Weingarten Realty Reports Strong Same Property Net Operating Income

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    HOUSTON–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24WRI&src=ctag” target=”_blank”gt;$WRIlt;/agt; lt;a href=”https://twitter.com/hashtag/NAREITFFO?src=hash” target=”_blank”gt;#NAREITFFOlt;/agt;–Weingarten Realty (NYSE: WRI) announced today the results of its
    operations for the quarter ended March 31, 2019. The supplemental
    financial package with additional information can be found on the
    Company’s website under the Investor Relations tab.

    First Quarter Operating and Financial Highlights

    • Net income attributable to common shareholders (“Net Income”) for the
      quarter was $0.39 per diluted share (hereinafter “per share”) compared
      to $1.13 per share in the same quarter of 2018;
    • Core Funds From Operations Attributable to Common Shareholders (“Core
      FFO”) for the quarter was $0.52 per share compared to $0.57 per share
      a year ago;
    • Same Property Net Operating Income (“SPNOI”) including redevelopments
      increased 3.2% over the same quarter of the prior year;
    • Investments in acquisitions of $20.3 million; and
    • Dispositions for the quarter totaled $67 million.

    Financial Results

    The Company reported Net Income of $49.7 million or $0.39 per share for
    the first quarter of 2019, as compared to $146.8 million or $1.13 per
    share for the same period in 2018. This decrease was due primarily to
    lower gains on sales of properties due to reduced disposition activity
    during 2019.

    Effective this quarter, the Company adopted the new standard issued by
    the Financial Accounting Standards Board, ASU 2016-02, “Leases.” Among
    the changes required under this new ASU are the following:

    • Indirect, internally-generated leasing and legal costs are no longer
      capitalized which resulted in an increase in general and
      administrative expenses of approximately $2.3 million for the quarter;
    • Real estate taxes paid directly by tenants are no longer included in
      revenues and expenses in the Company’s consolidated financial
      statements. Real estate taxes paid directly by tenants totaled $1.2
      million during the first quarter of 2018;
    • Ground leases where the Company is the lessee were recorded on the
      balance sheet and were amortized accordingly to rent expense; and,
    • New guidelines for assessing the collectability of accounts receivable
      and the related presentation were implemented.

    This standard was adopted on a modified retrospective approach;
    therefore, prior year amounts were not restated. Further details of
    these issues are included on page 44 of our Supplemental.

    Funds From Operations attributable to common shareholders in accordance
    with the newly revised National Association of Real Estate Investment
    Trusts definition (“NAREIT FFO”) was $67.3 million or $0.52 per share
    for the first quarter of 2019 compared to $78.3 million or $0.60 per
    share for 2018.

    Core FFO for the quarter ended March 31, 2019 was the same as NAREIT FFO
    at $67.3 million or $0.52 per share compared to $74.7 million or $0.57
    per share for the same quarter of last year. Key factors that effected
    this change of $0.05 per share from this year to last year are:

    • Disposition activity of $0.03 per share;
    • Increase of $0.02 per share for indirect leasing and legal costs
      expensed in accordance with the new leasing standard;
    • Non-cash expense increase of $0.02 per share of compensation expense
      due to lower valuations of our restricted shares for incentive
      compensation purposes offset by other reductions in overhead; and,
    • Increased SPNOI and other factors.

    Effective this quarter, the Company adopted the updated definition of
    NAREIT FFO and will exclude gains or losses on the sale of land parcels
    and securities which were previously not adjusted in NAREIT FFO. Prior
    period NAREIT FFO amounts have not been restated.

    Reconciliations of Net Income to NAREIT FFO and Core FFO are included
    herein.

    Operating Results

    For the period ending March 31, 2019, the Company’s operating highlights
    were as follows:

       

    Q1 2019

    Occupancy (Signed Basis):    
    Occupancy – Total   94.3%
    Occupancy – Small Shop Spaces   90.3%
    Occupancy – Same Property Portfolio   94.5%
         
    Same Property Net Operating Income, with redevelopments   3.2%
         
    Rental Rate Growth – Total:   3.7%
    New Leases   11.5%
    Renewals   2.0%
         
    Leasing Transactions:    
    Number of New Leases   65
    New Leases – Annualized Revenue (in millions)   $4.6
    Number of Renewals   145
    Renewals – Annualized Revenue (in millions)   $13.4
     

    A reconciliation of Net Income to SPNOI is included herein.

    “Operationally, we had a solid quarter with strong Same Store results of
    3.2%. However, rent growth for the quarter was below the recent norms.
    Our new leases produced strong increases of 11.5%; however, our renewals
    averaged only 2%. While shop renewals were a healthy 7%, a few box
    renewals where the tenant had significant negotiating leverage led to a
    decrease of 3% for boxes. Looking ahead to the rest of 2019, we expect
    to produce rent growth in the mid-to-high single digits for the rest of
    2019,” said Johnny Hendrix, Executive Vice President and Chief Operating
    Officer.

