Weingarten Realty Completes Strategic Portfolio Transformation and Increases Dividend by 6.2%
Weingarten Realty (NYSE:WRI) announced today the results of its operations for the fourth quarter and full year ended December 31, 2014.
Operating and Financial Highlights
- Recurring Funds from Operations (“FFO”) was $0.51 per diluted share for the fourth quarter;
- Same Property Net Operating Income (“SPNOI”) increased by 3.6% over the fourth quarter of the prior year and 3.4% over the full year 2013;
- Occupancy improved to 95.4% during the fourth quarter, up from 94.8% in the fourth quarter of last year;
- Acquisitions totaled $44 million for the year;
- Dispositions totaled $166 million for the fourth quarter and $387 million for the year; and
- The Board of Trust Managers increased the common dividend per share 6.2% to $0.345 per quarter or $1.38 on an annualized basis.
The Company reported net income attributable to common shareholders of $87.1 million or $0.70 per diluted share (hereinafter “per share”) for the fourth quarter of 2014, as compared to $47.7 million or $0.38 per share for the same period in 2013. For the full year 2014, the Company reported net income of $279.3 million or $2.25 per share compared to $184.1 million or $1.50 per share for the full year 2013. Included in net income for 2014 were gains on the sale of properties and partnership interests of $1.55 per share compared to $1.25 per share in 2013.
For the current quarter, Reported FFO was $62.5 million or $0.51 per share compared to $51.9 million or $0.42 per share for 2013. Recurring FFO for the fourth quarter of 2014 was $0.51 per share or $63.1 million. For the same quarter last year, Recurring FFO was $0.48 per share or $59.5 million. This increase in Recurring FFO per share over the prior year was primarily due to the Company’s acquisition and new development programs, increased operating income from the existing portfolio and reduced interest expense due to favorable refinancing transactions. These increases were partially offset by the impact of the Company’s disposition program, which reduced Recurring FFO by $0.05 per share for the quarter compared to last year.
For the full year ended December 31, 2014, Reported FFO was $256.7 million or $2.06 per share compared to $224.5 million or $1.81 per share for 2013. Recurring FFO for 2014 was $255.3 million or $2.05 per share compared to $243.1 million or $1.96 per share for 2013. The increase in Recurring FFO was primarily due to the Company’s acquisition and new development programs, improvements in the existing portfolio and reduced interest expense. These increases were offset by the impact of dispositions, which reduced FFO by $0.14 per share compared to the prior year.
A reconciliation of net income to both Reported and Recurring FFO is shown on the attached financial statement page and is also shown on page 5 of the supplemental package.
With a very active fourth quarter of disposition activity, the Company completed the strategic portfolio transformation it announced in April of 2011. From the beginning of 2011 through the end of 2014, the Company sold over $1.5 billion of non-core assets and reinvested over $700 million in quality acquisitions and new development projects. The remaining proceeds were used to reduce debt and redeem high cost preferred equity which greatly increased the strength of its balance sheet. The portfolio today is comprised of high growth, quality shopping centers almost exclusively located in the Company’s target markets with very strong demographics.
The Company sold $166.4 million of assets during the fourth quarter. This consisted of 14 non-core shopping centers and four land parcels. For the full year 2014, the Company sold 31 properties and 11 land parcels for $387.4 million. Subsequent to year-end, the Company sold two additional shopping centers for $25.1 million.
In December, the Company acquired Scottsdale Horizon located in North Scottsdale, Arizona for $43.8 million. This asset is anchored by Safeway and CVS Pharmacy and is located in an exceptional trade area that boasts average household incomes in excess of $120,000 and a highly educated population base with 65% of adult residents having a college degree. The 155,000 square foot shopping center is 94% leased. With this acquisition, Weingarten Realty currently owns 16 shopping centers in the greater Phoenix area totaling 1.5 million square feet.
During the quarter, the Company executed a purchase agreement for the retail portion of The Whittaker, an exciting mixed-use development in West Seattle. This six-story infill project is being co-developed with Lennar with the Company’s 63,000 square foot retail portion anchored by a 41,000 square foot Whole Foods. The Company’s estimated investment upon completion is $29.1 million. The Company has three additional shopping centers under development that upon completion will represent an investment of $127.5 million with an estimated average return of about 8%. The Company invested $5.0 million in these projects during the quarter and an additional $5.1 million in 13 redevelopment projects currently ongoing.
