HOUSTON--(BUSINESS WIRE)--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the first quarter ended March 31, 2016.
Operating and Financial Highlights
- Recurring Funds from Operations (“FFO”) was $0.57 per diluted share, up 9.6% from the prior year;
- Same Property Net Operating Income (“SPNOI”) increased by 3.1% over the first quarter of the prior year;
- Rental rates on new leases and renewals increased 13.1%;
- Sold $40 million of common shares under the Company’s ATM program;
- Extended and renewed its $500 million revolving credit facility;
- Acquisitions totaled $44 million; and,
- Dispositions totaled $112 million.
The Company reported net income attributable to common shareholders of $107.1 million or $0.85 per diluted share (hereinafter “per share”) for the first quarter of 2016, as compared to $44.9 million or $0.36 per share for the same period in 2015. Included in net income for 2016 were gains on the sale of properties and partnership interests of $0.65 per share compared to $0.19 per share in 2015.
For the current quarter, Reported FFO was $66.3 million or $0.52 per share compared to $60.3 million or $0.48 per share for 2015. Included in Reported FFO for 2016 was $0.05 per share of non-cash deferred tax expense related to a book gain, in its taxable REIT subsidiary, on the exchange of our partner’s interest in a joint venture for the distribution of property to the partner. 2015 included debt extinguishment costs of $0.05 per share offset by a gain on the settlement of a lawsuit of $0.01 per share.
Recurring FFO for the first quarter of 2016 was $0.57 per share or $72.3 million. For the same quarter last year, Recurring FFO was $0.52 per share or $65.4 million. This increase in Recurring FFO per share of 9.6% over the prior year was primarily due to the Company’s acquisition, new development and redevelopment programs, increased operating income from the existing portfolio and reduced interest expense due to favorable refinancing transactions. These increases were partially offset by the impact of the Company’s disposition program, which reduced Recurring FFO by $0.02 per share for the quarter compared to last year.
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.
SPNOI including redevelopments for the first quarter increased by 3.1% versus a year ago. These results are primarily driven by rental rate increases and reduced tenant fallouts. Base minimum rent, the most important component of SPNOI, increased 3.7%. SPNOI was negatively affected by the impact of the bankruptcy filing by The Sports Authority (“TSA”). As one of the alternatives presented by TSA is liquidation, the Company reserved all outstanding accounts receivable. These receivables totaled $810,000 which included $668,000 related to SPNOI locations.
A strategic initiative of the Company is to aggressively pursue higher rents and to upgrade tenant quality whenever feasible. This can create temporary downtime as new tenants are brought on-line; however, the long-term results are very positive. Despite these short-term headwinds, occupancy increased to 95.2% in the first quarter, an increase of 10 basis points over year-end 2015.
The Company produced solid leasing results again during the first quarter with 304 new leases and renewals totaling 1.5 million square feet and representing $25.8 million of annual revenue. These 304 transactions were comprised of 85 new leases and 219 renewals, representing annual revenues of $5.7 million and $20.1 million, respectively. The average rental rate increase on new leases and renewals signed during the quarter was 13.1% with rental rates on new leases up 34.7%.
The Company’s Houston portfolio was not significantly impacted by the flooding that occurred this week. Only one small property experienced minor flooding and no store was closed more than two days.
“Considering the negative impact of The Sports Authority bankruptcy as well as the ongoing initiative to upgrade our tenancy and increase our rental rates, we are very pleased with our Same Property NOI increase of 3.1%. We are equally as proud of our rental growth where we were able to increase rents by an average of 13.1%. With respect to the energy industry concerns, our outstanding Houston portfolio has contributed significantly to our results with Same Property occupancy increasing to 96.9% and rental rate increases of 36.8%,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.
The Company acquired the retail component of 2200 Westlake, located at 2200 Westlake Avenue in Seattle, Washington. The average household income and population in the 3-mile trade area is $99,000 and 220,000, respectively. The property was purchased in a joint venture between the Company and Bouwinvest in which WRI will hold a 65.7% interest. Weingarten’s investment is $43.5 million.
2200 Westlake is a mixed-use, vertically-integrated property anchored by Whole Foods Market. The complex also contains an income-producing parking garage, an 11-story 153-room five-star hotel, and residential condos. The joint venture purchased 73,800 square feet of retail including the Whole Foods Market and 412 parking stalls. The seller maintains ownership of the hotel.
The property is located in the high-growth neighborhood of South Lake Union. The area is home to Amazon and its existing 4 million square feet of office space, and one block away from the multi-million square foot headquarters campus now under construction. Over 4,000 new residential units are reportedly planned or proposed in the South Lake Union area served by 2200 Westlake.
The Company also continued to selectively dispose of assets that no longer met the criteria for long-term ownership. WRI was successful in selling four shopping centers and three land parcels for $111.9 million. The Company also, through an exchange for our partner’s interest in a joint venture, took 100% ownership of two shopping centers and a land parcel and distributed one shopping center to our partner.
The Company continues to make progress on its three active new development properties and its various redevelopment projects, spending a total of $14.5 million during the quarter. On the new development and redevelopment properties, the total spent to-date is $86.8 million and the estimated final investment is $159.1 million. Estimated final returns for the new developments and redevelopments are approximately 8% and 11%, respectively. At the beginning of the quarter, the Company stabilized its Hilltop Village Center new development in Alexandria, VA, moving it to the operating portfolio. This Wegmans anchored property is 100% leased with an investment of $65 million and an 8% yield.
“When you consider the impact of adding to our operating portfolio our recently stabilized new development, Hilltop Village, and our exciting new acquisition, 2200 Westlake, versus our disposition of $112 million of lower tier properties, we have successfully created significant value for our shareholders. We are dedicated to further enhancing the quality of our already outstanding portfolio through this kind of capital recycling going forward,” said Drew Alexander, President and Chief Executive Officer.
