WRI - Earnings call transcript Q1 2019 | Weingarten Realty Investors

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Operator

Good morning, and welcome to the Weingarten Realty, Inc.

First Quarter 2019 Earnings Call. My name is Brandon, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. this being note, Please Instructions] conference recorded. is [Operator it Michelle Wiggs. I will to turn now And over Michelle, begin. you may

Michelle Wiggs

Good morning, and conference call. welcome to our first quarter XXXX

Joe Joining Hendrix; Drew is Shafer. Richter; me Alexander, today Steve Johnny

results as statements during As reminder, of are subject Relations funds operations, both this of which Act. Litigation believe to supplemental certain are Private I’ll in could and such located Drew made Weingarten’s operating These based FFO, to within variety under measures call, we is over call differ a from results. from filings. uncertainty NAREIT, available may core Alexander. current Investor circumstances. and the information of these during in financial to due understand Reconciliation information statements expectations package the to changes meaning the and those are to better non-GAAP is management statements investors the such turn More analysts this forward-looking factors. the certain and tab course Actual statements factors call our help contained a reference in of our or Securities projected to Reform the Also the measures, these forward-looking now upon Company’s materially make non-GAAP management’s website. about in SEC financial

Drew Alexander

be transformation to will exhibits I’m Thank feel again quarter, you, start Michelle, portfolio. growth of and very joining what of of announce our Same-property another NOI a we pleased good once you thanks us. to all good great X.X%, to for significant year. a a

quality future a pipeline. of have a balance well much-improved in we lineup solid somewhat us strength of continues the up WRI environment in anchored of as our best-in-class the estate for and grocery post others to the Acquisition and a challenges, retail overall closed positioned diversification couple While real our on to sheet, has growth. Coupled the tenant base, our its of activity metrics. merchant center enables the picked is with Phoenix have

the that we’ve lately our by year. quality be encouraged balance optimistic properties seen are able are cautiously the and during will the We of portfolio product to add to some we

of The is have projects to They the feet Shopping we market. Driscoll units with they’re this will Oaks, cost of at mixed-use nicely. DC at the retail residential square their XX,XXX and valuable XXX non-core in we open estimated As albeit, a from half should challenges, of pieces, anchor, of of is in Recall, total of high-rise our residential over plan We’ll to have online timing and Arlington, XXXX. around floor modest widely mid-XXXX. benefit Harris area million. Teeter final Center to at units DC, new include million stabilization expected prominent scheduled River currently a expect Amazon $XX properties, we’ve luxury the to noted has Centro of a investment, the With supermarket dates to in and amount project ground close will but pre-leasing respect strong Northern to have our the XXXX. sell year-end XX-story $XXX estate in progressing foot projects. slower revenue impact latter continue were continue property some be and development locations to Alex have XXX,XXX both proximity activities in year at sold Arlington Centro and rate. Houston, ahead is approximately been many dispositions, and begin expect year-end. residential construction, Both to which moving strong real Oaks HQX River successful West of At Construction before Virginia the around projects available square activities these here the

quarter. other many to projects great on financials? work pipeline A have on those the we solid will and with the the redevelopment focus. continue excellent provide invested that Steve, in capital returns We

Steve Richter

Thanks, Drew. Good morning, everyone.

get this quarter, GAAP which adopted I standard, new our leasing Before into we the effective effects. out to that specifics has several the wanted quarter, of I point

is was previously of of discussed, most overhead we indirect over in first which the year. expensed leasing in As the last as being costs, significant and $X the G&A change expensing resulted million legal additional quarter that capitalized

authorities. estate are Second, expenses, and paid real to exclude the we required by taxes from revenues taxing now tenants directly to

on Third, recorded impact XX the we ground leases. Operating and ground are was the rent and balance expense on leases are and minimal. accordingly to the the now FFO sheet net lessee amortized

called rules what accounts. and new are the and expense there for bad presenting allowance determining be Finally, debt doubtful used to for

of an expense is included For on where account these to the additional have any in collected. of Page be the it has adjustment WRI, adjusted we some not The that will are nor quarter for by we probable first retained supplemental. believe AR in we think details XX reclassifications earnings resulted adequately as of don’t it all this

leasing is the decrease XXXX, but XXXX. disposition on cost Now FFO in share we was activities, prior quarter. the $X.XX the year. per which compared XX, per for ended March to share primarily cost quarter $X.XX $X.XX for quarter and first due per XXXX million for of of the to share to Core not expensed quarter $X.X The us the indirect same in