    Portfolio Activity

    During the quarter, the Company purchased Madison Village in Central
    Phoenix, Arizona at Seventh and Glendale for $20.3 million. The center
    is anchored by a Safeway that produces extremely strong sales and is
    located in a densely populated area of Phoenix with 140,000 people
    within a three-mile radius. With 40,000 square feet of shop space,
    focused leasing efforts to improve the tenancy should produce strong
    growth over the next couple of years.

    The Company closed $67 million of dispositions with the sale of three
    shopping centers including Reynolds Crossing and Brookwood Marketplace,
    both in suburban Atlanta, Georgia and Waterford Village in Leland, North
    Carolina. The Company also sold one land parcel.

    In addition, the Company invested $44 million in new developments and
    redevelopments during the first quarter. The majority of the investment
    is in its two projects in the Washington D.C. area and its 30-story
    residential tower at its River Oaks Shopping Center in Houston.

    “We are pleased to begin 2019 with the acquisition of a solid grocery
    anchored center with outstanding sales and great upside. Our two
    mixed-use developments in D.C. area are progressing nicely and will be
    successful, valuable real estate projects and our significantly
    transformed existing portfolio produced outstanding same property NOI of
    3.2%. All of these factors should contribute to solid gains for our
    shareholders,” said Drew Alexander, Chairman, President and Chief
    Executive Officer.

    Balance Sheet

    The Company continues to maintain one of the strongest balance sheets in
    its sector and proceeds from the Company’s recent dispositions were used
    to further strengthen its financial position. Net Debt to Core EBITDAre
    was a strong 5.3 times and Debt to Total Market Capitalization was 31.9%
    at quarter end.

    “Both Moody’s and S&P completed full credit analyses and confirmed our
    ratings of Baa1/BBB during the first quarter. With the strongest credit
    metrics we have had in many years, we are poised to take advantage of
    whatever opportunities may arise. Low leverage provides the flexibility
    to react quickly as market conditions change,” said Steve Richter,
    Executive Vice President and Chief Financial Officer.

    2019 Guidance

    As to earnings guidance, the Company affirms NAREIT FFO and Core FFO per
    share of a range from $2.09 to $2.17. All of the details of our guidance
    are included on page 10 of our Supplemental.

    Dividends

    The Board of Trust Managers declared a quarterly cash dividend of $0.395
    per common share payable on June 14, 2019 to shareholders of record on
    June 7, 2019.

    Conference Call Information

    The Company also announced that it will host a live webcast of its
    quarterly conference call on April 30, 2019 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 #
    47857841). A replay will be available through the Company’s website
    starting approximately two hours following the live call.

    About Weingarten Realty Investors

    Weingarten Realty Investors (NYSE: WRI) is a shopping center owner,
    manager and developer. At March 31, 2019, 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 177 properties which
    are located in 17 states spanning the country from coast to coast. These
    properties represent approximately 34.6 million square feet of which our
    interests in these properties aggregated approximately 22.6 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 represent 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
    March 31,
    2019 2018 (1)
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
    Revenues:
    Rentals, net $ 119,826 $ 129,148
    Other 3,312   3,304  
    Total Revenues 123,138   132,452  
    Operating Expenses:
    Depreciation and amortization 33,972 38,095
    Operating 24,248 23,270
    Real estate taxes, net 16,131 17,639
    Impairment loss 74
    General and administrative 9,581   5,595  
    Total Operating Expenses 84,006   84,599  
    Other Income (Expense):
    Interest expense, net (15,289 ) (14,672 )
    Interest and other income (expense) 4,384 1,533
    Gain on sale of property 17,787   109,045  
    Total Other Income 6,882   95,906  
    Income Before Income Taxes and Equity in Earnings of Real Estate
    Joint Ventures and Partnerships
    46,014 143,759
    Provision for Income Taxes (177 ) (783 )
    Equity in Earnings of Real Estate Joint Ventures and Partnerships,
    net
    5,417   5,993  
    Net Income 51,254 148,969

    Less: Net Income Attributable to Noncontrolling Interests

    (1,588 ) (2,145 )
    Net Income Attributable to Common Shareholders — Basic $ 49,666   $ 146,824  
    Net Income Attributable to Common Shareholders — Diluted $ 49,666   $ 147,352  
    Earnings Per Common Share — Basic $ .39   $ 1.15  
    Earnings Per Common Share — Diluted $ .39   $ 1.13  

    ______________

    (1) Reclassification of prior year’s amounts were made to conform to
    current year presentation.
     
