HOUSTON--(BUSINESS WIRE)--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended June 30, 2020. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.
“Given the headwinds of the pandemic, we had a relatively good quarter. With the reopening of the economy in our markets, most of our tenants have been able to restart operations as they learn to operate in this challenging environment. Accordingly, we have experienced continued improvement in our cash collections and rent deferrals. Our balance sheet remains strong and our liquidity position is more than adequate. We remain focused on the safety and well-being of our associates, tenants, stakeholders and the broader community. With a transformed portfolio of primarily grocery-anchored centers providing basic goods and services, we are optimistic our centers will perform well, on a relative basis, in this crisis,” said Drew Alexander, Chairman, President and Chief Executive Officer.
Second Quarter Operating and Financial Highlights
- Net income attributable to common shareholders (“Net Income”) for the quarter was $0.09 per diluted share (hereinafter “per share”) compared to $0.65 per share in the same quarter of 2019;
- Core Funds From Operations Attributable to Common Shareholders ("Core FFO") for the quarter was $0.34 per share compared to $0.53 per share a year ago;
- Bad debt expense/uncollectible revenue primarily related to COVID-19 for the quarter was $19.3 million or $0.15 per share and included $4.8 million or $0.04 per share of non-cash straight line rent receivables; and
- Dispositions to date totaled $131 million, including property sales closed subsequent to quarter-end totaling $43 million.
Financial Results
The Company reported Net Income of $11.4 million or $0.09 per share for the second quarter of 2020, as compared to $83.8 million or $0.65 per share for the same period in 2019 as the coronavirus pandemic continues to negatively affect the Company’s tenants. The Company recorded bad debt expense/uncollectible revenue of $19.3 million in the second quarter of 2020 which includes $4.8 million of non-cash straight line rent receivables. This is in addition to total bad debt expense/uncollectible expense of $9.4 million recorded in the first quarter of 2020 which included non-cash straight line rent receivables of $7.6 million.
Year-to-date, Net Income was $64.0 million or $0.50 per share for 2020 compared to $133.5 million or $1.03 per share for 2019.
Funds From Operations attributable to common shareholders in accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”) was $43.9 million or $0.34 per share for the second quarter of 2020 compared to $68.7 million or $0.53 per share for 2019. The decrease is primarily due to disposition activity and the $19.3 million of bad debt expense/uncollectible revenue primarily related to the coronavirus pandemic. Core FFO for the quarter ended June 30, 2020 was $43.9 million or $0.34 per share compared to $68.7 million or $0.53 per share for the same quarter of last year.
A reconciliation of Net Income to NAREIT FFO and Core FFO is included herein.
Operating Results
For the period ending June 30, 2020, the Company’s operating highlights were as follows:
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Q2 2020 |
YTD 2020 |
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Occupancy (Signed Basis): |
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Occupancy - Total |
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93.4 |
% |
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Occupancy - Small Shop Spaces |
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89.0 |
% |
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Occupancy - Same Property Portfolio |
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94.3 |
% |
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Same Property Net Operating Income, with redevelopments |
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(19.7) |
% |
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(9.8) |
% |
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Rental Rate Growth - Total: |
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7.3 |
% |
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9.0 |
% |
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New Leases |
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10.3 |
% |
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13.2 |
% |
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Renewals |
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7.0 |
% |
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8.4 |
% |
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Leasing Transactions: |
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Number of New Leases |
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27 |
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83 |
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New Leases - Annualized Revenue (in millions) |
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$ |
1.8 |
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$ |
6.3 |
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Number of Renewals |
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109 |
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253 |
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Renewals - Annualized Revenue (in millions) |
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$ |
9.2 |
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$ |
26.1 |
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A reconciliation of Net Income to SPNOI is included herein.
COVID-19 Update
The coronavirus pandemic continues to impact the Company’s operations. At the end of the second quarter, approximately 95% of the Company’s tenants were open for business though conditions are ever changing. Cash collections in April, May and June totaled 77%, 73% and 79%, respectively of prorata base rent and expense recoveries. For the second quarter, overall cash collections were 77%. These strong cash collections are a definitive reflection of the Company’s successful transformation of its portfolio over the last several years. Cash collections in July are trending up with 82% collected to-date. Deferrals of rent payments to future periods executed in April, May and June represent an additional 14%, 18% and 10%, respectively. Deferrals for the second quarter were 13% and bad debt expense/uncollectible revenue on a prorata basis applied against these deferrals was $4.7 million or 30% of the amounts deferred at June 30, 2020. Abatements of rent for the quarter were 1% of total rent and the Company continues to work closely with all of its tenants.
