||214|
|Renewals - Annualized Revenue (in millions)||$22.7|
During the quarter, the Company closed $47.4 million of dispositions and an additional $52.2 million subsequent to quarter end. These dispositions included three centers in Texas, one each in Florida and Arizona and three land parcels.
The Company purchased a condominium interest in The Whittaker, a six-story mixed-use project co-developed with Lennar in West Seattle. The Company will begin build-out of the 63,000 square foot retail portion of this development immediately with completion expected in early 2018. The Company also purchased a land parcel adjacent to one of its Phoenix shopping centers to allow the addition of a multi-tenant building to the property.
The Company’s new development and redevelopment programs include the following:
- The Gateway Alexandria, a premier, mixed-use development in Alexandria, Virginia, that will include 282 multi-family units, 100,000 square feet of retail anchored by a 62,000 square foot Harris Teeter grocery store, 23,000 square feet of office and a below-grade parking garage. The Company’s net investment upon completion is estimated at $181 million before the planned sale of the majority of the office and all of the residential components. The land was purchased in late 2016 and development is underway.
- Columbia Pike, a premier, mixed-use project in Arlington, Virginia, will include 330 multi-family units and 65,000 square feet of retail anchored by a 50,000 square foot Harris Teeter grocery store. The Company’s pro rata net investment upon completion is estimated at $135 million before the sale of the residential component. The Company expects to purchase the land and commence development next month.
- The Driscoll at River Oaks Shopping Center, a 30-story luxury high-rise with around 10,000 square feet of ground floor retail that the Company will construct at its River Oaks Shopping Center, located adjacent to the premier residential community in Houston. The tower will include over 300 residential units and a parking garage. The total project cost will approximate $150 million. Predevelopment activities are underway with construction expected to begin in 2018.
- An additional 15 redevelopments are underway representing $74.6 million of incremental investment.
The Company affirms its guidance for Core FFO in the range of $2.37 to $2.43 per diluted share and updates NAREIT FFO for the first quarter activity to $2.33 to $2.39 per diluted share. All of the details of guidance are included on page 9 of the Company’s Supplemental.
The Board of Trust Managers declared a quarterly cash dividend of $0.385 per common share payable on June 15, 2017 to shareholders of record on June 8, 2017.
Conference Call Information
The Company also announced that it will host a live webcast of its quarterly conference call on April 25, 2017 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 # 43147559). 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 March 31, 2017, 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 218 properties which are located in 18 states spanning the country from coast to coast. These properties represent approximately 44.4 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.
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)|
Three Months Ended
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME||(Unaudited)|
|Depreciation and Amortization||42,449||37,879|
|Real Estate Taxes, net||17,517||15,857|
|General and Administrative Expense||7,516||6,498|
|Interest Expense, net||(21,082||)||(20,891||)|
|Interest and Other Income||1,754||211|
|Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests||
|Benefit (Provision) for Income Taxes||3,359||(5,899||)|
|Equity in Earnings of Real Estate Joint Ventures and Partnerships, net||5,317||4,093|
|Income from Continuing Operations||20,633||63,510|
|Gain on Sale of Property||15,763||45,157|
Less: Net Income Attributable to Noncontrolling Interests
|Net Income Attributable to Common Shareholders -- Basic||$||30,826||$||107,074|
|Net Income Attributable to Common Shareholders -- Diluted||$||30,826||$||107,573|
|Weingarten Realty Investors|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|Property Held for Sale, net||15,998||479|
|Investment in Real Estate Joint Ventures and Partnerships, net||288,271||289,192|
|Unamortized Lease Costs, net||201,321||208,063|
|Accrued Rent and Accounts Receivable, net||90,883||94,466|
|Cash and Cash Equivalents||3,615||16,257|
|Restricted Deposits and Mortgage Escrows||3,299||25,022|
|LIABILITIES AND EQUITY|
|Accounts Payable and Accrued Expenses||90,728||116,859|
|Commitments and Contingencies||
|Deferred Compensation Share Awards||
|Common Shares of Beneficial Interest||3,895||3,885|
|Additional Paid-In Capital||1,769,133||1,718,101|
|Net Income Less Than Accumulated Dividends||(196,844||)||(177,647||)|
|Accumulated Other Comprehensive Loss||(7,958||)||(9,161||)|
|Total Liabilities and Equity||$||4,352,091||$||4,426,928|
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 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.
NAREIT FFO and Core FFO is calculated as follows (in thousands):
Three Months Ended
|Net income attributable to common shareholders||$||30,826||$||107,074|
|Depreciation and amortization||41,621||37,209|
|Depreciation and amortization of unconsolidated real estate joint ventures and partnerships||3,639||3,686|
|Impairment of operating properties and real estate equity investments||12,005||
|Impairment of operating properties of unconsolidated real estate joint ventures and partnerships||
|(Gain) on acquisition including associated real estate equity investment||
|(Gain) on sale of property and interests in real estate equity investments||(11,812||)||(45,125||)|
|(Benefit) provision for income taxes (1)||(2,392||)||
|NAREIT FFO – basic||73,887||65,787|
|Income attributable to operating partnership units||526||499|
|NAREIT FFO – diluted||74,413||66,286|
|Adjustments to Core FFO:|
|Other impairment loss||3,017||43|
|(Benefit) provision for income taxes||(952||)||5,895|
|Core FFO – diluted||$||79,544||$||72,337|
|FFO weighted average shares outstanding – basic||127,610||123,593|
|Effect of dilutive securities:|
|Share options and awards||938||1,216|
|Operating partnership units||1,462||1,462|
|FFO weighted average shares outstanding – diluted||130,010||126,271|
|NAREIT FFO per common share – basic||$||.58||$||.53|
|NAREIT FFO per common share – diluted||$||.57||$||.52|
|Core FFO per common share – diluted||$||.61||$||.57|
|(1)||Effective January 1, 2017 includes the applicable taxes related to gains and impairments of operating properties.|
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:
Three Months Ended
March 31, 2017
|Beginning of the period||193|
|End of the period||201|
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 to SPNOI is as follows (in thousands):
Three Months Ended
|Net income attributable to common shareholders||$||30,826||$||107,074|
|Net income attributable to noncontrolling interests||5,570||1,593|
|(Benefit) provision for income taxes||(3,359||)||5,899|
|Interest expense, net||21,082||20,891|
|Gain on sale of property||(15,763||)||(45,157||)|
|Equity in earnings of real estate joint ventures and partnership interests||(5,317||)||(4,093||)|
|Gain on sale and acquisition of real estate joint venture and partnership interests||
|Interest and other income||(1,754||)||(211||)|
|Revenue adjustments (1)||(4,109||)||(3,727||)|
|Property management fees||926||959|
|Depreciation and amortization||42,449||37,879|
|General and administrative||7,516||6,498|
|Net Operating Income||96,171||90,474|
|Less: NOI related to consolidated entities not defined as same property and noncontrolling interests||(18,306||)||(14,639||)|
|Add: Pro rata share of unconsolidated entities defined as same property||8,523||8,171|
|Same Property Net Operating Income||$||86,388||$||84,006|
|(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.|