“The completion of our highly successful portfolio transformation marks an important milestone for our company. The quality and growth potential of our portfolio is outstanding. Combined with a significantly improved balance sheet, we are well positioned to produce consistent growth in Funds from Operations through accretive external growth opportunities and strong operating results, especially since the negative impact of the transformation is behind us,” said Drew Alexander, President and Chief Executive Officer.
Same Property NOI during the fourth quarter increased by 3.6% versus a year ago. These results are primarily driven by leases that were previously signed and commenced during the quarter. Occupancy increased to 95.4% in the fourth quarter, an increase of 50 basis points over the prior quarter and 60 basis points over the same quarter of 2013. Occupancy of spaces less than 10,000 square feet, often referred to as shop occupancy, increased to 89.8% from 89.0% in the prior year.
The Company produced solid leasing results again during the fourth quarter with 283 new leases and renewals totaling 978,000 square feet and representing $15.9 million of annual revenue. The 283 transactions were comprised of 97 new leases and 186 renewals, representing annual revenues of $5.6 million and $10.3 million, respectively. The average rental rate increase on new leases and renewals signed during the quarter was 11.2% with rental rates on just new leases up a solid 10.4%.
“We are extremely pleased with the Same Property NOI increase of 3.6% for the quarter. With rental rate increases of 11.2%, we are clearly seeing the effect of the ever decreasing inventory of available space and, more importantly, the impact of our portfolio transformation. As further proof of this success, our year-end occupancy of 95.4% is the highest it has been since we took the Company public in 1985,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.
The Company has continued to strengthen its balance sheet this quarter by using disposition proceeds to further reduce debt. Since the beginning of our portfolio transformation in 2011, the Company has reduced Net Debt to EBITDA from 6.67 times to 5.39 times, Net Debt plus Preferreds to EBITDA from 7.96 times to 5.81 times and Debt to Total Market Cap from 43.2% to 30.2% at December 31, 2014.
“In addition to significantly decreasing the leverage on our balance sheet, we have also improved our maturity schedule with maturities in any future year no greater than $305 million and have reduced our average interest rate on nearly $2 billion of debt from 5.75% on January 1, 2011 to 4.37% at December 31, 2014,” said Steve Richter, Executive Vice President and Chief Financial Officer.
On February 16, 2015, the Board of Trust Managers declared an increase in the common dividend to $0.345 per share for the first quarter of 2015. This represents a 6.2% increase, resulting in an annualized dividend of $1.38 per share. The dividend is payable in cash on March 16, 2015 to shareholders of record on March 9, 2015.
The Board of Trust Managers also declared dividends on the Company’s 6.50% Series F Cumulative Redeemable Preferred Shares (NYSE:WRIPrF) of $0.40625 per share for the quarter payable on March 16, 2015 to shareholders of record on March 9, 2015.
The Company’s full year Recurring FFO guidance is in the range of $2.12 to $2.17 per share. Including debt extinguishment costs of approximately $0.05 per share the Company expects to incur during 2015, full year guidance for Reported FFO is in the range of $2.07 to $2.12 per share. Acquisitions are expected to be in the range of $200 to $250 million with dispositions in the range of $125 to $175 million. New development spending is estimated at $50 to $100 million. Please refer to the full list of guidance information found on page 9 of the supplemental package.
Conference Call Information
The Company also announced that it will host a live webcast of its quarterly conference call on February 17, 2015 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 # 37563657). A replay will be available through the Company’s web site 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 December 31, 2014, 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 237 properties which are located in 21 states spanning the country from coast to coast. These properties represent approximately 45.3 million square feet of which our interests in these properties aggregated approximately 27.8 million square feet of leasable area. To learn more about the Company’s operations and growth strategies, please visit www.weingarten.com.