The reopening of the economy has not been without challenges as the pace of new COVID-19 infections has increased at an alarming rate which has resulted in a temporary reversal of tenants reopening efforts in some markets. Nevertheless, the Company is confident that collections will remain strong as rents from tenants deemed “essential” represent 63% of total rents for the quarter. Cash collections from these essential tenants were 86% for the second quarter.
“We continue to devote a tremendous amount of effort in assisting our tenants in their reopening efforts and to obtaining rent payments. We are extremely pleased with our cash collection results which continue to improve. We remain confident that our transformed portfolio of quality properties will enable us to weather this storm,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.
Additional information can be found on page 41 of our supplemental disclosure.
Balance Sheet, Liquidity and Dividends
The benefit of the Company’s best in class balance sheet has been highlighted by this crisis. With low leverage and the absence of any material maturities until the fourth quarter of 2022, the Company is comfortable that it has adequate liquidity to restore its properties to their full operating potential. Given the general stability of the financial markets and the Company’s access to other sources of liquidity, the Company used its excess cash balances and disposition proceeds to pay down its revolving credit facility. The Company will continue to carefully monitor cash flows, any new capital requirements, and overall liquidity going forward.
In light of the uncertainties surrounding the pandemic, the Company expects to substantially limit acquisitions and will continue to monitor opportunities to dispose of additional properties. Both of its mixed-use projects in the Washington D.C. require minimal additional investment and leasing continues to make nice progress. Construction of the River Oaks residential tower has continued, leasing has recently begun and initial residential move-ins are expected in the third quarter.
The Board of Trust Managers declared a cash dividend of $0.18 per common share payable on September 15, 2020 to shareholders of record on September 8, 2020. As communicated last quarter, the Company will likely pay a regular cash dividend of $0.18 per share in each of the last two quarters of 2020 due to an election made last year to shift dividend payments from 2019 to 2020. The Company completed dispositions totaling $15 million in the quarter and closed the sale of its last center in Utah and a center in Los Angeles totaling an additional $43 million subsequent to quarter-end. As such, it is likely that the Company will need to pay a special dividend near year-end to cover additional 2020 taxable income resulting from these sales; however, the amount of any special dividend is uncertain at this time. The Company will continue to monitor tenant collections, evaluate its operations and financial position and will adjust future dividends as appropriate.
“With $498 million currently available under our revolver, cash collections trending at higher levels than originally projected, proceeds from additional dispositions and access to numerous other sources of capital, we remain comfortable with our ability to meet all liquidity needs going forward, including any additional dividends required by our disposition activity,” said Steve Richter, Executive Vice President and Chief Financial Officer.
Conference Call Information
The Company also announced that it will host a live webcast of its quarterly conference call on July 30, 2020 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 #49202522). 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, 2020, 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 165 properties which are located in 16 states spanning the country from coast to coast. These properties represent approximately 31.4 million square feet of which our interests in these properties aggregated approximately 21.3 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. These risks and uncertainties include those related to the COVID-19 pandemic, about which there are still many unknowns, including the duration of the pandemic and the extent of its impact, as well as those discussed in the Company’s regulatory filings with the Securities and Exchange Commission, which include other 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 |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2020 |
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2019 |
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2020 |
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2019 |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME | (Unaudited) |
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(Unaudited) |
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Revenues: | ||||||||||||||||
Rentals, net | $ | 95,813 |
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$ | 119,462 |
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$ | 203,863 |
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$ | 239,288 |
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Other | 2,322 |
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3,198 |
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5,624 |
|
6,510 |
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||||||||
Total Revenues | 98,135 |
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122,660 |
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209,487 |
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245,798 |
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Operating Expenses: | ||||||||||||||||
Depreciation and amortization | 37,627 |
