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Weingarten Realty Increases Same Store Net Operating Income by 4.9%

HOUSTON--(BUSINESS WIRE)--Oct. 29, 2012-- Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended September 30, 2012. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.

Third Quarter Operating and Financial Highlights

  • Recurring Funds from Operations ("FFO") for the quarter totaled $56.2 million or $0.46 per diluted share;
  • Same Property Net Operating Income increased a strong 4.9% over the same quarter of the prior year;
  • Occupancy of the Company’s retail portfolio increased again this quarter by 1.1% to 93.9% from 92.8% for the third quarter of 2011;
  • Acquisitions totaling $114 million and dispositions of $89 million were completed during the quarter, and;
  • Ten-year notes totaling $300 million were sold subsequent to quarter-end at an attractive yield of 3.42%.

Financial Results

The Company reported net income attributable to common shareholders of $31.4 million or $0.26 per diluted share (hereinafter “per share”) for the third quarter of 2012, as compared to a net loss of $42.1 million or $0.35 per share for the same period in 2011. Included in the 2011 operating results were non-cash impairment charges of $0.44 per share. Net income for the nine months ended September 30, 2012 was $66.3 million or $0.54 per share compared to a net loss of $42.0 million or $0.35 per share for 2011. Included in the 2011 operating results were non-cash impairment charges of $0.63 per share.

Reported FFO was $55.1 million or $0.45 per share for the third quarter of 2012 compared to $30.7 million or $0.25 per share for 2011. Excluded from Reported FFO in 2011 were impairments of $0.25 per share as they related to operating properties. Year-to-date, Reported FFO was $165.6 million or $1.36 per share for 2012 compared to $115.2 million or $0.96 per share for 2011.

Recurring FFO for the quarter ended September 30, 2012 was $0.46 per share or $56.2 million. For the same quarter last year, Recurring FFO was $0.47 per share. The $0.01 per share decrease in Recurring FFO over the prior year was primarily due to dispositions totaling $627 million since September 30, 2011, which includes the sale of the Company’s wholly-owned industrial assets in the second quarter of 2012 totaling $382 million. This reduction was offset by an improvement in operating income from increased occupancy in the existing portfolio, reduced interest expense resulting from refinanced debt maturities and acquisitions totaling $235 million. For the nine months, Recurring FFO was $169.6 million or $1.39 per share for 2012 compared to $159.2 million or $1.32 per share for 2011, a 5.3% increase on a per share basis.

A reconciliation between net income attributable to common shareholders to Reported FFO and Recurring FFO is listed on page 5 of the Company’s supplemental package.

Operating Results

Occupancy of the retail portfolio increased to 93.9% in the third quarter from 93.7% in the prior quarter and by a very strong 1.1% from 92.8% in the third quarter of 2011. Occupancy of small shop space increased by 0.5% from the prior quarter and by an impressive 1.6% from the same quarter of the prior year.

Same Property Net Operating Income ("SPNOI") for retail properties increased 4.9% primarily due to continued strength in both renewals and new leases and a reduction in merchant fallouts. Year-to-date, SPNOI has increased 4.1%, which ranks at the top of the Company’s shopping center peer group.

The Company produced strong leasing results during the third quarter with 356 new retail leases and renewals, totaling over one million square feet. These transactions were comprised of 152 new leases and 204 renewals, which represent annualized revenues of $5.1 million and $9.8 million, respectively. Year-to-date, the average rental rate increase on retail leases signed was a solid 3.8%.

"Our continued rise in occupancy and excellent Same Property NOI growth is a clear reflection of our best in class operating platform. While economic activity remains sluggish, our local market expertise coupled with our quality portfolio of properties enables us to sustain this improvement in operating results,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Capital Recycling

The Company continued its progress in selling its secondary assets and redeploying that capital into higher quality investments in its target markets. Year-to-date, dispositions have totaled $565 million. During the quarter, the Company sold ten retail assets for $66 million and continued the divestiture of its industrial assets by selling nine properties for $23 million from one of its remaining joint ventures. The Company expects to sell its interest in its other industrial joint venture by year-end. The Company redeployed $114 million with the purchase of two outstanding shopping centers and the opportunistic purchase of its venture partner’s interest in another. The Company purchased Roswell Crossing, a 202,000 square foot shopping center in Roswell, Georgia, an affluent suburb of Atlanta. Anchored by Trader Joe’s, Walgreens, OfficeMax and PetsMart, the trade area has average household incomes over $128,000 within a three-mile trade area and 66% of the residents are college graduates. The Company also purchased Pike Center, an 81,300 square foot community shopping center in affluent Rockville, Maryland. The center’s demographics boast 145,000 people within three miles and average household incomes of $110,000. Year-to-date, the Company has invested $235 million in quality shopping centers in great markets.