Additionally, of on increased driven the our by income XXXX and NOI rents gain primarily from – property per incremental extinguishment by $X.XX offset share. These decreases in minimum redevelopments. base increase driven debt developments and a same included strong were

in expenses income offset is included reconciliation core of by FFO increased We net G&A as share in release. A also our press recognized compensation to restricted expense release. for noted the press awards other

quarter strong schedule capitalization until XXXX. debt by no net sheet Our a in sector. well-laddered was to was end, market strongest supported and has the remains maturity amongst our At XX.X%, balance times a significant to total that debt EBITDA X.X maturities

pursue to that stability Our flexibility great provide arise. metrics credit opportunities and liquidity and strong long-term significant

guidance, amounts affirming earnings to our quarter. all prior we As are in presented

on details of included our are the Page Johnny? All supplemental. XX of guidance our of

Johnny Hendrix

Thanks, Steve.

We’re was XXX Leasing Fallout a has very operating rent. impact remains new our annual strong low. signed leases quarter. with XX.X%. pleased Occupancy of The for renewals and remained strong record results in minimal. this with at million $XX bankruptcies remains

redevelopment with program very produce redevelopment strong was our returns. to same-property risk-adjusted continues X.X%. And a finally, NOI strong Our

Just a update brief on the bankruptcies.

We rent have for May be Kmarts. and and we expect well. may April soon. closed received still two rejected One rent is store it closed We get to as the

affirmed. be We remaining will the expect Kmart

We’re working on Payless have. we remaining stores eight the leasing

four going we lease are to rent spaces The of would of several those XXXX. the for expect fourth months over one for spaces negotiating those next as has now. liquidate. paying by We closed Company toy spaces. the expect and those be back a online Leasing be leased three been end the nicely shop the to they I has

Mattress we four should stores quickly. get we back $XXX,XXX re-lease and have We in representing annual One locations any These good rent. generally are

will high leasing cautiously each year, quality for the these been direct so in accounted portfolio fallout during highest has through year first XXXX. the of lower guidance lower we’ve this the tenants to we’re quarter and fallout This XX% continue our Our the is fallout of result Overall recent transformed optimistic a quarter was a Normally, has the of years. bankruptcies. ago. than

around to supermarket our foot. and U.S. are of average end with $XXX in sales per foot. the is $XXX the incredibly square per sales supermarket This average quarter, As square the compares of strong

to and medical service XX.X%. strong discount lease restaurants. to remains We continue tenants, Occupancy clothing, mostly at uses, fitness facilities

point Importantly, have spread commenced. we and XXX basis signed a between

which six annual XXXX. We months, over million commence $X will fuel NOI, square same-property of in in XXX,XXX expect the rents the to feet next about nice gains or rest

an added was the Most up rent, the strong increase on X.X%. additional we’ve disclosure NOI grew the driven by was XX of a quarter. which supplemental. Same-property see, You’ll X.X% Page very minimum during of

was It’s the metric In we of few result rent in The to a for financial addition rent earlier renewals lower-than-expected crisis. XXXX, signed fallout, were to of appears tenants larger that growth at X.X%. the that a originally couple operating prior commenced the expected. box one we than low

for negative rent X.X%. X%, leases renewals quarter, new XX.X%. almost box renewals space grew were the at while a grew During at Shop

as visibility of and mid box have the We the the for expect we renewals increase some in single-digit to those to XXXX balance range.

like extract easing in efforts. options, adding restrictions supplement benefits were our notice, buildings for of flexibility longer lead which in the time redevelopment these to option or As non-economic able part more renewals, eliminating and of will we some reducing future,

Our remains expected excluding an we shopping program centers investment of XX estimated returns redevelopment as and redevelopment strong under XX%. have River with million, of around $XX Oaks

These XX,XXX is feet fronting in added square buildings program. Shopping the Trails a located close to San which This Texas. center anchors supermarket Antonio, Center quarter, our in HEB, are to shopping the in Interstate Fiesta with XX, two and dominant we outparcel

below is feet shop This has of quarter, a high center, square the we market center a Madison purchased Safeway has During couple years. improve on volume of also we Center the Shopping can rent. foot square Village XX,XXX Arizona. in with the next we The over tenancy feel shopping which XX,XXX space, first