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34,967 |
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74,283 |
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68,939 |
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Operating | 19,978 |
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22,767 |
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43,138 |
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47,015 |
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Real estate taxes, net | 15,733 |
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15,736 |
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30,741 |
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31,867 |
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Impairment loss | — |
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— |
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44 |
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74 |
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General and administrative | 12,920 |
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8,880 |
|
15,227 |
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18,461 |
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Total Operating Expenses | 86,258 |
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82,350 |
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163,433 |
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166,356 |
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Other Income (Expense): | ||||||||||||||||
Interest expense, net | (15,776 |
) |
(14,953 |
) |
(30,378 |
) |
(30,242 |
) |
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Interest and other income (expense), net | 5,293 |
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1,921 |
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(535 |
) |
6,305 |
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Gain on sale of property | 7,898 |
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52,061 |
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21,474 |
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69,848 |
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Total Other (Expense) Income | (2,585 |
) |
39,029 |
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(9,439 |
) |
45,911 |
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Income Before Income Taxes and Equity in Earnings of Real Estate Joint Ventures and Partnerships | 9,292 |
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79,339 |
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36,615 |
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125,353 |
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Provision for Income Taxes | (343 |
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(484 |
) |
(515 |
) |
(661 |
) |
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Equity in Earnings of Real Estate Joint Ventures and Partnerships, net | 3,428 |
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6,665 |
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30,525 |
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12,082 |
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Net Income | 12,377 |
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85,520 |
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66,625 |
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136,774 |
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Less: Net Income Attributable to Noncontrolling Interests | (1,009 |
) |
(1,711 |
) |
(2,635 |
) |
(3,299 |
) |
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Net Income Attributable to Common Shareholders -- Basic | $ | 11,368 |
|
$ | 83,809 |
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$ | 63,990 |
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$ | 133,475 |
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Net Income Attributable to Common Shareholders -- Diluted | $ | 11,368 |
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$ | 84,337 |
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$ | 63,990 |
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$ | 134,531 |
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Earnings Per Common Share -- Basic | $ | 0.09 |
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$ | 0.66 |
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$ | 0.50 |
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$ | 1.04 |
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Earnings Per Common Share -- Diluted | $ | 0.09 |
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$ | 0.65 |
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$ | 0.50 |
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$ | 1.03 |
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Weingarten Realty Investors (in thousands) Financial Statements |
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June 30, |
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December 31, |
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2020 |
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2019 |
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(Unaudited) |
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(Audited) |
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CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
ASSETS | ||||||||
Property | $ | 4,202,337 |
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$ | 4,145,249 |
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Accumulated Depreciation | (1,156,304 |
) |
(1,110,675 |
) |
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Property Held for Sale, net | 24,421 |
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— |