    Weingarten Realty Investors
    (in thousands)
    Financial Statements
       
    March 31,
    2019
    December 31,
    2018
    (Unaudited) (Audited)
    CONDENSED CONSOLIDATED BALANCE SHEETS
    ASSETS
    Property $ 4,104,795 $ 4,105,068
    Accumulated Depreciation (1,118,217 ) (1,108,188 )
    Investment in Real Estate Joint Ventures and Partnerships, net 364,165 353,828
    Unamortized Lease Costs, net 139,533 142,014
    Accrued Rent, Accrued Contract Receivables and Accounts Receivable,
    net
    76,900 97,924
    Cash and Cash Equivalents 60,570 65,865
    Restricted Deposits and Mortgage Escrows 11,134 10,272
    Other, net 198,783   160,178  
    Total Assets $ 3,837,663   $ 3,826,961  
     
    LIABILITIES AND EQUITY
    Debt, net $ 1,788,551 $ 1,794,684
    Accounts Payable and Accrued Expenses 79,459 113,175
    Other, net 209,219   168,403  
    Total Liabilities 2,077,229   2,076,262  
     
    Commitments and Contingencies
     
    EQUITY
    Common Shares of Beneficial Interest 3,903 3,893
    Additional Paid-In Capital 1,777,089 1,766,993
    Net Income Less Than Accumulated Dividends (187,581 ) (186,431 )
    Accumulated Other Comprehensive Loss (10,480 ) (10,549 )
    Shareholders’ Equity 1,582,931 1,573,906
    Noncontrolling Interests 177,503   176,793  
    Total Liabilities and Equity $ 3,837,663   $ 3,826,961  
     

    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), change in control, 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):

     
      Three Months Ended
    March 31,
    2019   2018
    (Unaudited)
    Net income attributable to common shareholders $ 49,666   $ 146,824
    Depreciation and amortization of real estate 33,743 37,765
    Depreciation and amortization of real estate of unconsolidated real
    estate joint ventures and partnerships
    2,952 3,184
    Impairment of properties and real estate equity investments 74
    (Gain) on sale of property, investment securities and interests in
    real estate equity investments
    (18,949 ) (109,038 )
    (Gain) on dispositions of unconsolidated real estate joint ventures
    and partnerships
    (274 ) (2,363 )
    Provision for income taxes (1) 161
    Noncontrolling interests and other (2) (489 ) 1,210  
    NAREIT FFO – basic (3) 66,723 77,743
    Income attributable to operating partnership units 528   528  
    NAREIT FFO – diluted (3) 67,251   78,271  
    Adjustments to Core FFO:
    (Gain) on extinguishment of debt including related swap activity   (3,557 )
    Core FFO – diluted $ 67,251   $ 74,714  
     
    FFO weighted average shares outstanding – basic 127,756 127,926
    Effect of dilutive securities:
    Share options and awards 834 781
    Operating partnership units 1,432   1,432  
    FFO weighted average shares outstanding – diluted 130,022   130,139  
     
    NAREIT FFO per common share – basic $ .52   $ .61  
     
    NAREIT FFO per common share – diluted $ .52   $ .60  
     
    Core FFO per common share – diluted $ .52   $ .57  
     
    (1)   The applicable taxes related to gains and impairments of properties.
    (2) Related to gains, impairments and depreciation on operating
    properties and unconsolidated real estate joint ventures, where
    applicable.
    (3) 2019 Nareit FFO is presented in accordance with 2018 Restatement of
    “Nareit’s Funds from Operations White Paper.”
     

    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:

      Three Months Ended
    March 31, 2019
    Beginning of the period 171
    Properties added:
    New Developments 1
    Properties removed:
    Dispositions (4 )
    End of the period 168  
     

    We calculate 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, we
    exclude 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
    March 31,
    2019   2018
    (Unaudited)
    Net income attributable to common shareholders $ 49,666 $ 146,824
    Add:
    Net income attributable to noncontrolling interests 1,588 2,145
    Provision for income taxes 177 783
    Interest expense, net 15,289 14,672
    Property management fees 873 867
    Depreciation and amortization 33,972 38,095
    Impairment loss 74
    General and administrative 9,581 5,595
    Other (1) 444 89
    Less:
    Gain on sale of property (17,787 ) (109,045 )
    Equity in earnings of real estate joint ventures and partnership
    interests, net
    (5,417 ) (5,993 )
    Interest and other income/expense (4,384 ) (1,533 )
    Revenue adjustments (2) (3,219 ) (3,932 )
    Adjusted income 80,857 88,567
    Less: Adjusted income related to consolidated entities not defined
    as same property and noncontrolling interests
    44 (10,511 )
    Add: Pro rata share of unconsolidated entities defined as same
    property
    8,308   8,374  
    Same Property Net Operating Income 89,209 86,430
    Less: Redevelopment Net Operating Income (7,793 ) (7,084 )
    Same Property Net Operating Income excluding Redevelopments $ 81,416     $ 79,346  

    ___________________

    (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.

    Contacts

    Michelle Wiggs, Phone: (713) 866-6050

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