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Weingarten Realty Reports Strong Quarter and a 5.5% Dividend Increase

HOUSTON--(BUSINESS WIRE)--

Weingarten Realty (WRI) announced today the results of its operations for the fourth quarter and full year ended December 31, 2016. 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 $0.34 per diluted share (hereinafter “per share”) for the quarter and $1.87 per share for the year compared to $0.38 and $1.29 per share for the respective periods in 2015;
  • Core Funds From Operations Attributable to Common Shareholders ("Core FFO") increased 8.9% to $0.61 per share for the fourth quarter of 2016 and 7.3% to $2.34 per share for the full year 2016 compared to comparable 2015 periods;
  • Same Property Net Operating Income (“SPNOI”) including redevelopments increased by 3.8% over the fourth quarter of 2015 and by 3.3% over the full year 2015;
  • Rental rates on new leases and renewals completed during the year were up 26.7% and 10.2%, respectively;
  • Acquisitions totaled $515 million for the year;
  • Dispositions totaled $223 million for the year; and
  • Common dividends per share increased 5.5% to $0.385 per quarter or $1.54 on an annualized basis.

Financial Results

The Company reported Net Income of $44.1 million or $0.34 per share for the fourth quarter of 2016, as compared to $47.3 million or $0.38 per share for the same period in 2015. This decrease was due primarily to an increase in net income attributable to noncontrolling interests due to higher gains on sales of properties in 2016. For the year, Net Income was $238.9 million or $1.87 per share for 2016 compared to $160.8 million or $1.29 per share for 2015. This increase was due primarily to higher gains on sales of properties in 2016.

Funds From Operations Attributable to Common Shareholders in accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”) was $78.9 million or $0.61 per share for the fourth quarter of 2016 compared to $71.4 million or $0.57 per share for 2015. The increase is primarily due to increased income from the existing portfolio, incremental income from our new developments and redevelopments, and the significant acquisitions completed in 2016. Reduced interest expense from favorable debt refinancings also contributed to the increase; however, these increases were offset by the dilution resulting from the issuance of common shares during 2015 and 2016. For the year, NAREIT FFO was $293.7 million or $2.28 per share for 2016 compared to $260.0 million or $2.07 per share for 2015. Included in NAREIT FFO for 2016 were deferred taxes related to gains on property sales and property acquisitions, the write-off of new development pursuit costs and costs related to a term loan commitment. Each of these items is added back in arriving at Core FFO for 2016.

Core FFO for the quarter ended December 31, 2016 was $79.4 million or $0.61 per share compared to $70.7 million or $0.56 per share for the same quarter of last year, an increase of 8.9% on a per share basis. For the full year, Core FFO was $300.9 million or $2.34 per share for 2016 compared to $274.8 million or $2.18 per share for 2015, an increase of 7.3% 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, 2016, the Company’s operating highlights were as follows:

     
 

Q4 2016

YTD

Occupancy (Signed Basis):    
Occupancy - Total 94.3%  
Occupancy - Small Shop Spaces 90.6%  
Occupancy - Same Property Portfolio 95.6%  
     
Same Property Net Operating Income, with redevelopments 3.8% 3.3%
     
Rental Rate Growth - Total: 12.8% 13.1%
New Leases 22.4% 26.7%
Renewals 11.0% 10.2%
     
Leasing Transactions:    
Number of New Leases 78 348
New Leases - Annualized Revenue (in millions) $5.1 $22.7
Number of Renewals 178 739
Renewals - Annualized Revenue (in millions) $14.8 $59.6
 

A reconciliation of Net Income to SPNOI is included herein.

Portfolio Activity

During the quarter, the Company closed $19.9 million of acquisitions including:

  • Two freestanding buildings adjacent to the Company’s River Oaks Shopping Center that will facilitate planned future redevelopment at this premier, inner-city Houston location.
  • A vacant 96,000 square foot former Target building adjacent to the Company’s highly successful Fiesta Trails shopping center in San Antonio which the Company believes it can profitably redevelop.

This brought the Company’s acquisitions for the year to $514.8 million.

The highlights of the Company’s new development program are as follows:

  • Purchased 5.2 acres of land that will be the site of The Gateway Alexandria, a premier, mixed-use development in Alexandria, Virginia. This project will include 282 multi-family units, 100,000 square feet of retail anchored by a 62,000 square foot Harris Teeter grocery store, 23,000 square feet of office and a below-grade parking garage. The Company’s net investment upon completion is estimated at $180 million before the planned sale of the majority of the office and all of the residential components. This high-barrier, infill site has impressive demographics within three miles of 290,000 people with average incomes of about $108,000 and with nearly 62% of the population having college degrees. The Company has engaged a prominent residential developer to assist in the development of the property and the leasing and management of the residential component.
  • Executed a partnership agreement with a prominent residential developer for the development of Columbia Pike, a premier, mixed-use project in Arlington, Virginia. This project will include 365 multi-family units and 72,000 square feet of retail anchored by a 50,000 square foot Harris Teeter grocery store. The Company’s prorata net investment upon completion is estimated at $135 million before the sale of the residential component. The Company expects to purchase the land and commence development in April of 2017.
  • Stabilized Nottingham Commons, a $46 million development in White Marsh, Maryland anchored by MOM’s Organic Market, Petco, TJ Maxx and DSW. This project was completed in 27 months and is generating an 8% return.
  • Currently have four projects including all of the above, under development representing an estimated final investment of $391.9 million and nine redevelopments underway representing $61.9 million of incremental investment.

