Weingarten Realty Continues Portfolio Transformation and Increases Dividend by 6.6%
HOUSTON--(BUSINESS WIRE)--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the fourth quarter and full year ended December 31, 2013.
Fourth Quarter Operating and Financial Highlights
- Recurring Funds from Operations (“FFO”) was $0.48 per diluted share;
- Continued progress of the portfolio transformation with $85.3 million of high quality acquisitions and $38.6 million of non-core dispositions;
- Same Property Net Operating Income (“NOI”) increased by 3.0% over the fourth quarter of the prior year and 4.2% over the full year 2012;
- Occupancy improved to 94.8% during the fourth quarter, up from 93.6% in the fourth quarter of last year; and
- The Board of Trust Managers increased the common dividend per share 6.6% to $0.325 per quarter or $1.30 on an annualized basis.
The Company reported net income attributable to common shareholders of $47.2 million or $0.38 per diluted share (hereinafter “per share”) for the fourth quarter of 2013, as compared to $42.9 million or $0.35 per share for the same period in 2012. For the full year 2013, the Company reported net income of $184.1 million or $1.50 per share compared to $109.2 million or $0.90 per share for the full year 2012. Included in net income for 2013 were, on a per share basis, gains on the sale of properties and partnership interests of $0.90, a gain on acquisition of $0.16 and the write off of an above market debt intangible of $.07. Offsetting these amounts were redemption costs on preferred shares of $0.15 and a non-cash deferred tax provision of $0.06 related to the gain on acquisition. Included in 2012 were gains on the sale of properties and partnership interests of $0.69 per share, offset by non-cash impairments of $0.28 per share.
Recurring FFO for the fourth quarter of 2013 was $0.48 per share or $59.5 million. For the same quarter last year, Recurring FFO was $0.47 per share or $58.6 million. This increase in Recurring FFO per share over the prior year was primarily due to the Company’s acquisition and new development programs, increased operating income from the existing portfolio and reduced interest expense due to favorable refinancing transactions offset by the cost of the sale of non-core assets of $0.03 per share. Recurring FFO for the full year 2013 was $243.1 million or $1.96 per share compared to $229.4 million or $1.86 per share for 2012. This increase in Recurring FFO was also primarily due to the Company’s acquisitions, new development programs, improvements in the existing portfolio and reduced interest expense offset by the cost of repositioning the portfolio through non-core asset sales of $0.17 per share.
For the current quarter, Reported FFO was $51.9 million or $0.42 per share compared to $57.0 million or $0.46 per share for 2012. Included in Reported FFO for the fourth quarter of 2013 was a non-cash deferred tax provision of $0.06 related to a gain on acquisition. For the full year ended December 31, 2013, Reported FFO was $224.5 million or $1.81 per share compared to $223.8 million or $1.82 per share for 2012.
A reconciliation of net income to both Reported and Recurring FFO is shown on the attached financial statement page and is also shown on page 5 of the supplemental package.
Same Property NOI during the fourth quarter increased by 3.0% versus a year ago. These results are primarily driven by leases that were previously signed but commenced during the quarter. Occupancy increased to 94.8% in the fourth quarter, an increase of 40 basis points over the prior quarter and 120 basis points over the same quarter of 2012. Occupancy of spaces less than 10,000 square feet increased to 89.0% from 88.2% in the prior year.
The Company produced solid leasing results again during the fourth quarter with 331 new leases and renewals totaling 1.1 million square feet and representing $20.3 million of annual revenue. The 331 transactions were comprised of 119 new leases and 212 renewals, representing annual revenues of $8.4 million and $11.9 million, respectively. The average rental rate increase on new leases and renewals signed during the quarter was 6.8% with rental rates on just new leases up a solid 13.1%.
“With two consecutive years of 4.2% increases in Same Property NOI, rental rates on new leases up 12.7% for the year and occupancy nearing 95%, it is clear that the transformation of our portfolio is paying dividends. These accomplishments are a testament to the strength of our quality portfolio and the exceptional efforts of our associates,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.
Portfolio Transformation Through Capital Recycling
As previously announced, the Company sold $38.6 million of assets during the fourth quarter. This consisted of two shopping centers, the Company’s share of a center held in a partnership and a land parcel. For the full year 2013, the Company sold 33 assets, including 24 non-core shopping centers, three industrial buildings and six land parcels, comprising 3.9 million square feet for $278.3 million. Subsequent to quarter-end the Company sold two additional shopping centers for $55.6 million and received notice from the holder of the ground leases at The Village Arcade in Houston, Texas of their intent to exercise their purchase option under the ground lease. This transaction is expected to close in the second half of 2014. Since 2008, the Company has completed $2.3 billion in dispositions.
During the fourth quarter the Company acquired Mueller Regional Retail Center in Austin, Texas. Mueller is a 350,000 square foot power center anchored by Home Depot, Marshalls, Bed Bath & Beyond and PetSmart. Additionally, the Company added to its investment at Queen Ann Marketplace in Seattle, Washington by purchasing the 15,034 square foot condominium interest for the Bartell Drugs store. This property is owned in a joint venture with Bouwinvest, where the Company owns 51%. The Company’s share of acquisition activity for the fourth quarter and full year totaled $85.3 million and $174.6 million, respectively.