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)|
|Three Months Ended||Twelve Months Ended|
|December 31,||December 31,|
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME||(Unaudited)||(Unaudited)|
|Depreciation and Amortization||36,408||39,724||150,356||146,763|
|Real Estate Taxes, net||14,349||14,819||60,768||57,515|
|General and Administrative Expense||7,023||6,559||24,902||25,371|
|Interest Expense, net||(21,462||)||(27,830||)||(94,725||)||(96,312||)|
|Interest and Other Income, net||863||1,898||3,756||7,685|
|Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests||–||22,071||1,718||33,670|
|Equity in Earnings of Real Estate Joint Ventures and Partnerships, net||5,986||20,645||22,317||35,112|
|(Provision) Benefit for Income Taxes||(624||)||(7,302||)||1,261||(7,046||)|
|Income from Continuing Operations||28,732||48,314||116,365||132,977|
|Operating Income from Discontinued Operations||–||2,289||342||12,214|
|Gain on Sale of Property from Discontinued Operations||–||2,977||44,582||119,203|
|Income from Discontinued Operations||–||5,266||44,924||131,417|
|Gain on Sale of Property||74,883||192||146,290||762|
|Less:||Net Income Attributable to Noncontrolling Interests||(14,635||)||(3,838||)||(19,571||)||(44,894||)|
|Net Income Adjusted for Noncontrolling Interests||88,980||49,934||288,008||220,262|
|Less:||Preferred Share Dividends||(2,710||)||(2,710||)||(10,840||)||(18,173||)|
|Less:||Redemption Costs of Preferred Shares||–||–||–||(17,944||)|
|Net Income Attributable to Common Shareholders — Basic||$||86,270||$||47,224||$||277,168||$||184,145|
|Net Income Attributable to Common Shareholders — Diluted||$||87,073||$||47,668||$||279,339||$||184,145|
|FUNDS FROM OPERATIONS|
|Net Income Attributable to Common Shareholders||$||86,270||$||47,224||$||277,168||$||184,145|
|Depreciation and Amortization||35,118||39,805||145,660||152,075|
|Depreciation and Amortization of Unconsolidated Real Estate|
|Joint Ventures and Partnerships||3,504||4,180||14,793||17,550|
|Impairment of Operating Properties and Real Estate Equity Investments||895||–||895||457|
|Impairment of Operating Properties of Unconsolidated Real Estate|
|Joint Ventures and Partnerships||305||–||305||366|
|Gain on Acquisition Including Associated Real Estate Equity Investment||–||(20,234||)||–||(20,234||)|
|Gain on Sale of Property and Interests in Real Estate Equity Investments||(61,733||)||(3,797||)||(179,376||)||(95,675||)|
|Gain on Dispositions of Unconsolidated Real Estate Joint Ventures|
|Funds from Operations — Basic||62,460||51,493||254,518||222,732|
|Adjustments for Recurring FFO:|
|Income Attributable to Operating Partnership Units||–||444||2,171||1,780|
|Other Impairment Loss, net of tax||129||–||129||2,387|
|Redemption Costs of Preferred Shares||–||–||–||18,131|
|Write-off of Debt Costs, net||323||–||2,173||(9,263||)|
|Deferred Tax Benefit, net||–||–||(2,097||)||–|
|Other, net of tax||–||7,423||(1,862||)||6,750|
|Recurring Funds from Operations — Diluted||$||63,097||$||59,488||$||255,285||$||243,073|
|Weighted Average Shares Outstanding — Basic||121,706||121,370||121,542||121,269|
|Weighted Average Shares Outstanding — Diluted||124,611||124,069||124,370||122,460|
|Weighted Average Shares Outstanding — Diluted (FFO)||123,118||124,069||124,370||124,014|
|PER SHARE DATA|
|Earnings Per Common Share — Basic||$||0.71||$||0.39||$||2.28||$||1.52|
|Earnings Per Common Share — Diluted||$||0.70||$||0.38||$||2.25||$||1.50|
|FFO — Per Diluted Share||$||0.51||$||0.42||$||2.06||$||1.81|
|Recurring FFO — Per Diluted Share||$||0.51||$||0.48||$||2.05||$||1.96|
|Weingarten Realty Investors|
|December 31,||December 31,|
|CONDENSED CONSOLIDATED BALANCE SHEETS||(Unaudited)||(Audited)|
|Property Held for Sale, net||3,670||122,614|
|Investment in Real Estate Joint Ventures and Partnerships, net||257,156||266,158|
|Notes Receivable from Real Estate Joint Ventures and Partnerships||–||13,330|
|Unamortized Debt and Lease Costs, net||141,122||164,828|
|Accrued Rent and Accounts Receivable, net||77,781||82,351|
|Cash and Cash Equivalents||23,189||91,576|
|Restricted Deposits and Mortgage Escrows||79,998||4,502|
|LIABILITIES AND EQUITY|
|Accounts Payable and Accrued Expenses||112,479||108,535|
|Commitments and Contingencies|
|Preferred Shares of Beneficial Interest||2||2|
|Common Shares of Beneficial Interest||3,700||3,683|
|Additional Paid-In Capital||1,706,880||1,679,229|
|Net Income Less Than Accumulated Dividends||(212,960||)||(300,537||)|
|Accumulated Other Comprehensive Loss||(12,436||)||(4,202||)|
|Total Liabilities and Equity||$||3,814,094||$||4,223,929|
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