Weingarten Realty Reports Strong Third Quarter Results and Raises Guidance

Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended September 30, 2017. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.

Third Quarter Operating and Financial Highlights

• Net income attributable to common shareholders (“Net Income”) for the quarter increased to $0.56 per diluted share (hereinafter “per share”) from $0.40 per share in the same quarter of 2016;
• Core Funds From Operations Attributable to Common Shareholders ("Core FFO") for the quarter increased to $0.61 per share from $0.58 per share a year ago;
• Guidance was raised for Net Income, Funds From Operations Attributable to Common Shareholders in accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”), and Core FFO;
• Signed occupancy increased to 94.8% from 94.1% at the end of third quarter of 2016;
• Same Property Net Operating Income (“SPNOI”) including redevelopments increased 2.8% over the same quarter of the prior year;
• Rental rates on new leases and renewals for the quarter were up 29.5% and 12.3%, respectively; and
• Dispositions totaled $110 million for the quarter and $214 million through September 30, 2017.

Financial Results

The Company reported Net Income of $72.6 million or $0.56 per share for the third quarter of 2017, as compared to $51.9 million or $0.40 per share for the same period in 2016. Year-to-date, Net Income was $167.3 million or $1.30 per share for 2017 compared to $194.8 million or $1.53 per share for 2016.

NAREIT FFO was $78.9 million or $0.61 per share for the third quarter of 2017 compared to $73.1 million or $0.56 per share for 2016. Year-to-date, NAREIT FFO was $232.7 million or $1.79 per share for 2017 compared to $214.7 million or $1.68 per share for 2016.

Core FFO for the quarter ended September 30, 2017 was $0.61 per share or $79.7 million, an increase of 5.2% on a per share basis over $0.58 per share or $75.6 million for the same quarter of last year. The increase in Core FFO over the prior year was primarily due to higher operating income driven by increased rental rates, and the full year effect of the Company’s 2016 acquisitions. Reduced interest expense from favorable debt refinancings also contributed to the increase, all of which was offset by property dispositions. For the nine months, Core FFO was $238.5 million or $1.83 per share for 2017 compared to $221.5 million or $1.73 per share for 2016.

Included in operating expenses for the third quarter is $0.8 million related to Hurricanes Harvey and Irma, which reflects the Company’s best estimate of its exposure. These expenses are included in NAREIT FFO, but are excluded in arriving at Core FFO.

“We are very pleased with our performance this quarter. While retailer issues and recent storms have created some operating headwinds, our significantly transformed portfolio has performed very well. It is especially satisfying to beat consensus and raise guidance for consecutive quarters in this environment,” said Drew Alexander, President and Chief Executive Officer.

A reconciliation of Net Income to NAREIT FFO and Core FFO is included herein.

Operating Results

For the period ending September 30, 2017, the Company’s operating highlights were as follows:

A reconciliation of Net Income to SPNOI is included herein.

“Operations remain very strong. Leasing for the quarter remained extremely productive with outstanding rental rate increases on new leases and renewals. Our signed occupancy increased 70 basis points from the third quarter of 2016 in spite of several leases that were terminated due to bankrupt tenants. The majority of the increase resulted from the leasing of all but one of our former Sports Authority boxes. Commencement of these leases will benefit Same Property NOI next year,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Portfolio Activity

During the quarter, the Company closed $110 million of dispositions and an additional $43.6 million subsequent to quarter end. These dispositions included three centers in California, two in North Carolina, one each in Tennessee, Georgia and Florida, and one land parcel.

The Company acquired one land parcel adjacent to an existing property during the quarter.

The Company’s new development and redevelopment programs are moving forward as planned. The new developments include Gateway Alexandria and Columbia Pike, both of which are mixed-use developments in northern Virginia, and The Whittaker in West Seattle.

Additionally, we continue to invest in 17 redevelopments at our existing properties representing $237.5 million of incremental investment at returns of 7.5% to 9.5%. Our most prominent redevelopment is The Driscoll at River Oaks Shopping Center, a 30-story luxury high-rise at the Company’s River Oaks Shopping Center in Houston. Details of these projects can be found in the Company’s Supplemental Financial Information package on its website.

Balance Sheet

The Company’s balance sheet remains in great shape with minimal maturities for the next several years and only $40 million currently outstanding under its $500 million revolving credit facility. Net Debt to EBITDA at quarter-end was 5.55 times, down significantly from 6.05 times at the end of the third quarter 2016. Debt to Total Market Cap was a very strong 34.9%.

2017 Guidance

With respect to 2017 guidance, the Company is raising and narrowing 2017 guidance for Net Income, NAREIT FFO and Core FFO as set forth in the table below. Additionally, the Company has increased the amount of property it is marketing for sale; therefore, has increased its guidance for dispositions. Shown below is the Company’s guidance with revised items highlighted.