The Company sold $18.1 million of common shares during the quarter with another $21.9 million in the first few days of April under its “At-The-Market” or ATM program, further strengthening its balance sheet. The $40 million in common shares was sold at an average price of $37.46. The Company’s debt ratios remain very strong at quarter-end with Net Debt to EBITDA at 5.93 times and Debt to Total Market Cap at 31.6%, both of which will improve further with the full impact of the share issuance subsequent to quarter-end. Additionally, during the quarter the Company amended and extended its $500 million unsecured revolving credit facility. The agreement is for four years with two six-month extensions at the Company’s option, and there is an accordion feature where a request can be made to increase the facility to $850 million. The LIBOR borrowing margin was reduced by 15 basis points to 90 basis points and certain covenants were improved.
“The capital transactions this quarter continued our strategy of strengthening our balance sheet and maintaining adequate liquidity. The sale of common shares under the ATM program, the extension and renewal of our revolver along with our very favorable debt maturity schedule positions us very well to capitalize on future growth opportunities,” said Steve Richter, Executive Vice President and Chief Financial Officer.
The Board of Trust Managers declared a quarterly cash dividend of $0.365 per common share payable on June 15, 2016 to shareholders of record on June 8, 2016.
The Company reaffirms its guidance for Recurring FFO of $2.27 to $2.31 per diluted share while revising its guidance for Reported FFO from a range of $2.26 to $2.31 per share to a range of $2.21 to $2.26 per share due to the non-recurring deferred tax expense recognized this quarter. 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 April 22, 2016 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 # 40193469). 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 March 31, 2016, 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 227 properties which are located in 18 states spanning the country from coast to coast. These properties represent approximately 44.5 million square feet of which our interests in these properties aggregated approximately 27.6 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|
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME||(Unaudited)|
|Depreciation and Amortization||37,879||36,151|
|Real Estate Taxes, net||15,857||14,627|
|General and Administrative Expense||6,498||7,372|
|Interest Expense, net||(20,891||)||(26,458||)|
|Interest and Other Income, net||211||2,722|
|Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests||37,392||861|
|Equity in Earnings of Real Estate Joint Ventures and Partnerships, net||4,093||5,372|
|Provision for Income Taxes||(5,899||)||(661||)|
|Income from Continuing Operations||63,510||26,700|
|Gain on Sale of Property||45,157||22,522|
|Less:||Net Income Attributable to Noncontrolling Interests||(1,593||)||(1,575||)|
|Net Income Adjusted for Noncontrolling Interests||107,074||47,647|
|Less:||Preferred Share Dividends||-||(2,710||)|
|Net Income Attributable to Common Shareholders -- Basic||$||107,074||$||44,937|
|Net Income Attributable to Common Shareholders -- Diluted||$||107,573||$||45,418|
|FUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS (FFO)|
|Net Income Attributable to Common Shareholders||$||107,074||$||44,937|
|Depreciation and Amortization||37,209||35,263|
Depreciation and Amortization of Unconsolidated Real Estate Joint Ventures and Partnerships
Impairment of Operating Properties of Unconsolidated Real Estate Joint Ventures and Partnerships
|Gain on Acquisition Including Associated Real Estate Equity Investment||(37,383||)||-|
|Gain on Sale of Property and Interests in Real Estate Equity Investments||(45,125||)||(23,333||)|
Gain on Dispositions of Unconsolidated Real Estate Joint Ventures and Partnerships
|FFO -- Basic||65,787||59,815|
|Adjustments for Recurring FFO:|
|Income Attributable to Operating Partnership Units||499||481|
|Write-off of Debt Costs, net||-||6,100|
|Other Impairment Loss, net||43||-|
|Deferred Tax Expense, net||5,895||-|
|Other, net of tax||(242||)||(1,161||)|
|Recurring FFO -- Diluted||$||72,337||$||65,439|
|Weighted Average Shares Outstanding -- Basic||123,593||122,126|
|Weighted Average Shares Outstanding -- Diluted||126,271||125,043|
|Weighted Average Shares Outstanding -- Diluted (FFO)||126,271||125,043|
|PER SHARE DATA|
|Earnings Per Common Share -- Basic||$||0.87||$||0.37|
|Earnings Per Common Share -- Diluted||$||0.85||$||0.36|
|FFO Per Common Share -- Diluted||$||0.52||$||0.48|
|Recurring FFO Per Common Share -- Diluted||$||0.57||$||0.52|
|Weingarten Realty Investors|
|March 31,||December 31,|
|CONDENSED CONSOLIDATED BALANCE SHEETS||(Unaudited)||(Audited)|
|Property Held for Sale, net||-||34,363|
|Investment in Real Estate Joint Ventures and Partnerships, net||295,994||267,041|
|Unamortized Lease Costs, net||146,733||137,609|
|Accrued Rent and Accounts Receivable, net||74,094||84,782|
|Cash and Cash Equivalents||27,200||22,168|
|Restricted Deposits and Mortgage Escrows||107,275||3,074|
|LIABILITIES AND EQUITY|
|Accounts Payable and Accrued Expenses||88,738||112,205|
|Commitments and Contingencies|
|Common Shares of Beneficial Interest||3,785||3,744|
|Additional Paid-In Capital||1,636,296||1,616,242|
|Net Income Less Than Accumulated Dividends||(161,184||)||(222,880||)|
|Accumulated Other Comprehensive Loss||(11,309||)||(7,644||)|
|Total Liabilities and Equity||$||4,033,840||$||3,901,945|