Weingarten Realty Announces Second Quarter 2009 Results
Houston, July 30, 2009 --- Weingarten Realty (NYSE: WRI) announced today the results of its second quarter ended June 30, 2009. Net income, on a diluted, per share basis was $0.35 for the second quarter of 2009, compared to $0.76 per share for the same period of 2008. The decrease in net income was primarily the result of a decrease in the gains on sale of properties from $41 million in 2008 to $11 million this period, as well as the dilution resulting from the Company’s common equity offering in April.
Operating and Financial Highlights
| | · | Funds from Operations (“FFO”) on a diluted per share basis was $0.61 for the second quarter of 2009, compared to $0.76 per share from the prior year. The FFO results were achieved after the common equity offering which diluted second quarter FFO by $.14 per share partially offset by the gains from the redemption of the convertible bonds; |
| | · | Despite market conditions retail occupancy increased slightly to 92.1% during the second quarter 2009 compared to 91.7% at the end of first quarter 2009. Total occupancy was down to 90.9% from 91.5% at the end of the previous quarter as a result of fallouts in the industrial division; |
| | · | During the second quarter of 2009, Weingarten executed 380 lease transactions resulting in $17.1 million of annual revenue. The 380 transactions were comprised of 158 new leases adding $9.2 million of annual revenue and 222 lease renewals which represents $7.9 million of annual revenue to our operating results; |
| | · | In the second quarter, the Company sold 32.2 million common shares which included the exercise of the over-allotment option by the underwriters, providing new liquidity of $439.1 million; |
| | · | Weingarten tendered for a portion of its near-term unsecured debt and convertible bonds, resulting in the redemption of $103 million of unsecured debt during the quarter and subsequent to quarter end, an additional $320 million of 3.95% convertible’s bonds being retired; |
| | · | During the second quarter of 2009, the Company’s New Development program also stabilized a retail project in Ft. Worth, Texas representing an investment of $11 million; |
| | · | During the quarter, the Company closed on the sale of our interest in Glenwood Meadows, one of our new developments for $15 million, generating merchant build income of $3.9 million. In addition, after quarter end, Weingarten sold a 200,000 square foot building in its expansion of ClayPoint Distribution Park for $11 million. This transaction produced a merchant build gain of $0.7 million net of tax in the third quarter and brings our total merchant build gains for the year to $0.14 per share; |
| | · | Subsequent to quarter end, the Company also closed a $71 million secured loan with a major life insurance company. |
“Our team has made tremendous progress in leasing space, strengthening our balance sheet, and right sizing our development pipeline” 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 second quarter of 2009. The dividend is payable in cash on September 15, 2009 to shareholders of record on September 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 September 15, 2009 to shareholders of record on September 7, 2009.
Existing Portfolio
Leasing demand remained steady and slightly above the Company’s 2009 forecast during the second quarter. Rental rates have somewhat softened on signed leases, although, the Company still completed 380 new leases and renewals, totaling 1.3 million square feet, during the quarter. For leases commencing during the quarter, the average rental rate increased 12% on a GAAP basis.
Retail occupancy increased to 92.1% during second quarter 2009 compared to the first quarter of 2009. This is still below the 94.2% seen in the second quarter of 2008, but we were able to realize positive traction during the quarter. Overall occupancy was down during the second quarter to 90.9% compared to 93.6% during the same period in 2008.
Overall occupancy is expected to remain within a half of a percentage point of its current level through the balance of 2009.
Same Property Net Operating Income (NOI) was down 5.6% overall during the quarter, with retail properties down 6% and industrial properties down 2.2%. The decrease in Same Property NOI was primarily a result of lower average occupancy for the quarter.
“While these results are below our prior results they are in-line with our 2009 Business Plan. I believe we will end the year with Same Property NOI at -2% to -3%. However, the fact that our retail occupancy increased over last quarter shows the benefits of having a quality portfolio as well as the incredible efforts and determination of our team” said Johnny Hendrix, Executive Vice President of Asset Management.