Dividends

The Board of Trust Managers declared a quarterly cash dividend of $0.385 per common share payable on December 15, 2017 to shareholders of record on December 8, 2017.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on October 25, 2017 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 # 43147578). A replay will be available through the Company’s website 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 September 30, 2017, 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 210 properties which are located in 18 states spanning the country from coast to coast. These properties represent approximately 42.4 million square feet of which our interests in these properties aggregated approximately 27.2 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.

Projections involve numerous assumptions such as rental income (including assumptions on percentage rent), interest rates, tenant defaults, occupancy rates, volume and pricing of properties held for disposition, volume and pricing of acquisitions, expenses (including salaries and employee costs), insurance costs and numerous other factors. Not all of these factors are determinable at this time and actual results may vary from the projected results, and may be above or below the ranges indicated. The above ranges represents management’s estimate of results based upon these assumptions as of the date of this press release. Accordingly, there is no assurance that our projections will be realized.

Non-GAAP Financial Measures

Certain aspects of our key performance indicators are considered non-GAAP financial measures. Management uses these measures along with our Generally Accepted Accounting Principles ("GAAP") financial statements in order to evaluate our operating results. Management believes these additional measures provide users of our financial information additional comparable indicators of our industry, as well as, our performance.

Funds from Operations Attributable to Common Shareholders

The National Association of Real Estate Investment Trusts ("NAREIT") defines NAREIT FFO as net income (loss) attributable to common shareholders computed in accordance with GAAP, excluding extraordinary items and gains or losses from sales of operating real estate assets and interests in real estate equity investments and their applicable taxes, plus depreciation and amortization of operating properties and impairment of depreciable real estate and in substance real estate equity investments, including our share of unconsolidated real estate joint ventures and partnerships. The Company calculates NAREIT FFO in a manner consistent with the NAREIT definition.

Management believes NAREIT FFO is a widely recognized measure of REIT operating performance which provides our shareholders with a relevant basis for comparison among other REITs. Management uses NAREIT FFO as a supplemental internal measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income by itself as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that uses historical cost accounting is insufficient by itself. There can be no assurance that NAREIT FFO presented by the Company is comparable to similarly titled measures of other REITs.

The Company also presents Core FFO as an additional supplemental measure as it is more reflective of the core operating performance of our portfolio of properties. Core FFO is defined as NAREIT FFO excluding charges and gains related to non-cash and non-operating transactions and other events that hinder the comparability of operating results. Specific examples of items excluded from Core FFO include, but are not limited to, gains or losses associated with the extinguishment of debt or other liabilities, impairments of land, transactional costs associated with acquisition and development activities, certain deferred tax provisions/benefits, redemption costs of preferred shares and gains on the disposal of non-real estate assets. NAREIT FFO and Core FFO should not be considered as alternatives to net income or other measurements under GAAP as indicators of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. NAREIT FFO and Core FFO do not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

NAREIT FFO and Core FFO is calculated as follows (in thousands):

Same Property Net Operating Income

Management considers SPNOI an important additional financial measure because it reflects only those income and expense items that are incurred at the property level and when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates and operating costs. The Company calculates this most useful measurement by determining our proportional share of SPNOI from all owned properties, including the Company’s share of SPNOI from unconsolidated joint ventures and partnerships, which cannot be readily determined under GAAP measurements and presentation. Although SPNOI (see page 1 of the supplemental disclosure regarding this presentation and limitations thereof) is a widely used measure among REITs, there can be no assurance that SPNOI presented by the Company is comparable to similarly titled measures of other REITs. Additionally, the Company does not control these unconsolidated joint ventures and partnerships, and the assets, liabilities, revenues or expenses of these joint ventures and partnerships, as presented, do not represent its legal claim to such items.

Properties are included in the SPNOI calculation if they are owned and operated for the entirety of the most recent two fiscal year periods, except for properties for which significant redevelopment or expansion occurred during either of the periods presented, and properties classified as discontinued operations. While there is judgment surrounding changes in designations, management moves new development and redevelopment properties once they have stabilized, which is typically upon attainment of 90% occupancy. A rollforward of the properties included in the Company’s same property designation is as follows:

The Company calculates SPNOI using operating income as defined by GAAP excluding property management fees, certain non-cash revenues and expenses such as straight-line rental revenue and the related reversal of such amounts upon early lease termination, depreciation, amortization, impairment losses, general and administrative expenses, acquisition costs and other items such as lease cancellation income, environmental abatement costs, demolition expenses and lease termination fees. Consistent with the capital treatment of such costs under GAAP, tenant improvements, leasing commissions and other direct leasing costs are excluded from SPNOI. A reconciliation of Net Income to SPNOI is as follows (in thousands):

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