During the fourth quarter, the Company sold four land parcels, five shopping centers held in joint ventures and one wholly-owned center for $24.9 million, bringing the dispositions for the year to $222.6 million.

Balance Sheet

The Company’s credit metrics remain very strong at quarter end with Net Debt to EBITDA at 5.9 times and Debt to Total Market Cap at 33.7%. Debt maturities for 2017 are $86.7 million.

2017 Guidance

The Company’s guidance for 2017 is as follows:

                 
               

2017 Guidance

NAREIT FFO (per diluted share)               $2.36 - $2.42
Core FFO (per diluted share)               $2.37 - $2.43
Acquisitions               $125 - $225 million
Re / New Development               $135 - $235 million
Dispositions               $125 - $225 million
Same Property NOI with redevelopments               2.50% - 3.50%
Same Property NOI w/o redevelopments               2.00% - 3.00%

Dividends

The Board of Trust Managers declared a quarterly cash dividend of $0.385 per common share payable on March 15, 2017 to shareholders of record on March 8, 2017, representing a 5.5% increase on an annualized basis.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on February 22, 2017 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 # 43147576). 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 (WRI) is a shopping center owner, manager and developer. At December 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 220 properties which are located in 18 states spanning the country from coast to coast. These properties represent approximately 44.7 million square feet of which our interests in these properties aggregated approximately 28.5 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,
2016     2015 2016     2015
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited)
Rentals, net $ 139,507 $ 127,242 $ 537,265 $ 502,464
Other Income 3,356   2,412   12,290   10,380  
Total Revenues 142,863   129,654   549,555   512,844  
Depreciation and Amortization 43,374 37,011 162,535 145,940
Operating Expense 25,896 25,168 98,855 94,244
Real Estate Taxes, net 16,213 14,394 66,358 60,289
Impairment Loss 55

-

98 153
General and Administrative Expense 7,193   7,503   27,266   27,524  
Total Expenses 92,731   84,076   355,112   328,150  
Operating Income 50,132 45,578 194,443 184,694
Interest Expense, net (21,711 ) (20,426 ) (83,003 ) (87,783 )
Interest and Other Income 729 2,311 2,569 4,563
Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests 1,915

-

48,322 879
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net 5,531 5,620 20,642 19,300
Benefit (Provision) for Income Taxes 164   239   (6,856 ) (52 )
Income from Continuing Operations 36,760 33,322 176,117 121,601
Gain on Sale of Property 32,416   15,704   100,714   59,621  
Net Income 69,176 49,026 276,831 181,222

Less: Net Income Attributable to Noncontrolling Interests

(25,034 ) (1,751 ) (37,898 ) (6,870 )
Net Income Adjusted for Noncontrolling Interests 44,142 47,275 238,933 174,352

Less: Preferred Share Dividends

-

-

-

(3,830 )

Less: Redemption Costs of Preferred Shares

-

 

-

 

-

  (9,687 )
Net Income Attributable to Common Shareholders -- Basic $ 44,142   $ 47,275   $ 238,933   $ 160,835  
Net Income Attributable to Common Shareholders -- Diluted $ 44,142   $ 47,746   $ 240,929   $ 160,835  
 
Weingarten Realty Investors
(in thousands)
Financial Statements
       
December 31,
2016
December 31,
2015
(Unaudited) (Audited)
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
Property $ 4,789,145 $ 4,262,959
Accumulated Depreciation (1,184,546 ) (1,087,642 )
Property Held for Sale, net 479 34,363
Investment in Real Estate Joint Ventures and Partnerships, net 289,192 267,041
Unamortized Lease Costs, net 208,063 137,609
Accrued Rent and Accounts Receivable, net 94,466 84,782
Cash and Cash Equivalents 16,257 22,168
Restricted Deposits and Mortgage Escrows 25,022 3,074
Other, net 188,850   177,591  
Total Assets $ 4,426,928   $ 3,901,945  
 
LIABILITIES AND EQUITY
Debt, net $ 2,356,528 $ 2,113,277
Accounts Payable and Accrued Expenses 116,859 112,205
Other, net 191,887   131,453  
Total Liabilities 2,665,274   2,356,935  
 
