Weingarten Realty Reports Strong Fourth Quarter Results

HOUSTON--()--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended December 31, 2017. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.

Fourth Quarter and Full Year Operating and Financial Highlights

  • Net income attributable to common shareholders (“Net Income”) was $1.30 per diluted share (hereinafter “per share”) for the quarter and $2.60 per share for the year compared to $0.34 and $1.87 per share for each respective period in 2016;
  • Core Funds From Operations Attributable to Common Shareholders ("Core FFO") increased 4.7% to $2.45 per share for the year ended 2017 compared to 2016;
  • Common dividend per share increased 2.6% to $0.395 per quarter or $1.58 per share on an annualized basis;
  • Signed occupancy increased to 94.8% from 94.3% a year ago;
  • Same Property Net Operating Income (“SPNOI”) including redevelopments increased by 2.4% over the fourth quarter of 2016 and by 2.6% over the full year 2016;
  • Rental rates on new leases and renewals completed during the year were up 23.1% and 9.0%, respectively;
  • Dispositions totaled $444 million in 2017 and $221 million to-date in 2018; and,
  • Balance sheet leverage was reduced with Net Debt to Adjusted EBITDA of 5.3 times.

Financial Results

The Company reported Net Income of $168.0 million or $1.30 per share for the fourth quarter of 2017, as compared to $44.1 million or $0.34 per share for the same period in 2016. For the year, Net Income was $335.3 million or $2.60 per share for 2017 compared to $238.9 million or $1.87 per share for 2016.

Funds From Operations attributable to common shareholders in accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”) was $77.4 million or $0.60 per share for the fourth quarter of 2017 compared to $78.9 million or $0.61 per share for 2016. For the year, NAREIT FFO was $311.6 million or $2.40 per share for 2017 compared to $293.7 million or $2.28 per share for 2016.

Included in total expenses for the fourth quarter are $1.0 million related to Hurricanes Harvey and Irma and $1.4 million of severance charges related to an overall reduction in the workforce. Offsetting these expenses is a $0.9 million recovery of predevelopment costs. These items are included in NAREIT FFO, but are excluded in arriving at Core FFO.

Core FFO for the quarter ended December 31, 2017 was $0.61 per share or $78.5 million, as compared to $0.61 per share or $79.4 million for the same quarter of last year. Higher operating income driven by increased rental rates and reduced interest expense from favorable debt refinancings increased Core FFO over the prior year; however, this was completely offset by the $444 million of property dispositions. For the full year, Core FFO was $318.4 million or $2.45 per share for 2017 compared to $300.9 million or $2.34 per share for 2016, an increase of 4.7% on a per share basis.

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

Operating Results

For the period ending December 31, 2017, the Company’s operating highlights were as follows:

             
     

Q4 2017

   

YTD 2017

Occupancy (Signed Basis):            
Occupancy - Total     94.8%      
Occupancy - Small Shop Spaces     90.5%      
Occupancy - Same Property Portfolio     95.4%      
             
Same Property Net Operating Income, with redevelopments     2.4%     2.6%
             
Rental Rate Growth - Total:     8.6%     11.6%
New Leases     17.2%     23.1%
Renewals     6.1%     9.0%
             
Leasing Transactions:            
Number of New Leases     88     338
New Leases - Annualized Revenue (in millions)     $5.2     $24.8
Number of Renewals     159     705
Renewals - Annualized Revenue (in millions)     $10.9     $57.6
       

A reconciliation of Net Income to SPNOI is included herein.

“Operations remain strong. Leasing for the quarter remained extremely productive with strong rental rate increases on new leases and renewals. Our signed occupancy increased 50 basis points from the fourth quarter of 2016 in spite of several leases that were terminated due to bankrupt tenants. The majority of the increase resulted from the leasing of all but one of our former Sports Authority boxes. Commencement of these leases will benefit Same Property NOI,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Portfolio Activity

During the quarter, the Company sold six shopping centers and other real estate for $230.2 million. For all of 2017, WRI sold $444 million of assets with the disposition of 19 shopping centers and other real estate.

