Weingarten Realty Announces Third Quarter 2009 Results and New Joint Venture for the Southeast Retail Portfolio

October 26, 2009 7:00 AM EDT

HOUSTON--(BUSINESS WIRE)-- Weingarten Realty (NYSE: WRI) announced today the results of its third quarter ended September 30, 2009. The Company reported a net loss of $9.4 million or $0.08 per diluted share compared to net income of $0.32 per share for the same period of 2008. The net loss for the third quarter included the effects of a non-cash impairment charge of $46.1 million or $0.39 per diluted share primarily from its new development program and a $16.5 million or $0.14 per diluted share gain from the repurchase of its debt securities, both of which are non-recurring. The third quarter's per share results were also affected by the dilution from the $439 million common share offering in April of this year, resulting in a significant increase in the weighted average shares outstanding increasing from 84.3 million shares to 119.4 million shares.

Operating and Financial Highlights

    --  Funds from Operations ("FFO") excluding the non-recurring items
        mentioned above were $59.3 million or $0.50 per diluted share for the
        third quarter of 2009, compared to $59.9 million or $0.71 per share in
        2008. Including the non-recurring items, FFO for the quarter was $29.7
        million or $0.25 per diluted share;
    --  Overall occupancy increased during the third quarter to 91.1% from 90.9%
        in the previous quarter and retail occupancy was flat
        quarter-over-quarter at 92.1%;
    --  The Company's balance sheet and liquidity has been significantly
        improved by eliminating or extending near-term debt maturities. Since
        December 31, 2008, the Company has reduced debt maturities through 2011
        by approximately $1 billion;
    --  In the third quarter, the Company sold $100 million of ten-year
        unsecured notes, closed on two secured loans totaling $128.3 and
        subsequent to quarter-end, closed an additional secured loan for $26.6
        million;
    --  Weingarten closed on the tender of its convertible bonds, resulting in
        the redemption of $320 million of 3.95% convertible bonds;
    --  During the quarter, the Company closed on the sale of one operating
        property, two land parcels and a 200,000 square foot building in its
        expansion of ClayPoint Distribution Park for $17 million. The ClayPoint
        transaction produced a merchant build gain of $0.5 million, net of tax,
        in the third quarter and brings total merchant build gains for the year
        to $0.13 per share, net of taxes;
    --  Also, subsequent to quarter-end, the Company closed on the first phase
        of the Southeast Retail Joint Venture which in total includes six
        properties, with a total value of approximately $160 million. Weingarten
        will retain a 20% ownership interest in the joint venture. With the
        receipt of these proceeds, the Company has reduced the balance
        outstanding under its $575 million revolving credit facility to zero.

"This has been a very turbulent year. However, I am very proud of the Weingarten team and the strides the Company has made throughout 2009. Third quarter operating results were very successful, especially when you take into account the dilution from the equity offering, the progress we have made to right size the balance sheet and the opportunities we have taken this year through dispositions of non-core assets, all while keeping occupancy stable," stated Drew Alexander, President and Chief Executive Officer.

Dividends

The Board of Trust Managers declared a common dividend of $0.25 per share for the third quarter of 2009. The dividend is payable in cash on December 15, 2009 to shareholders of record on December 7, 2009.

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 6.95% Series E Cumulative Redeemable Preferred Shares (NYSE: WRIPrE) are $0.434375 per share for the same period. 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 also payable on December 15, 2009 to shareholders of record on December 7, 2009.

Existing Portfolio

Conditions across most of the existing portfolio appear to be stabilizing as retailers are learning to adapt to current market conditions by managing inventories. Overall occupancy increased to 91.1% during the third quarter compared to 90.9% during the second quarter of 2009. Retail occupancy was flat quarter-over-quarter at 92.1%, the second straight quarter retail occupancy has not declined. Industrial occupancy saw a slight up-tick to 88.0% from 87.7% in the second quarter of 2009. Overall occupancy is expected to remain at around 91% through the balance of 2009.

For leases commencing during the quarter, the average rental rate increased 3.8% on a GAAP basis. Year-to-date rental rates have increased 8.1%, however this metric is expected to move to a negative number in the fourth quarter as some of the leases signed in the first six months of 2009 begin to commence at lower rental levels.