In addition to the ongoing acquisition and disposition activity described above, the Company completed two transactions with joint venture partners in the fourth quarter and an additional joint venture transaction subsequent to year-end. These transactions will have an immaterial impact on future earnings, but will simplify our financial structure, creating better balance sheet clarity.
First, the Company reported that it closed on a multi-property transaction with affiliates of Miller Real Estate Investments in Denver, Colorado, essentially completing the dissolution of this relationship. The Company reported that it received the remaining 50% interest in River Point at Sheridan (two consolidated joint ventures), cash, the repayment of a note receivable and a small building in Salt Lake City, Utah in exchange for the Company’s interest in two unconsolidated venture properties, Alpine Valley Center and 300 West, both in Salt Lake City. River Point is a 519,000 square foot power center anchored by Target and Costco who own their own facilities. The center is also anchored by Regal Cinema, Michaels and Tuesday Morning. This project includes 16.4 acres available for future development.
In the second transaction, the Company purchased control of both phases of a grocery anchored shopping center in Apple Valley, California (Jess Ranch Marketplace and Jess Ranch Phase III). The center totals over 502,000 square feet and is anchored by Winco Foods, who owns their own facility, 24 Hour Fitness, Cinemark Theaters, Bed Bath & Beyond, Ulta Salon, PetSmart and others.
In January of 2014, the Company completed the dissolution of its consolidated joint venture with the Hines Retail REIT (“Hines”), where the Company owned a 30% interest in 13 properties. The transaction was completed through the distribution of five properties to the Company and eight properties to Hines. The Company will continue to lease and manage the properties owned by Hines.
These three joint venture transactions will not materially change the Company’s 2014 Funds from Operations, but clarifies and simplifies its balance sheet.
During the year, the Company also redeployed capital into existing new development projects, investing $13.2 million for the year.
Additional disclosure on specific properties impacted by the transactions noted above and ground lease commitments are detailed on page 13 and 40 of the supplemental package, respectively.
“We are extremely pleased with the continued transformation of the portfolio that occurred during the fourth quarter and its contribution to our outstanding operating metrics. While our growth in Recurring Funds from Operations was a reasonable 5.4% year over year, it was clearly muted by the $0.17 per share decrease due to our disposition program,” said Drew Alexander, President and Chief Executive Officer.
In October, the Company closed on the sale of $250 million of 4.45% notes due in January 2024. The notes were priced at a slight discount yielding 4.50%. The proceeds from the transaction were used to pay down all amounts outstanding under the Company’s $500 million revolving credit facility with the remainder invested in short-term instruments. This transaction effectively pre-funded the majority of the Company’s $285 million of January 2014 debt maturities, which were repaid subsequent to year-end.
“With the repayment of the $285 million in January, we now have less than $100 million of debt maturing in the remainder of 2014. We also expect to exercise our option to call $100 million of 8.1% bonds that would otherwise mature in 2019. With these transactions, our maturity schedule is in excellent shape,” said Steve Richter, Executive Vice President and Chief Financial Officer.
On February 13, 2014, the Board of Trust Managers declared an increase in the common dividend to $0.325 per share for the first quarter of 2014. This represents a 6.6% increase resulting in an annualized dividend of $1.30 per share. The dividend is payable in cash on March 14, 2014 to shareholders of record on March 6, 2014.
The Board of Trust Managers also declared 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 March 14, 2014 to shareholders of record on March 6, 2014.
Recurring FFO Guidance
The Company’s full year Recurring FFO guidance remains in the range of $1.95 to $2.01 per share. Our specific guidance on dispositions did not include the two properties that closed subsequent to year-end or the pending Village Arcade ground lease transaction. Accordingly, we are raising our disposition guidance from a range of $200 million to $300 million to a range of $300 million to $400 million. All other guidance remains unchanged. Please refer to the full list of guidance information found on page 9 of the supplemental package.
Conference Call Information
The Company also announced that it will host a live webcast of its quarterly conference call on February 14, 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 # 35533138). A replay and will be available through the Company’s web site 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 December 31, 2013, 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 270 properties which are located in 21 states spanning the country from coast to coast. These properties represent approximately 49.9 million square feet of which our interests in these properties aggregated approximately 30.4 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.