Thus far in 2018, the Company has closed an additional $221 million in dispositions with the sale of five shopping centers and other real estate including Moore Plaza in Corpus Christi, Texas, Best in the West, in Las Vegas, Nevada, Millpond Center and Tates Creek Centre in Lexington, Kentucky and Horne Street Market in Fort Worth, Texas.

As for acquisitions in 2017, the Company purchased two parcels which are adjacent to existing shopping centers for $1.9 million. No acquisitions have been closed to-date in 2018.

The Company invested $124 million in new developments and redevelopments in 2017 and expects to spend a similar amount in 2018 including the groundbreaking for its 30-story residential tower at its River Oaks Shopping Center.

“While the recent disposition volume will reduce Funds From Operations in the short-term, Weingarten remains focused on maximizing long-term value to our shareholders. Our dispositions improve the overall quality of our portfolio by reducing exposure to tertiary markets and power centers, and provide capital for future growth including our redevelopment and new development programs. WRI continues to underwrite quality acquisitions; the competitive market resulted in only modest land acquisitions in 2017, unlike 2016 when we acquired over $500 million of quality shopping centers,” said Drew Alexander, President and Chief Executive Officer.

Balance Sheet

Proceeds for the Company’s 2017 disposition program were used to eliminate the balance under its revolving credit facility which continued to improve the credit metrics. At quarter-end, Net Debt to Adjusted EBITDA was a strong 5.3 times and Debt to Total Market Capitalization was 32.8%. The Company continued its disposition program subsequent to year-end and expects to use those proceeds to fund its New Development program, and possibly further reduce its debt or repurchase its common shares. The Board of Trust Managers previously approved a $200 million share repurchase plan that is fully available to the Company. The amount of share repurchases will depend upon the Company’s share price as it relates to the Company’s net asset value.

“As we remain dedicated to maintaining low leverage in our capital structure, the amount of capital we allocate to these various opportunities, including repurchasing our common shares, will be influenced by the level of dispositions proceeds in 2018,” said Steve Richter, Executive Vice President and Chief Financial Officer.

2018 Guidance

The Company’s guidance for 2018 is as follows:

       
     

2018 Guidance

Net Income (per share)     $2.24 - $2.34
NAREIT FFO (per share)     $2.27 - $2.33
Core FFO (per share)     $2.27 - $2.33
Acquisitions     $50 - $150 million
Re / New Development     $125 - $175 million
Dispositions     $250 - $450 million
Same Property NOI with redevelopments     2.50% - 3.50%
Same Property NOI w/o redevelopments     2.00% - 3.00%
   

A rollforward detailing the components of the change in 2017 Core FFO per share to 2018 Core FFO per share guidance is included on page 9 of the Company’s Supplemental.

Dividends

The Board of Trust Managers declared a quarterly cash dividend of $0.395 per common share payable on March 15, 2018 to shareholders of record on March 8, 2018. Annualized, the dividend will be $1.58 per common share, an increase of 2.6% over the recurring quarterly dividends in 2017. The Company also paid a special dividend of $0.75 per common share in December 2017.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on February 22, 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 # 45774516). 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 December 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 204 properties which are located in 17 states spanning the country from coast to coast. These properties represent approximately 41.3 million square feet of which our interests in these properties aggregated approximately 26.4 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
December 31,
Twelve Months Ended
December 31,
2017     2016 2017     2016
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited)
Rentals, net $ 135,798 $ 139,507 $ 560,643 $ 537,265
Other Income 3,569   3,356   12,520   12,290  
Total Revenues 139,367   142,863   573,163   549,555  
Depreciation and Amortization 40,986 43,374 167,101 162,535
Operating Expense 25,366 25,896 109,310 98,855
Real Estate Taxes, net 17,853 16,213 75,636 66,358
Impairment Loss 245 55 15,257 98
General and Administrative Expense 7,868   7,193   28,435   27,266  
Total Expenses 92,318   92,731   395,739   355,112  
Operating Income 47,049 50,132 177,424 194,443
Interest Expense, net (18,921 ) (21,711 ) (80,326 ) (83,003 )
Interest and Other Income 3,390 729 7,915 2,569
Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests 1,915 48,322
(Provision) Benefit for Income Taxes (2,018 ) 164 17 (6,856 )