New Development
The Company’s total new development pipeline at the end of the second quarter of 2009 includes 24 properties at various stages of development with an estimated Weingarten investment of $449 million when completed. At June 30, these projects were 87% funded leaving minimal costs left to complete the 24 development properties.
During the second quarter one property, Horne Street Market, reached stabilization representing a total investment of $11 million and a final ROI of 8.6%. Currently, there are four remaining development projects that are all estimated to stabilize by the end of the year. These projects were 72% leased at quarter end, including tenant-owned square footage. Each of the remaining 20 projects stabilizing in 2010 and beyond have anchor tenants secured, with the overall pipeline 68% leased, including tenant-owned square footage.
The earlier referenced sale of a portion of the ClayPoint Distribution Park adjusts the occupancy for the remaining development properties projected to stabilize this year to 82% net of non-owned anchors and 90% including tenant-owned square footage.
Portfolio Enhancements
Weingarten continues to improve the quality of the portfolio with dispositions totaling $51.2 million in the second quarter. The sale of these seven properties included $35.7 million from five operating properties, with an average cap rate of 8.3% and merchant build sales of $15.5 million from two other transactions.
The Company continues to reposition the portfolio with dispositions of properties under contract and letters of intent currently at $46 million and $134 million, respectively.
Balance Sheet
On June 1, 2009, Weingarten tendered for a portion of its near-term unsecured debt and convertible bonds resulting in a total of $423 million of principal being retired during the second quarter and subsequent to quarter end. The results of the tender, plus the convertible notes repurchased in the open market in November of last year and during the first half of 2009, reduced our potential near term debt maturities by $543 million. These transactions resulted in an economic gain of $38 million since the fourth quarter of last year.
Subsequent to quarter end, the Company closed 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%. With the addition of this loan, Weingarten has closed $184 million of secured financings year-to-date.
“We have made enormous strides repositioning our balance sheet since the end of the first quarter through our common equity offering, several secured loans, and the recently completed redemption of unsecured notes and convertible bonds. The combination of these transactions has significantly improved our liquidity by reducing near- and immediate-term debt maturities to manageable levels,” stated Steve Richter, Executive Vice President and Chief Financial Officer.
Outlook
The Company confirmed full year FFO guidance of $1.88 to $2.12 per share. This guidance excludes $25.5 million or $0.22 per share of accounting gains from the redemption of the debt and convertible notes. However, if the gains are added back, full year FFO would be in the range of $2.10 to $2.34 per share. The $25.5 million of gains include the gains of $8.9 million recognized on transactions completed as of June 30, 2009, plus the gains of $16.6 million from the tender offer for the convertible bonds which closed subsequent to quarter end.
“I think the great strength of this company will be evident in our operating performance for 2009 and beyond. Our ability to manage and lease a large portfolio of properties in any economic environment is key to creating shareholder value,” said Drew Alexander. “Weingarten is moving forward with what is does best, leasing space to top tier supermarkets and necessity based retailers in our high quality retail centers. The repositioning of our balance sheet also positions us to take advantage of the opportunities that we believe will be available later this year and into 2010.”
Conference Call Information
The Company also announced that it will host a live webcast of its quarterly conference call on July 31, 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 is also 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 16175588 until 11:59 PM Central Time on Aug 3, 2009.
About Weingarten Realty Investors
Weingarten Realty Investors (NYSE: WRI) is a commercial real estate owner, manager and developer. At June 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 378 developed income-producing properties and 24 properties under various stages of construction and development. The total number of properties includes 318 neighborhood and community shopping centers located in 22 states spanning the country from coast to coast. The company also owns 81 industrial projects located in California, Florida, Georgia, Tennessee, Texas and Virginia and three other operating properties located in Arizona and Texas. At June 30, 2009, the company’s portfolio of properties was approximately 71.4 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.