“We have delivered on every facet of the five-year strategic plan we laid out back in 2011. We continue to reduce the size of our secondary portfolio and recycle that capital into outstanding new properties while using some of the proceeds to reduce our leverage. We are not finished repositioning our portfolio, but our progress has been substantial,” said Drew Alexander, President and Chief Executive Officer.

Balance Sheet

On October 9, 2012, the Company closed on the sale of $300 million of 3.375% notes due in October 2022. The notes yield interest at 3.42% and were sold at a discount to par value. The proceeds from the transaction were used to pay down all amounts outstanding under the Company’s $500 million revolving credit facility and to redeem $54 million of its 3.95% Convertible Notes.

Subsequent to this transaction, the Company also called for the redemption of $72.5 million of its 6.95% Series E Preferred Shares.

“The $300 million notes offering was exceptionally well received by the market as the transaction was more than six times over-subscribed with $1.2 billion of demand. The sale of these notes allowed us to lock in very favorable long-term rates for ten years and pay off our revolving credit facility to provide liquidity for future debt maturities and growth opportunities,” said Steve Richter, Executive Vice President and Chief Financial Officer.

Recurring FFO Guidance

With respect to 2012 guidance, the Company once again raised the lower end of guidance for Recurring FFO from $1.78 to $1.84 per share to $1.80 to $1.84 per share and also improved its rental growth assumption from -1% to +2% to +2% to +4%. Recurring FFO guidance for 2013 is a range from $1.84 to $1.90 per share. The Company’s guidance for 2012 and 2013 and assumptions for 2012 are provided in its supplemental package.

Dividends

The Board of Trust Managers declared a common dividend of $0.29 per share for the third quarter of 2012. The dividend is payable in cash on December 14, 2012 to shareholders of record on December 6, 2012.

The Board of Trust Managers also declared dividends on the Company’s preferred shares. Dividends related to the 6.75% Series D Cumulative Redeemable Preferred Shares (NYSE:WRIPrD) are $0.421875 per share for the quarter. Dividends on the 6.50% Series F Cumulative Redeemable Preferred Shares (NYSE:WRIPrF) are $0.40625 per share for the quarter. All preferred dividends are payable on December 14, 2012 to shareholders of record on December 6, 2012.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on October 29, 2012 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 # 32594657). 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 September 30, 2012, 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 301 developed income-producing properties and 11 properties under various stages of construction and development. The total number of properties includes 295 neighborhood and community shopping centers and 17 other operating properties located in 22 states spanning the country from coast to coast representing approximately 59.8 million square feet. 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.

               
Weingarten Realty Investors
(in thousands, except per share amounts)
Financial Statements
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited)
Rentals, net $ 126,406 $ 119,746 $ 363,770 $ 347,882
Other Income   3,139     3,123     8,444     11,123  
Total Revenues   129,545     122,869     372,214     359,005  
Depreciation and Amortization 36,623 33,487 103,909 98,489
Operating Expense 26,583 22,494 73,088 66,777
Real Estate Taxes, net 15,259 14,658 43,557 42,054
Impairment Loss 159 31,658 9,908 51,319
General and Administrative Expense   6,421     5,762     21,105     18,898  
Total Expenses   85,045     108,059     251,567     277,537  
Operating Income 44,500 14,810 120,647 81,468
Interest Expense, net (28,109 ) (35,475 ) (88,587 ) (108,268 )
Interest and Other Income (Loss), net 1,818 (494 ) 4,786 2,984
Gain on Sale of Real Estate Joint Venture and Partnership Interests - - 5,562 -
Equity in Earnings (Losses) of Real Estate Joint Ventures and Partnerships, net 4,905 (3,034 ) (6,715 ) 3,942
Gain on Acquisition 1,869 - 1,869 -
(Provision) Benefit for Income Taxes   (733 )   (471 )   (462 )   67  
Income (Loss) from Continuing Operations   24,250     (24,664 )   37,100     (19,807 )
Operating Income (Loss) from Discontinued Operations 2,636 (12,272 ) 9,763 1,802
Gain on Sale of Property from Discontinued Operations   14,826     586     49,724     586  
Income (Loss) from Discontinued Operations 17,462 (11,686 ) 59,487 2,388
Gain on Sale of Property   335     392     859     1,588  
Net Income (Loss) 42,047 (35,958 ) 97,446 (15,831 )

Less: Net (Income) Loss Attributable to Noncontrolling Interests

  (1,774 )   2,738     (4,557 )   410  
Net Income (Loss) Adjusted for Noncontrolling Interests 40,273 (33,220 ) 92,889 (15,421 )

Less: Preferred Share Dividends

  (8,869 )   (8,869 )   (26,607 )   (26,607 )
Net Income (Loss) Attributable to Common Shareholders -- Basic $ 31,404   $ (42,089 ) $ 66,282   $ (42,028 )
 