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

9,108   5,531   27,074   20,642  
Income from Continuing Operations 38,608 36,760 132,104 176,117
Gain on Sale of Property 132,045   32,416   218,611   100,714  
Net Income 170,653 69,176 350,715 276,831

Less: Net Income Attributable to Noncontrolling Interests

(2,686 ) (25,034 ) (15,441 ) (37,898 )
Net Income Attributable to Common Shareholders -- Basic $ 167,967   $ 44,142   $ 335,274   $ 238,933  
Net Income Attributable to Common Shareholders -- Diluted $ 169,484   $ 44,142   $ 338,358   $ 240,929  
Earnings Per Common Share -- Basic $ 1.31   $ .35   $ 2.62   $ 1.90  
Earnings Per Common Share -- Diluted $ 1.30   $ .34   $ 2.60   $ 1.87  
 
 
Weingarten Realty Investors
(in thousands)
Financial Statements
         
December 31,
2017
December 31,
2016
(Unaudited) (Audited)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
Property $ 4,498,859 $ 4,789,145
Accumulated Depreciation (1,166,126 ) (1,184,546 )
Property Held for Sale, net 54,792 479
Investment in Real Estate Joint Ventures and Partnerships, net 317,763 289,192
Unamortized Lease Costs, net 181,047 208,063
Accrued Rent and Accounts Receivable, net 104,357 94,466
Cash and Cash Equivalents 13,219 16,257
Restricted Deposits and Mortgage Escrows 8,115 25,022
Other, net 184,613   188,850  
Total Assets $ 4,196,639   $ 4,426,928  
 
LIABILITIES AND EQUITY
Debt, net $ 2,081,152 $ 2,356,528
Accounts Payable and Accrued Expenses 116,463 116,859
Other, net 189,182   191,887  
Total Liabilities 2,386,797   2,665,274  
 
Commitments and Contingencies
Deferred Compensation Share Awards 44,758
 
EQUITY
Common Shares of Beneficial Interest 3,897 3,885
Additional Paid-In Capital 1,772,066 1,718,101
Net Income Less Than Accumulated Dividends (137,065 ) (177,647 )
Accumulated Other Comprehensive Loss (6,170 ) (9,161 )
Shareholders' Equity 1,632,728   1,535,178  
Noncontrolling Interests 177,114   181,718  
Total Liabilities and Equity $ 4,196,639   $ 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
December 31,
Twelve Months Ended
December 31,
2017     2016 2017     2016
(Unaudited) (Unaudited)
Net income attributable to common shareholders $ 167,967     $ 44,142 $ 335,274     $ 238,933
Depreciation and amortization of real estate 40,746 42,847 166,125 162,989
Depreciation and amortization of real estate of unconsolidated real estate joint ventures and partnerships 3,380 3,774 14,020 15,118
Impairment of operating properties and real estate equity investments 240 12,247
Impairment of operating properties of unconsolidated real estate joint ventures and partnerships 326
(Gain) on acquisition including associated real estate equity investment (46,398 )
(Gain) on sale of property and interests in real estate equity investments (131,393 ) (34,024 ) (217,659 ) (101,124 )
(Gain) on dispositions of unconsolidated real estate joint ventures and partnerships (4,209 ) (538 ) (6,187 ) (3,693 )
Provision (benefit) for income taxes (1) 1,232 (711 )
Noncontrolling interests (2) (539 ) 22,245 5,424 25,521
Other (8 ) (8 ) (16 ) (16 )
NAREIT FFO – basic 77,416 78,438 308,517 291,656
Income attributable to operating partnership units   499   3,084   1,996  
NAREIT FFO – diluted 77,416   78,937   311,601   293,652  
Adjustments to Core FFO:
Other impairment loss 2 55 3,031 98
Provision (benefit) for income taxes 223 (729 ) 7,024
Acquisition costs 622 1,782
(Gain) on extinguishment of debt (1,679 )
Severance costs 1,378 1,378
Storm damage costs 1,018 1,822
Recovery of Pre-development costs (949 ) (949 )
Other (612 ) (254 ) 2,292   17  
Core FFO – diluted $ 78,476   $ 79,360   $ 318,446   $ 300,894  
 