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Investment in Real Estate Joint Ventures and Partnerships, net | 401,724 |
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427,947 |
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Unamortized Lease Costs, net | 146,620 |
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148,479 |
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Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net | 73,760 |
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83,639 |
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Cash and Cash Equivalents | 14,203 |
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41,481 |
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Restricted Deposits and Escrows | 14,063 |
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13,810 |
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Other, net | 186,385 |
|
188,004 |
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Total Assets | $ | 3,907,209 |
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$ | 3,937,934 |
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LIABILITIES AND EQUITY | ||||||||
Debt, net | $ | 1,743,194 |
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$ | 1,732,338 |
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Accounts Payable and Accrued Expenses | 97,776 |
|
111,666 |
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Other, net | 210,507 |
|
217,770 |
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Total Liabilities | 2,051,477 |
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2,061,774 |
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Commitments and Contingencies | — |
|
— |
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EQUITY | ||||||||
Common Shares of Beneficial Interest | 3,890 |
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3,905 |
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Additional Paid-In Capital | 1,767,972 |
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1,779,986 |
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Net Income Less Than Accumulated Dividends | (85,008 |
) |
(74,293 |
) |
||||
Accumulated Other Comprehensive Loss | (11,158 |
) |
(11,283 |
) |
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Shareholders' Equity | 1,675,696 |
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1,698,315 |
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Noncontrolling Interests | 180,036 |
|
177,845 |
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Total Liabilities and Equity | $ | 3,907,209 |
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$ | 3,937,934 |
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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
Effective January 1, 2019, 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 gains or losses from sales of certain real estate assets (including: depreciable real estate with land, land, development property and securities), changes in control of real estate equity investments, and interests in real estate equity investments and their applicable taxes, plus depreciation and amortization related to real estate and impairment of certain real estate assets 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 assets 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 and transactional costs associated with development activities. 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): |
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2020 |
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2019 |
|
2020 |
|
2019 |
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(Unaudited) |
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(Unaudited) |
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Net income attributable to common shareholders |
$ | 11,368 |
|
|
$ |
83,809 |
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|
$ |
63,990 |
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|
$ |
133,475 |
|
|
Depreciation and amortization of real estate |
37,520 |
|
|
|
34,732 |
|
|
|
73,995 |
|
|
|
68,475 |
|
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Depreciation and amortization of real estate of unconsolidated real estate joint ventures and partnerships |
4,322 |
|
|
|
2,789 |
|
|
|
8,119 |
|
|
|
5,741 |
|
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Impairment of properties and real estate equity investments |
— |
|
|
|
— |
|
|
|
44 |
|
|
|
74 |
|
||
(Gain) on sale of property, investment securities and interests in real estate equity investments |
(7,903 |
) |
|
|
(51,605 |
) |
|
|
(21,477 |
) |
|
|
(70,554 |
) |
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(Gain) on dispositions of unconsolidated real estate joint ventures and partnerships |
(1,044 |
) |
|
|
(1,106 |
) |
|
|
(23,416 |
) |
|
|
(1,380 |
) |
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Provision for income taxes (1) |
— |
|
|
|
44 |
|
|
|
— |
|
|
|
44 |
|
||
Noncontrolling interests and other (2) |
(652 |
) |
|
|
(484 |
) |
|
|
(1,227 |
) |
|
|
(973 |
) |
||
NAREIT FFO – basic |
43,611 |
|
|
|
68,179 |
|
|
|
100,028 |
|
|
|
134,902 |
|
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Income attributable to operating partnership units |
241 |
|
|
|
528 |
|
|
|
769 |
|
|
|
1,056 |
|
||
NAREIT FFO – diluted |
43,852 |
|
|
|
68,707 |
|
|
|
100,797 |
|
|
|
135,958 |
|
||
Adjustments for Core FFO: |
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|
|
|
|
|
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Contract terminations |
— |
|
|
|
— |
|
|
|
340 |
|
|
|
— |
|
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Core FFO – diluted |
$ | 43,852 |
|
|
$ |
68,707 |
|
|
$ |
101,137 |
|
|
$ |
135,958 |
|
|
|
|
|
|
|
|
|
|
|
|