Net Income (Loss) Attributable to Common Shareholders -- Diluted $ 31,404   $ (42,089 ) $ 66,282   $ (42,028 )
 
FUNDS FROM OPERATIONS
Numerator:
Net Income (Loss) Attributable to Common Shareholders $ 31,404 $ (42,089 ) $ 66,282 $ (42,028 )
Depreciation and Amortization 35,611 38,470 106,551 113,397
Depreciation and Amortization of Unconsolidated Real Estate
Joint Ventures and Partnerships 5,254 5,689 16,261 17,282
Impairment of Operating Properties and Real Estate Equity Investments 177 24,341 15,007 27,576
Impairment of Operating Properties of Unconsolidated Real Estate
Joint Ventures and Partnerships 57 5,253 19,946 5,664
Gain on Acquisition (1,869 ) - (1,869 ) (4,559 )
Gain on Sale of Property and Interests in Real Estate Equity Investments (15,140 ) (979 ) (56,047 ) (2,129 )
(Gain) Loss on Sale of Property of Unconsolidated Real Estate
Joint Ventures and Partnerships   (435 )   -     (558 )   10  
Funds from Operations -- Basic 55,059 30,685 165,573 115,213
Funds from Operations Attributable to Operating Partnership Units   -     -     -     -  
Funds from Operations -- Diluted 55,059 30,685 165,573 115,213
Adjustments for Recurring FFO:
Other Impairment Loss, net of tax 159 23,048 403 42,062
Severance Costs - - 2,123 -
Litigation Settlement, net of tax - - - (1,040 )
Extinguishment of Debt Costs, net of tax - 2,429 - 2,679
Acquisition Costs   981     12     1,473     276  
Recurring Funds from Operations -- Diluted $ 56,199   $ 56,174   $ 169,572   $ 159,190  
 
Denominator:
Weighted Average Shares Outstanding -- Basic   120,766     120,413     120,637     120,301  
 
Weighted Average Shares Outstanding -- Diluted   121,844     120,413     121,653     120,301  
 
PER SHARE DATA
Earnings Per Common Share -- Basic $ 0.26   $ (0.35 ) $ 0.55   $ (0.35 )
 
Earnings Per Common Share -- Diluted $ 0.26   $ (0.35 ) $ 0.54   $ (0.35 )
 
FFO -- Per Diluted Share
Net Income (Loss) Attributable to Common Shareholders per Share $ 0.26 $ (0.35 ) $ 0.54 $ (0.35 )
Adjustments for Reported FFO:
Impairment of Operating Properties 0.00 0.24 0.29 0.28
Depreciation, Amortization and Other Adjustments   0.19     0.36     0.53     1.03  
Reported Funds from Operations -- Diluted per Share $ 0.45 $ 0.25 $ 1.36 $ 0.96
Adjustments for Recurring FFO:
Other Impairment Loss, net of tax 0.00 0.20 0.00 0.35
All Other Adjustments   0.01     0.02     0.03     0.01  
Recurring Funds from Operations -- Diluted per Share $ 0.46   $ 0.47   $ 1.39   $ 1.32  
             
Weingarten Realty Investors
(in thousands)
Financial Statements
 
September 30, December 31,
2012 2011
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Audited)
ASSETS
 
Property $ 4,392,028 $ 4,688,526
Accumulated Depreciation (1,013,294 ) (1,059,531 )
Property Held for Sale, net 73,404 73,241
Investment in Real Estate Joint Ventures and Partnerships, net 300,471 341,608
Notes Receivable from Real Estate Joint Ventures and Partnerships 90,385 149,204
Unamortized Debt and Lease Costs, net 138,718 115,191
Accrued Rent and Accounts Receivable, net 77,741 86,530
Cash and Cash Equivalents 19,089 13,642
Restricted Deposits and Mortgage Escrows 13,813 11,144
Other, net   170,304     168,671  
Total Assets $ 4,262,659   $ 4,588,226  
 
LIABILITIES AND EQUITY
 
Debt, net $ 2,227,419 $ 2,531,837
Accounts Payable and Accrued Expenses 117,956 124,888
Other, net   120,433     107,919  
Total Liabilities   2,465,808     2,764,644  
 
Commitments and Contingencies
 
EQUITY
 
Preferred Shares of Beneficial Interest 8 8
Common Shares of Beneficial Interest 3,658 3,641
Additional Paid-In Capital 1,997,230 1,983,978
Net Income Less Than Accumulated Dividends (343,688 ) (304,504 )
Accumulated Other Comprehensive Loss   (25,939 )   (27,743 )
Shareholders' Equity 1,631,269 1,655,380
Noncontrolling Interests   165,582     168,202  
Total Liabilities and Equity $ 4,262,659   $ 4,588,226  

Source: Weingarten Realty

Weingarten Realty
Michelle Wiggs, (713) 866-6050

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