We expect over a net annual income compound growth X%. operating

the a diligence there to in we of have pipeline that complete, no like, have lot close. few properties properties other guarantee Drew? is We still we so a those

Drew Alexander

interest we us, behind well grocery-anchored you happy to for center, that start extensive a great and Great value of thank low efforts Company properties to our great are results. velocity great acquisition of call positioned This feel the all NOI future leasing largely people, shareholders. your tenant a a maximize now long-term I the today continued platform program fallout, balance nice been positioned our Johnny. disposition has great Operator, With accelerated joining great take sheet. be XXXX, for same-property great transformation and questions. equals We Thanks, we’d our have growth. good and to a for Weingarten. in for the growth,

Operator

the begin have McElroy. And you. Thank ahead. Please now Citi, [Operator we Christy go We’ll session. Instructions] question-and-answer from

Christy McElroy

Hey anomaly per related QX. Hi. box are option if Dixie additional wondering stores the just Good renewals involved this renewal And on with could an the was a on some reduction on square spread rent many everyone. foot in renegotiation Johnny, exposure? color more looking How color to morning, provide you your I’m this on for in that.

Johnny Hendrix

Yes, Johnny. morning. of original we Good were XXXX. early these the that is in renegotiation on this actually Christy, did leases boxes Hey

be perspective, the but increase been an X.X%. this in I increases communicated on for I place to bit of $XX.XX as very of base overall and rent they’ve average Company’s they Number the of overall that through situation, for from The would the I the expect expect did strong. will the little year, averaged for $XX.XX bit last a closer rest of renegotiations, the lot have So year. anomaly. – We and a a quarter the this this $XX.XX years. for double-digits. renewals be boxes of box mid-single make couple tenants the do XX digits that $XX.XX sure, a an leverage box to we just that’s quarter some don’t is rest quarter. bit that things. one, reported see renewals want clearly was have of for again And we in the visibility XXXX again about that from an exerted. Again anomaly these were and of last this from particular the Company a We at the to

Christy McElroy

doing concerned sort retailer aggressively any sort their line tenants? be with come this about this to through may them rent not more roll? you’ll stores continue that we of programmatically as XXXX to is see this trying so this should to such other in but the sort perhaps this slower of have year, box happening get your across And any you maybe of of your that exposure rent down And we go

Johnny Hendrix

tell I is that you as every much they pressure as Christy, can. retailer possibly exerting would

over. all We are reductions getting for requests

very part, strength portfolio are a For we situations. strong and able negotiate those the most to have from we in

be this So that I see and issue think forward. concerned this don’t be to ongoing would about as an going overly is wouldn’t I an situation, going I

Christy McElroy

thank Okay, you.

Johnny Hendrix

Thank you.

Operator

we McGinniss. Please Scotiabank, Greg From ahead. have go

Greg McGinniss

how to guidance just what you items and like Hey, assuming Payless same-store the in metric due you for to to for firm. top also sense there range I’d get that good of bottom year to and morning. the trend or the well? a there then, or could Steve, take Kmart And expect still items range? are the for the above the Does you that are came NOI other headwinds but as quarter,

Steve Richter

a good The there’s of quarter pieces. morning. quarter, was first Good moving lots

the what could it’s mentioned, high to – – the to – probably low Johnny the is the move fallout. end, As issue the still biggest

XXXX are in XXXX have conservative. the or We will still was we if that – overall. of XXXX our the well extremely for Again, in fallout guidance, bode continues low, year, QX it balance through

than other of things mentioned rents, really Accelerating on to cetera. et commencement really and the as leases, tough fallout I what it’s go helped that side, obviously the guess cause to up, think quicker fallout downside could I the of So positive well. on go leasing to to

in really for wind the So predict the we’ll balance up it’s difficult to the this of to year. early year where

Johnny Hendrix

the really Greg, rent, the Hi, is mention low. to want not as store. that’s you the Kmart this Placerville of Johnny. is rent is that a I remember, lot And just

it’s think I about a $XX,XXX month.