Commitments and Contingencies

-

-

Deferred Compensation Share Awards 44,758

-

 
EQUITY
Common Shares of Beneficial Interest 3,885 3,744
Additional Paid-In Capital 1,718,101 1,616,242
Net Income Less Than Accumulated Dividends (177,647 ) (222,880 )
Accumulated Other Comprehensive Loss (9,161 ) (7,644 )
Shareholders' Equity 1,535,178   1,389,462  
Noncontrolling Interests 181,718   155,548  
Total Liabilities and Equity $ 4,426,928   $ 3,901,945  
 

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, 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,
2016     2015 2016     2015
(Unaudited) (Unaudited)
Net income attributable to common shareholders $ 44,142     $ 47,275 $ 238,933     $ 160,835
Depreciation and amortization 42,245 36,350 159,938 143,067
Depreciation and amortization of unconsolidated real estate joint ventures and partnerships 3,774 3,849 15,118 14,451
Impairment of operating properties and real estate equity investments

-

-

-

153
Impairment of operating properties of unconsolidated real estate joint ventures and partnerships

-

-

326 1,497
(Gain) on acquisition including associated real estate equity investment

-

-

(46,398 )

-

(Gain) on sale of property and interests in real estate equity investments (11,177 ) (15,625 ) (72,552 ) (60,309 )
(Gain) on dispositions of unconsolidated real estate joint ventures and partnerships (538 ) (943 ) (3,693 ) (1,558 )
Other (8 ) (6 ) (16 ) (10 )
 
NAREIT FFO – basic 78,438 70,900 291,656 258,126
Income attributable to operating partnership units 499   471   1,996   1,903  
 
NAREIT FFO – diluted 78,937   71,371   293,652   260,029  
Adjustments to Core FFO:
Redemption costs of preferred shares

-

-

-

9,749
Deferred tax expense, net

-

-

7,024

-

Acquisition costs 622 305 1,782 1,007
Other impairment loss, net of tax 55

-

98

-

(Gain) loss on extinguishment of debt

-

-

(1,679 ) 6,100
Other, net of tax (254 ) (952 ) 17   (2,113 )
 
Core FFO – diluted $ 79,360   $ 70,724   $ 300,894   $ 274,772  
 
FFO weighted average shares outstanding – basic 127,476 123,357 126,048 123,037
Effect of dilutive securities:
Share options and awards 933 1,258 1,059 1,292
Operating partnership units 1,462   1,462   1,462   1,472  
FFO weighted average shares outstanding – diluted 129,871   126,077   128,569   125,801  
 
NAREIT FFO per common share – basic $ .62   $ .57   $ 2.31   $ 2.10  
 
NAREIT FFO per common share – diluted $ .61   $ .57   $ 2.28   $ 2.07  
 
Core FFO per common share – diluted $ .61   $ .56   $ 2.34   $ 2.18  
 

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,

Twelve Months Ended
December 31,

Beginning of the period 200 206
Properties added:
Acquisitions

-

1
Redevelopments

-

11
Other

-

1
Properties removed:
Dispositions (6 ) (16 )
Redevelopments

-

(5 )
Other (1 ) (5 )
End of the period 193   193  
 

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 and demolition expenses. 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,
2016   2015 2016   2015
(Unaudited) (Unaudited)
Net income attributable to common shareholders $ 44,142   $ 47,275 $ 238,933   $ 160,835
Add:
Redemption costs of preferred shares

-

-

-

9,687
Dividends on preferred shares

-

-

-

3,830
Net income attributable to noncontrolling interests 25,034 1,751 37,898 6,870
(Benefit) provision for income taxes (164 ) (239 ) 6,856 52
Interest expense, net 21,711 20,426 83,003 87,783
Less:
Gain on sale of property (32,416 ) (15,704 ) (100,714 ) (59,621 )
Equity in earnings of real estate joint ventures and partnership interests (5,531 ) (5,620 ) (20,642 ) (19,300 )
Gain on sale and acquisition of real estate joint venture and partnership interests (1,915 )

-

(48,322 ) (879 )
Interest and other income (729 ) (2,311 ) (2,569 ) (4,563 )
Operating Income 50,132 45,578 194,443 184,694
Less:
Revenue adjustments (1) (4,959 ) (2,870 ) (16,364 ) (11,973 )
Add:
Property management fees 681 680 2,854 2,958
Depreciation and amortization 43,374 37,011 162,535 145,940
Impairment loss 55

-

98 153
General and administrative 7,193 7,503 27,266 27,524
Acquisition costs 614 303 1,350 968
Other (2) (246 ) 191   72   481  
Net Operating Income 96,844 88,396 372,254 350,745
Less: NOI related to consolidated entities not defined as same property and noncontrolling interests (14,214 ) (8,775 ) (45,986 ) (35,658 )
Add: Pro rata share of unconsolidated entities defined as same property 7,937   7,600   30,516   30,190  
Same Property Net Operating Income $ 90,567   $ 87,221   $ 356,784   $ 345,277  
 
(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 and demolition expenses.

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