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Weingarten Realty Completes Strategic Portfolio Transformation and Increases Dividend by 6.2%

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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.

Financial Results

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.

Strategic Transformation

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.

Operating Results

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.

Balance Sheet

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.

Dividend

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.

FFO Guidance

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.

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 Twelve Months Ended
December 31, December 31,
2014 2013 2014 2013
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Unaudited)
Rentals, net $ 122,730 $ 123,460 $ 503,128 $ 477,340
Other Income 3,372 2,611 11,278 11,855
Total Revenues 126,102 126,071 514,406 489,195
Depreciation and Amortization 36,408 39,724 150,356 146,763
Operating Expense 23,329 26,137 95,318 97,099
Real Estate Taxes, net 14,349 14,819 60,768 57,515
Impairment Loss 1,024 1,024 2,579
General and Administrative Expense 7,023 6,559 24,902 25,371
Total Expenses 82,133 87,239 332,368 329,327
Operating Income 43,969 38,832 182,038 159,868
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
Net Income 103,615 53,772 307,579 265,156
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
Numerator:
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
and Partnerships (1,895 ) (15,684 ) (4,919 ) (15,951 )
Other (4 ) (1 ) (8 ) (1 )
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 )
Acquisition Costs 185 128 253 556
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
Denominator:
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
(in thousands)
Financial Statements
December 31, December 31,
2014 2013
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Audited)
ASSETS
Property $ 4,076,094 $ 4,289,276
Accumulated Depreciation (1,028,619 ) (1,058,040 )
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
Other, net 183,703 247,334
Total Assets $ 3,814,094 $ 4,223,929
LIABILITIES AND EQUITY
Debt, net $ 1,938,188 $ 2,299,844
Accounts Payable and Accrued Expenses 112,479 108,535
Other, net 124,484 127,572
Total Liabilities 2,175,151 2,535,951
Commitments and Contingencies
EQUITY
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 )
Shareholders’ Equity 1,485,186 1,378,175
Noncontrolling Interests 153,757 309,803
Total Liabilities and Equity $ 3,814,094 $ 4,223,929

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