the talked not that have about. number. that’s And bankruptcies. X, kind big looming The is there obviously a huge that one thing So out is is that we has everybody the of Pier

Our about annual rent. low, $X relatively exposure them to in is million

have loss file we probably – they for that today, So and wouldn’t even bankruptcy XXXX. if much rent

hurt. would already bankruptcies there it, For not the rest definitely big that aware we’re that are currently then of, of

Greg McGinniss

selling lot development a the next I how investment about ground-up pipeline appreciated. are stabilization, to left considering Amazon there, to but development thinking color those few you planning over assets recognize years? a deliver are you the next years, be few on more still Okay, or kind contribute about still those Virginia of bit. the coming portion investments town thanks. And long-term DC, there’s stabilize on And think would multifamily gears, thinking over any multifamily about of to shifting how additional then

Drew Alexander

Greg, morning, it’s good Hey, Drew.

the of works, use the good developments just think as project but we’re very how we with of mixed DC the all interrelate. the thought the sell a everything comfortable was them we’ve have two stabilized, to articulated So after original after not understanding really how I

So change. it’s hope that about been that may I our off always view flexible time and we’ve some on something

hold opportunistic place So about jobs as evaluate take get offers on somebody we we so. if us or might you attractive and venture and price, closer, coming – really something XXXX really joint it. might mentioned, is with the Amazon longer, will that be until we those don’t It as a don’t create those or certainly we’d

I on are a projects to big digest opportunities, don’t more are our said until but three the things if digest As we but That our amount we looking did as don’t expertise that some not the mixed resi sheet. balance multifamily before, we core new we The have. any really multifamily looking the on exposure mentioned we nicely would some the The were have three we it, the on add with structure we add of at until to going appreciate think not working balance have. where sheet projects we’re added more we’re and they very not would development tremendous we new and we it’s Seeing before, our doing said, some we I do like things, think Whittaker, pipeline. to comfortable we be development there’ll of use, other

just and We’re the demand willing tenants pay not the seeing to the rents.

and we product. On add portfolio existing go hand, to seeing our alluded redevelopment his Johnny remarks, in tremendous the other as opportunities number of into a are

We’re make to that also us. starting to see sense some acquisition opportunities

to at small will and really that our acquisitions new not think a lot I things. capital development few of So of redevelopments do a we’ll go likely more and that are we lot looking a

Greg McGinniss

Thanks, Drew. the Appreciate color.

Operator

Craig From America, Bank go Hello? we of Craig? Please Schmidt. ahead. have

Craig Schmidt

My questions been asked been questions thanks. – so have my asked, have

Operator

Okay. Sure.

Drew Alexander

Good Thanks. Craig. morning,

Operator

Street From go we Please ahead. Advisors, have Tibone. Green Vince

Vince Tibone

quarter. leases lower weighted average Hi, The morning. term new this to trend continue lease for good

the a negotiating tenants mix is than this actively if wondering shorter past? Just issue leases in or

Johnny Hendrix

there’s would just this as some be the longer I clearly many normally of actually in leases, Vince, with. even Yes, have may other quarter Hi, to really renegotiating this is morning. signed negotiating tenants issue. for change no is this new relative area the mix particularly boxes, leases have. boxes. say a Good Johnny. We didn’t some as would We we that we’re

time. So back see normal I increasing would to the even that over trend or going term lease

Vince Tibone

Interesting.

So how structure changing just options in terms longer more much – absolutely? the is of or lease

Johnny Hendrix

these getting it. are we tenants just capital some get we terms, able some Vince, in on cases, we to negotiating are of and for are know, longer-term, you spending more a little longer in there, as

Vince Tibone

it. one then Got more, And one me. That sense. for quick just makes

below Madison really much is how in is market, get Safeway can Village market-to-market? that before in term including left mentioned to on you options it space You

Johnny Hendrix

We a It’s it be �� a long lot of time. will term.

Vince Tibone

Okay, thank all you. That’s have. I

Johnny Hendrix

you. Thank

Drew Alexander

Thank you.