The Company completed 393 new leases and renewals during the quarter, totaling 1.2 million square feet and representing $17.5 million of annual revenue. The 393 transactions were comprised of 176 new leases and 217 lease renewals which represent annual revenue of $7.5 million and $10.0 million, respectively. New leases and renewals during the quarter were up from third quarter of 2008 where 305 new leases and renewals were completed.

Same Property Net Operating Income (NOI) was down 4.0% overall during the quarter, with retail properties down 4.0% and industrial properties down 3.9%. This is in-line with management's expectations and the Company continues to believe it will meet the prior guidance for the full year of -2% to -3%; however it may be towards the bottom end of the range. The decrease in Same Property NOI was primarily a result of lower average occupancy for the quarter compared to the same period in 2008.

"Operations seem to have stabilized and we can see an improving future. The leasing team is continuing its forward momentum of leasing space, especially in the big box arena. In addition, we are encouraged that Weingarten's anchors including supermarkets, general merchandise stores, discount clothing and restaurants continue to outperform other categories," said Johnny Hendrix, Executive Vice President of Asset Management.

Balance Sheet

The Company continued to strengthen its balance sheet during 2009 with several significant financings and other transactions. These transactions allowed the Company to reduce its revolving credit agreement to zero subsequent to quarter-end and significantly reduced near term maturities.

Weingarten completed the tender of its convertible bonds, resulting in a total of $320 million of principal being retired during the third quarter.

Also, during the quarter and subsequent to quarter-end, the Company reported it closed three secured loans. First, the Company completed a $71 million secured loan with a major life insurance company. The loan has a seven-year term and is secured by five retail shopping centers with an interest rate of 7.4%. Secondly, the Company closed a $58 million secured loan with another life company. This loan has a ten-year term at a 7% interest rate, and is secured by ten industrial properties. Subsequent to quarter-end, the Company closed the final secured loan for $27 million with a major bank. With the addition of these loans, Weingarten has closed $268 million of secured financings year-to-date.

Additionally, the Company sold $100 million of ten-year unsecured notes with a five-year call option and an interest rate of 8.1%. The notes had a par value of $20 and were sold in the retail market. The notes are listed on the NYSE under the ticker symbol "WRD".

"Despite the turbulent economy and difficult financial markets, we have executed the liquidity plan that we outlined at the beginning of the year very effectively. The team has reduced leverage to around 46%, significantly reduced total debt maturities through 2011 to only $485 million and provided adequate liquidity allowing the Company to focus on growth opportunities," stated Steve Richter, Executive Vice President and Chief Financial Officer.

New Joint Venture

The Company also reported that subsequent to quarter-end, it closed on the first phase of the Southeast Retail Joint Venture, which in total includes six properties for a total value of $160 million. The first phase, which includes four unencumbered properties, was sold to the Joint Venture for $114 million under an all equity arrangement. The Joint Venture is currently in the secured market to leverage these assets and anticipates closing the loan before the end of the year. The two remaining properties, which have existing mortgages, will close upon the Joint Venture's assumption of the loans. The new Joint Venture is targeting 60% leverage and Weingarten will retain a 20% interest in the assets.

"We are very pleased to partner with Jamestown, a highly respected German manager of real estate funds, founded in 1983 with almost $8 billion invested in US assets. Weingarten has a long, successful history of performing well for its partners and we are pleased to have Jamestown in this group," stated Drew Alexander.

New Development

The Company performed a thorough analysis of each property in the New Development program during the third quarter, resulting in an impairment of $43 million, after tax. Additionally, the Company stabilized seven properties, some earlier than normal (this resulted in moving the project from its New Development program into operating properties) and transferred $107 million of total investment on projects where buildings had yet to commence to Land Held for Development.

After transferring the properties to Land Held for Development and recognizing stabilizations during the third quarter, the new development pipeline now includes 13 properties at various stages of development with an estimated Weingarten investment of $242 million when completed. Each of the remaining 13 projects stabilizing in 2010 and beyond have anchor tenants secured, with the overall pipeline 83% leased, including tenant-owned square footage.

The Company reported that through third quarter, they delivered $110 million in completions which meets its 2009 guidance of $100 - 130 million.