|Weingarten Realty Investors|
|(in thousands, except per share amounts)|
|Three Months Ended||Twelve Months Ended|
|December 31,||December 31,|
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME||(Unaudited)||(Unaudited)|
|Depreciation and Amortization||40,411||34,968||149,493||129,500|
|Real Estate Taxes, net||15,049||13,094||58,502||52,699|
|General and Administrative Expense||6,559||7,444||25,371||28,538|
|Interest Expense, net||(28,122||)||(24,974||)||(97,444||)||(106,800||)|
|Interest and Other Income, net||1,898||1,262||7,685||6,047|
|Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests||22,071||8,641||33,670||14,203|
|Equity in Earnings (Losses) of Real Estate Joint Ventures and Partnerships, net||20,645||5,157||35,112||(1,558||)|
|Gain on Acquisition||-||-||-||1,869|
|(Provision) Benefit for Income Taxes||(7,302||)||412||(7,051||)||70|
|Income from Continuing Operations||48,884||31,410||135,372||60,511|
|Operating Income from Discontinued Operations||1,719||4,525||9,819||22,287|
|Gain on Sale of Property from Discontinued Operations||2,977||18,865||119,203||68,619|
|Income from Discontinued Operations||4,696||23,390||129,022||90,906|
|Gain on Sale of Property||192||175||762||1,004|
Less: Net Income Attributable to Noncontrolling Interests
|Net Income Adjusted for Noncontrolling Interests||49,934||53,751||220,262||146,640|
Less: Preferred Share Dividends
Less: Redemption Costs of Preferred Shares
|Net Income Attributable to Common Shareholders -- Basic||$||47,224||$||42,928||$||184,145||$||109,210|
|Net Income Attributable to Common Shareholders -- Diluted||$||47,668||$||42,928||$||184,145||$||109,210|
|FUNDS FROM OPERATIONS|
|Net Income Attributable to Common Shareholders||$||47,224||$||42,928||$||184,145||$||109,210|
|Depreciation and Amortization||39,805||37,232||152,075||143,783|
|Depreciation and Amortization of Unconsolidated Real Estate|
|Joint Ventures and Partnerships||4,180||4,694||17,550||20,955|
|Impairment of Operating Properties and Real Estate Equity Investments||-||26||457||15,033|
|Impairment of Operating Properties of Unconsolidated Real Estate|
|Joint Ventures and Partnerships||-||-||366||19,946|
|Gain on Acquisition Including Associated Real Estate Equity Investment||(20,234||)||-||(20,234||)||(1,869||)|
|Gain on Sale of Property and Interests in Real Estate Equity Investments||(3,797||)||(27,636||)||(95,675||)||(83,683||)|
|Gain on Sale of Property of Unconsolidated Real Estate|
|Joint Ventures and Partnerships||(15,684||)||(689||)||(15,951||)||(1,247||)|
|Funds from Operations -- Basic||51,493||56,555||222,732||222,128|
|Adjustments for Recurring FFO:|
|Income Attributable to Operating Partnership Units||444||427||1,780||1,721|
|Other Impairment Loss, net of tax||-||-||2,387||403|
|Redemption Costs of Preferred Shares||-||2,500||18,131||2,500|
|Write-off of Debt Costs, net of tax||-||(1,650||)||(9,263||)||(1,650||)|
|Other, net of tax||7,423||702||6,750||2,825|
|Recurring Funds from Operations -- Diluted||$||59,488||$||58,555||$||243,073||$||229,421|
|Weighted Average Shares Outstanding -- Basic||121,370||120,871||121,269||120,696|
|Weighted Average Shares Outstanding -- Diluted||124,069||121,906||122,460||121,705|
|Weighted Average Shares Outstanding -- Diluted (FFO)||124,069||123,471||124,014||123,283|
|PER SHARE DATA|
|Earnings Per Common Share -- Basic||$||0.39||$||0.36||$||1.52||$||0.90|
|Earnings Per Common Share -- Diluted||$||0.38||$||0.35||$||1.50||$||0.90|
|FFO -- Per Diluted Share||$||0.42||$||0.46||$||1.81||$||1.82|
|Recurring FFO -- Per Diluted Share||$||0.48||$||0.47||$||1.96||$||1.86|
|Weingarten Realty Investors|
|December 31,||December 31,|
|CONDENSED CONSOLIDATED BALANCE SHEETS||(Unaudited)||(Audited)|
|Property Held for Sale, net||122,614||-|
|Investment in Real Estate Joint Ventures and Partnerships, net||266,158||289,049|
|Notes Receivable from Real Estate Joint Ventures and Partnerships||13,330||89,776|
|Unamortized Debt and Lease Costs, net||164,828||135,783|
|Accrued Rent and Accounts Receivable, net||82,351||79,540|
|Cash and Cash Equivalents||91,576||19,604|
|Restricted Deposits and Mortgage Escrows||4,502||44,096|
|LIABILITIES AND EQUITY|
|Accounts Payable and Accrued Expenses||108,535||119,699|
|Commitments and Contingencies|
|Preferred Shares of Beneficial Interest||2||7|
|Common Shares of Beneficial Interest||3,683||3,663|
|Additional Paid-In Capital||1,679,229||1,934,183|
|Net Income Less Than Accumulated Dividends||(300,537||)||(335,980||)|
|Accumulated Other Comprehensive Loss||(4,202||)||(24,743||)|
|Total Liabilities and Equity||$||4,223,929||$||4,184,784|