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FFO weighted average shares outstanding – basic |
127,242 |
|
|
|
127,856 |
|
|
|
127,552 |
|
|
|
127,807 |
|
||
Effect of dilutive securities: |
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|
|
|
|
|
|
|
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||||||
Share options and awards |
861 |
|
|
|
847 |
|
|
|
899 |
|
|
|
841 |
|
||
Operating partnership units |
1,432 |
|
|
|
1,432 |
|
|
|
1,432 |
|
|
|
1,432 |
|
||
FFO weighted average shares outstanding – diluted |
129,535 |
|
|
|
130,135 |
|
|
|
129,883 |
|
|
|
130,080 |
|
||
NAREIT FFO per common share – basic |
$ | 0.34 |
|
|
$ |
0.53 |
|
|
$ |
0.78 |
|
|
$ |
1.06 |
|
|
NAREIT FFO per common share – diluted |
$ | 0.34 |
|
|
$ |
0.53 |
|
|
$ |
0.78 |
|
|
$ |
1.05 |
|
|
Core FFO per common share – diluted |
$ | 0.34 |
|
|
$ |
0.53 |
|
|
$ |
0.78 |
|
|
$ |
1.05 |
|
__________________________ | |
(1) |
The applicable taxes related to gains and impairments of operating and non-operating real estate assets. |
(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:
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|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, 2020 |
|
June 30, 2020 |
Beginning of the period |
|
149 |
|
155 |
Properties removed: |
|
|
|
|
Redevelopments |
|
- |
|
(2) |
Dispositions |
|
(1) |
|
(5) |
End of the period |
|
148 |
|
148 |
The Company calculates SPNOI using net income attributable to common shareholders excluding net income attributable to noncontrolling interests, other income (expense), income taxes and equity in earnings of real estate joint ventures and partnerships. Additionally to reconcile to SPNOI, the Company excludes the effects of 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 and amortization, impairment losses, general and administrative expenses 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 |
|
Six Months Ended |
||||||||||||||
June 30, |
|
June 30, |
||||||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||||
(Unaudited) |
|
(Unaudited) |
||||||||||||||
Net income attributable to common shareholders | $ | 11,368 |
|
$ | 83,809 |
|
$ | 63,990 |
|
$ | 133,475 |
|
||||
Add: | ||||||||||||||||
Net income attributable to noncontrolling interests | 1,009 |
|
1,711 |
|
2,635 |
|
3,299 |
|
||||||||
Provision for income taxes | 343 |
|
484 |
|
515 |
|
661 |
|
||||||||
Interest expense, net | 15,776 |
|
14,953 |
|
30,378 |
|
30,242 |
|
||||||||
Property management fees | 829 |
|
683 |
|
1,907 |
|
1,556 |
|
||||||||
Depreciation and amortization | 37,627 |
|
34,967 |
|
74,283 |
|
68,939 |
|
||||||||
Impairment loss | — |
|
— |
|
44 |
|
74 |
|
||||||||
General and administrative | 12,920 |
|
8,880 |
|
15,227 |
|
18,461 |
|
||||||||
Other (1) | 79 |
|
743 |
|
167 |
|
1,989 |
|
||||||||
Less: | ||||||||||||||||
Gain on sale of property | (7,898 |
) |
(52,061 |
) |
(21,474 |
) |
(69,848 |
) |
||||||||
Equity in earnings of real estate joint ventures and partnership interests, net | (3,428 |
) |
(6,665 |
) |
(30,525 |
) |
(12,082 |
) |
||||||||
Interest and other (income) expense, net | (5,293 |
) |
(1,921 |
) |
535 |
|
(6,305 |
) |
||||||||
Revenue adjustments (2) | 866 |
|
(3,060 |
) |
3,991 |
|
(6,279 |
) |
||||||||
Adjusted income | 64,198 |
|
82,523 |
|
141,673 |
|
164,182 |
|
||||||||
Less: Adjusted income related to consolidated entities not defined as same property and noncontrolling interests | (5,831 |
) |
(8,965 |
) |
(10,760 |
) |
(17,607 |
) |
||||||||
Add: Pro rata share of unconsolidated entities defined as same property | 6,648 |
|
7,443 |
|
14,403 |
|
14,565 |
|
||||||||
Same Property Net Operating Income | $ | 65,015 |
|
$ | 81,001 |
|
$ | 145,316 |
|
$ | 161,140 |
|
_______________________ | |
(1) |
Other includes items such as environmental abatement costs, demolition expenses and lease termination fees. |
(2) |
Revenue adjustments consist primarily of straight-line rentals, lease cancellation income and fee income primarily from real estate joint ventures and partnerships. |
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 certain 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 |
|
Six Months Ended |
||||||||||
June 30, |
|
June 30, |
||||||||||
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre): | ||||||||||||
Net income | $ | 12,377 |
$ | 85,520 |
$ | 66,625 |
$ | 136,774 |
||||
Interest expense, net | 15,776 |
14,953 |
30,378 |
30,242 |
||||||||
Provision for income taxes | 343 |
484 |
515 |
661 |
||||||||
Depreciation and amortization of real estate | 37,627 |
34,967 |
74,283 |
68,939 |
||||||||
Impairment loss on operating properties and real estate equity investments | — |
— |
44 |
74 |
||||||||
Gain on sale of property and investment securities (1) | (7,903) |
(51,619) |
(21,477) |
(70,589) |
||||||||
EBITDAre adjustments of unconsolidated real estate joint ventures and partnerships, net (2) | 4,195 |
2,643 |
(13,442) |
6,267 |
||||||||
Total EBITDAre | 62,415 |
86,948 |
136,926 |
172,368 |
||||||||
Adjustments for Core EBITDAre: | ||||||||||||
Contract terminations | — |
— |
340 |
— |
||||||||
Total Core EBITDAre | $ | 62,415 |
$ | 86,948 |
$ | 137,266 |
$ | 172,368 |
__________________________ | |
(1) |
Includes a $.1 million gain on sale of non-operating assets for both the three and six months ended June 30, 2020 and a $.2 million gain on sale of non-operating assets for the six months ended June 30, 2019. |
(2) |
Includes a $1.0 million and $23.4 million gain on the sale of operating properties for the three and six months ended June 30, 2020, respectively, and a $1.1 million gain on sale of operating properties for both the three and six months ended June 30, 2019. Also includes $.3 million gain on sale of non-operating assets for the six months ended June 30, 2019. |