Seven properties were stabilized during the third quarter, representing a total investment of $79 million with a current return on investment of 7.0%. These seven properties averaged 93% leased at quarter-end, including tenant-owned square footage.

Portfolio Enhancements

Weingarten disposed of $17 million of assets in the third quarter at an average cap rate of 8.4%. Subsequent to quarter-end, an additional $47 million of assets were sold, bringing year-to-date dispositions to $163 million at an average cap rate of 8.1%. During the third quarter the Company slowed the disposition program due to successfully eliminating any liquidity issues. Therefore, the Company is reducing its previous guidance of $300 million in one-off dispositions to a range that falls closer to $200 to $250 million in total one-off dispositions for 2009. This guidance does not include the sale to the Southeast Retail Joint Venture which closed subsequent to quarter-end.

Outlook

The Company, based on the performance of its quality portfolio, increased full year 2009 FFO guidance from a range of $1.88 to $2.12 per share to a range of $2.08 to $2.16 per share, excluding the $0.39 per share effect of the non-cash impairment charge and $0.23 per share of gains from the retirement of debt.

The Company reported that its 2010 budget process is not finalized, however management anticipates full year 2010 FFO to be in the range of $1.54 to $1.78 per share.

"As I have discussed many times before, Weingarten has a seasoned and experience management team that worked diligently to ensure maximum value be created through each transaction during the third quarter, as well as, throughout the year," said Drew Alexander. "We are optimistic that operating fundamentals will continue to improve and we will begin to grow the portfolio and FFO. While acquisition opportunities have been limited thus far, we do believe we are entering a period of opportunity for creating shareholder value through acquiring assets in this turbulent real estate market."

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on October 26, 2009 at 10:00 a.m. Central Time. The live webcast can be accessed via the Company's Web site 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 (877) 763-1324 (no confirmation code). A replay and Podcast will also be available through the Company's Web site starting approximately two hours following the live call or can be heard by calling (800) 642-1687, identification number 29020017 until 11:59 PM Central Time on October 27, 2009.

About Weingarten Realty Investors

Weingarten Realty Investors (NYSE: WRI) is a commercial real estate owner, manager and developer. At September 30, 2009, 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 385 developed income-producing properties and 13 properties under various stages of construction and development. The total number of properties includes 315 neighborhood and community shopping centers located in 22 states spanning the country from coast to coast. The company also owns 80 industrial projects located in California, Florida, Georgia, Tennessee, Texas and Virginia and three other operating properties located in Arizona and Texas. At September 30, 2009, the company's portfolio of properties was approximately 72.3 million square feet.

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.

Financial Statements

Weingarten Realty Investors

(in thousands, except per share amounts)

                        Three Months Ended            Nine Months Ended

                        September 30,                 September 30,

CONDENSED CONSOLIDATED  2009           2008           2009          2008
STATEMENTS OF INCOME

AND FUNDS FROM          (Unaudited)                   (Unaudited)
OPERATIONS

Rentals, net            $ 139,636      $ 149,725      $ 422,106     $ 441,288

Other Income              4,908          4,242          12,321        10,310

Total Revenues            144,544        153,967        434,427       451,598

Depreciation and          37,159         35,368         112,836       115,281
Amortization

Operating Expense         25,733         26,045         76,014        77,151

Ad Valorem Taxes, net     18,275         19,967         55,012        54,620

Impairment Loss           32,774                        32,774

General and               6,178          5,816          19,198        19,774
Administrative Expense

Total Expenses            120,119        87,196         295,834       266,826

Operating Income          24,425         66,771         138,593       184,772

Interest Expense, net     (36,431   )    (40,878   )    (115,247 )    (118,724 )

Interest and Other        3,596          1,171          8,504         3,919
Income, net

Equity in (Loss)
Earnings of Real          (4,763    )    5,151          2,783         15,537
Estate Joint Ventures
and Partnerships, net

Gain on Redemption of
Convertible Senior        16,453                        25,311
Unsecured Notes

Gain on Merchant          491            1,418          18,619        8,240
Development Sales

Provision for Income      (4,364    )    (701      )    (7,071   )    (2,991   )
Taxes

(Loss) Income from        (593      )    32,932         71,492        90,753
Continuing Operations

Operating (Loss)
Income from               (1,294    )    2,016          1,250         8,398
Discontinued
Operations