Operator

have Bin From ahead. we go Please Kim. Ki SunTrust,

Ki Bin Kim

more little us you remind a And you where Can can about Thanks. the where your talk underwriting a projects? bit market was today? for rent is versus development the multifamily

Steve Richter

it’s Good generally between projects, $X.XX But morning, of all generally something modest at on three Ki rents, haven’t untrended we’re foot. we look kind we comfortable disclosures. very Bin. gotten specific mostly into about trending. with, $X and It’s that a called are square we those Yes, a speaking

So want sensitive discussions to, had all lots of but is rent these to are to things, with be credit to the the very both the of and renters with people operators, you generally free or comfortable three properties want very markets all in also leasing are speaking, choice. quality by some luxury submarkets. you we’ve There you’re these

work right to generally and to So XX, upon the sensitive, leases. And your at be depending looking that you XX-month have through getting have timing you people.

So these it’s pretty prone you But good of the quickly. people another to move. some that get apple at bite are

don’t also before you called back things be you door up. too feel, leaving careful, people soon as you to So it’s have the have

be coming we project. after So projects very on, start will be The little jobs long-term. comfortable with the the leasing but Amazon will a bit that

with So to projects cautiously done, this lot three be point. left we’re all but and pleased a optimistic at

Ki Bin Kim

from about some kind Arlington momentum project? start leasing of the we is see away in to that Centro a year should And stabilization. When

Drew Alexander

construction residential some much end this is of Harris Arlington exactly Centro to how where a end how of How things towards nicely revenue leasing as at year. and both Harris of year. expense year, But versus and open the start is we Teeter develop. little we’ll have projects, progressing supposed end the is the in opening the and calendar Towards this Teeter mentioned is dicey goes falls and the the

this So a of and bit year substantially revenue more year. little next

a on been about do So have parts, are of toward moving I the and but for payoff getting and we a we’re are lot a lot very talking these on projects pleased. Mixed-use time. complexity, encouraged. projects We’ve as working of long them said,

they will projects. good very long-term think be I

Ki Bin Kim

Okay. And last on topic. question same

for you key Your that Point have one of project. & Beyond XX, Sunset at tenants redevelopment Bed, redevelopment as Bath the

think and balance you do if you mix gain the they how how how future rent? merchandising versus So we tenant? in about are that And do that

Drew Alexander

Maybe it’s Johnny since the chime but I’ll take move, of lot store. the it it, and in, start decision, think can I to they project, more really leasing there they good were was a a wanted in

We new are a term. also giving good nice new with a them in spot box

Johnny Hendrix

Yes.

they many with I issue to a there. stores. ICSC Beyond. They The over relationship able got to other have we at retail And balance store you’re store thing they of Bed, an center year again distribution space, our be to time. over is center We’ll too when We some & very good obviously by some the a they’ll stores Bath them. merchandising be get at going working when them But be property, I is is am in we’ll you’re very sure the forward. of have be that in them. recently a we’ve space looking deal and they’re had got have place issues great all decision. on. a will at close strong by going probably They think success talking looking This sheet. this improve that this their is chain and a with, a sales, and their the all stores and that’ll strongest don’t with really area, with They key going we other which have very for

Ki Bin Kim

you. Thank right. All

Drew Alexander

Thanks.

Operator

JPMorgan, Hong Jiang. Please From go have ahead. we

Hong Jiang

either many a today? how Hi. of and question I on dispositions. on guess much – you acquisitions how do I under as guess, contract have side

Drew Alexander

it’s So, Hong, Drew.

guidance. comfortable dispositions, we As to our feel with

to the opportunistic sell, we at going good when what it’s a portfolio before, NAV. NAV. think sell stock’s of at be we’re mentioned to discount about the very bottom looking As the We to

want are contract. helpful. some which But acquisitions, don’t to We under get is what’s I into seeing really

not probability. in that’s to are going We contract under close everything all

lot We’re going close. to more work a on we than expect to

Johnny but expect we’re opportunistic. position we’ll very to to can on. be ourselves don’t well – close working likewise, Acquisition, And we everything chime that So in.

be we’re to on seeing But and count to more specific We’re things little – Johnny? and a some publishing early encouraged. pipelines would thing. it’s start it starting

Johnny Hendrix

to got Yes, I We’ve $XXX about few intent market Again, letters little had excited the or we a of things the under negotiating that think on. good contract around more and mid we’ve product been work couple feel million. has able a of on a be we’re to point of guidance things.

we where we’ll think that’s end up. So

Hong Jiang

the backfilling to tenants spaces? Got are take Kmart, then guess sort those you on I you. what And found Toys, Payless have of

Johnny Hendrix

I is would say ready-to-wear dominating. the discount

have of We Ross couple another Ross’s. Burlington,

So where that’s we are. really

think the we furniture have a on other one. I store

absolutely where today. is So – but the discount is business ready-to-wear

Hong Jiang

Got Thank it. you.