FFO weighted average shares outstanding – basic 127,816 127,476 127,755 126,048
Effect of dilutive securities:
Share options and awards 848 933 870 1,059
Operating partnership units   1,462   1,446   1,462  
FFO weighted average shares outstanding – diluted 128,664   129,871   130,071   128,569  
 
NAREIT FFO per common share – basic $ .61   $ .62   $ 2.41   $ 2.31  
 
NAREIT FFO per common share – diluted $ .60   $ .61   $ 2.40   $ 2.28  
 
Core FFO per common share – diluted $ .61   $ .61   $ 2.45   $ 2.34  
______________
(1)   Effective January 1, 2017 includes the applicable taxes related to gains and impairments of operating properties.
(2) Related to gains, impairments and depreciation on operating properties, 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 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
December 31, 2017
Twelve Months Ended
December 31, 2017
Beginning of the period 190 193
Properties added:
Acquisitions 4
New Developments 1
Redevelopments 6
Properties removed:
Dispositions (7 ) (20 )
Other   (1 )
End of the period 183   183  
 

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
December 31,
Twelve Months Ended
December 31,
2017     2016 2017   2016
(Unaudited) (Unaudited)
Net income attributable to common shareholders $ 167,967     $ 44,142 $ 335,274   $ 238,933
Add:
Net income attributable to noncontrolling interests 2,686 25,034 15,441 37,898
Provision (benefit) for income taxes 2,018 (164 ) (17 ) 6,856
Interest expense, net 18,921 21,711 80,326 83,003
Less:
Gain on sale of property (132,045 ) (32,416 ) (218,611 ) (100,714 )
Equity in earnings of real estate joint ventures and partnership interests (9,108 ) (5,531 ) (27,074 ) (20,642 )
Gain on sale and acquisition of real estate joint venture and partnership interests (1,915 ) (48,322 )
Interest and other income (3,390 ) (729 ) (7,915 ) (2,569 )
Operating Income 47,049 50,132 177,424 194,443
Less:
Revenue adjustments (1) (4,308 ) (4,959 ) (16,877 ) (16,364 )
Add:
Property management fees 649 681 2,902 2,854
Depreciation and amortization 40,986 43,374 167,101 162,535
Impairment loss 245 55 15,257 98
General and administrative 7,868 7,193 28,435 27,266
Acquisition costs 614 1,350
Other (2) (798 ) (233 ) 3,586   129  
Net Operating Income 91,691 96,857 377,828 372,311
Less: NOI related to consolidated entities not defined as same property and noncontrolling interests (9,684 ) (17,389 ) (55,160 ) (58,434 )
Add: Pro rata share of unconsolidated entities defined as same property 8,094   8,500   32,903   32,715  
Same Property Net Operating Income 90,101 87,968 355,571 346,592
Less: Redevelopment Net Operating Income (8,762 ) (8,502 ) (34,914 ) (32,932 )
Same Property Net Operating Income excluding Redevelopments $ 81,339       $ 79,466       $ 320,657     $ 313,660  
___________________
(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.

Contacts

Weingarten Realty
Michelle Wiggs, 713-866-6050

Release Summary

Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended December 31, 2017.

$Cashtags

Contacts

Weingarten Realty
Michelle Wiggs, 713-866-6050