Gain on Sale of
Property from             398            4,520          7,385         53,983
Discontinued
Operations

(Loss) Income from
Discontinued              (896      )    6,536          8,635         62,381
Operations

Gain (Loss) on Sale of    994            (43       )    12,374        101
Property

Net (Loss) Income         (495      )    39,425         92,501        153,235

Less: Net Income
Attributable to           (20       )    (2,515    )    (2,894   )    (6,968   )
Noncontrolling
Interests

Net (Loss) Income
Adjusted for              (515      )    36,910         89,607        146,267
Noncontrolling
Interests

Less: Preferred Share     (8,869    )    (9,114    )    (26,607  )    (25,842  )
Dividends

Redemption Costs of                      (860      )                  (1,850   )
Preferred Shares

Net (Loss) Income
Available to Common       ($9,384   )  $ 26,936       $ 63,000      $ 118,575
Shareholders--Basic

Earnings Per Common       ($0.08    )  $ 0.32         $ 0.59        $ 1.42
Share--Basic

Net (Loss) Income
Available to Common       ($9,384   )  $ 26,936       $ 63,000      $ 118,575
Shareholders--Diluted

Earnings Per Common       ($0.08    )  $ 0.32         $ 0.59        $ 1.41
Share--Diluted

Funds from Operations:

Net (Loss) Income
Available to Common       ($9,384   )  $ 26,936       $ 63,000      $ 118,575
Shareholders

Depreciation and          35,646         34,282         109,446       114,535
Amortization

Depreciation and
Amortization of           4,850          3,137          13,415        8,698
Unconsolidated Joint
Ventures

Gain on Sale of           (1,383    )    (4,470    )    (19,736  )    (53,437  )
Property

(Gain) Loss on Sale of
Property of                              2              (4       )    (12      )
Unconsolidated Joint
Ventures

Funds from              $ 29,729       $ 59,887       $ 166,121     $ 188,359
Operations--Basic

Funds from Operations
Per Common              $ 0.25         $ 0.71         $ 1.56        $ 2.25
Share--Basic

Funds from              $ 29,729       $ 59,887       $ 166,121     $ 188,359
Operations--Diluted

Funds from Operations
Per Common              $ 0.25         $ 0.71         $ 1.56        $ 2.23
Share--Diluted

Weighted Average
Shares                    119,384        83,795         106,186       83,739
Outstanding--Basic

Weighted Average
Shares                    119,384        84,316         106,745       84,288
Outstanding--Diluted

                        September 30,  December 31,

                        2009           2008

CONDENSED CONSOLIDATED  (Unaudited)    (Audited)
BALANCE SHEETS

Property                $ 4,806,661    $ 4,915,472

Accumulated               (861,547  )    (812,323  )
Depreciation

Property Held for         51,007
Sale, net

Investment in Real
Estate Joint Ventures     311,353        357,634
and Partnerships, net

Notes Receivable from
Real Estate Joint         323,141        232,544
Ventures and
Partnerships

Unamortized Debt and      109,661        119,464
Lease Costs, net

Accrued Rent and
Accounts Receivable,      84,948         103,873
net

Cash and Cash             104,694        58,946
Equivalents

Restricted Deposits       14,526         33,252
and Mortgage Escrows

Other, net                92,854         105,350

Total Assets            $ 5,037,298    $ 5,114,212

Debt, net               $ 2,724,888    $ 3,148,636

Accounts Payable and      152,022        179,432
Accrued Expenses

Other, net                98,791         90,461

Total Liabilities         2,975,701      3,418,529

Commitments and                          41,000
Contingencies

Preferred Shares of       8              8
Beneficial Interest

Common Shares of          3,605          2,625
Beneficial Interest

Accumulated Additional    1,949,308      1,514,940
Paid-In Capital

Net Income Less Than      (80,015   )    (37,245   )
Accumulated Dividends

Accumulated Other         (27,814   )    (29,676   )
Comprehensive Loss

Shareholders' Equity      1,845,092      1,450,652

Noncontrolling            216,505        204,031
Interest

Total Liabilities,
Shareholders' Equity    $ 5,037,298    $ 5,114,212
and Noncontrolling
Interest

    Source: Weingarten Realty

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