Operator

[Operator Instructions] Please Lucas. From Capital One, go we have ahead. Chris

Chris Lucas

Good Hey, Johnny. morning, everybody.

your couple On at that is real of to till to talking sort backfilling? you’re term next get of hook fee if or term their they they of lease or have taking going in to it over wait the they’re indicated When a on their are the you’re or advance, And that what’s the more to that out getting lease the as until them, keeping they just likely are in the looking view years. estate end closing advance? looking of out footprint tenants stores shrinking them are

Johnny Hendrix

to close store the earlier the Most of I end looking the Office Good example are they And really are of good the the a than think that. morning, of time, Depots Chris. term.

late day start that go. how early, on we the not on to should and a depending piece actually stores us. closing that you to We we today. a really two Both XXXX, We approved they of may entitlements think construction lease that negotiating are with helps in have committee terminate either We terminate. they’re stores and negotiations I one them. those expire may that ready our them be published mid go the

people most late either that We XXXX. we are talking of to The good really is shape in very or year or In wait cases, until several we’re until That’s who store, in expires. normal. lease idea should have a terminate early – their be tenants good have one And a to they’re they advance. other what so interested, them kind we doing.

and leases we can of been advantages that on negotiating away the it’s where better of longer or these mean negotiating helpful One take about we’ve position if for options, talked if different is, I the a the period earlier, that notice get some us. if and options have can the I of tenants time, to ability very next I options lot always look at very, different some that’s and the

Chris Lucas

press then And a guys number you been WhyHotel good and for describing of deal that over a describe Okay. that to numbers? you Can Centro, how how will works impact XXXX moving have sort of a accounts number units. to it’s with the signed of

Drew Alexander

genre don’t to niche, it’s Good where than in a our much catching traditional us and longer of of the lot that other stay out a worked don’t out my a operationally well nice there very be done. permanent of something projects is to jump-start morning, cases has pre-leasing who part a job hotel, become to terms do and significant was units seems on very But of That a routine be Chris, partner, it’s good like at peers or of in in are screening of disruptive. it’s that people and or talking it’s the world. think and that as XXXX. That’s get Drew. up the business. brought with looking was They end by friends a that. A who anything the the that this expert whole It I any bachelor lot in parties started you seems bachelorette a way lot apartment be more to it’ll to some there.

a of nice it’s business. book So

So things. mixed-use a But it projects. both example to other example. public a one some started be end And may trying private in recent up learn try. projects, and could quite something happens be being of announcement, longer, short, people more niche. – that talking out different companies, again to recent seems something it’s may It but just new it as in that obviously, about it we as the are be Marriott’s

So that think but good, we’ll XXXX. be in it’s much it, we it won’t try

Chris Lucas

structure? is structure, structure lease active sort lease correct, I how I it’s you’re involved actually master a that mean, units the a mean, and And of are rented not master

Drew Alexander

That correct. is absolutely correct. You’re

their We we have standards no. prevent handing desk are and room at no, of the parties, understandings but to I’m the policy bachelor key, the not. in front some not the

right. exactly You’re

Joe Shafer

And, Chris, Joe Shafer here.

in not going recognizing On going contra the a the to we’re to so cash, to door going WhyHotel, on that’s revenue. be asset, be we’re bring

Chris Lucas

great. Okay, you. Appreciate it. Thank

Operator

No the right. remarks. All it further questions we’ll at for closing back you turn to moment. Drew,

Drew Alexander

Well, the thank you, Brandon. We appreciate everybody’s in interest call.

Have so of a if We day. your in you much We’re there interest and/or other are thanks see We’ll look many Weingarten. at around questions. great Again, RECon NAREIT. very much forward for that. to

Operator

this ladies concludes you gentlemen, for conference. joining. and again, today’s Thank And

now disconnect. may You

Weingarten Realty Investors (WRI) 30 Apr 192019 Q1 Earnings call transcript