Weingarten Realty Solid Quarter and Increased Acquisition Guidance

Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended September 30, 2019. 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 was $0.82 per diluted share (hereinafter “per share”) compared to $0.34 per share in the same quarter of 2018;

• Core Funds From Operations Attributable to Common Shareholders ("Core FFO") for the quarter was $0.53 per share compared to $0.58 per share a year ago;

• Same Property Net Operating Income (“SPNOI”) including redevelopments increased 2.9% over the same quarter of the prior year and 3.4% year-to-date;

• Occupancy was 94.7% at quarter-end with small shop occupancy at a ten-year high of 90.7%;

• Rental rates on new leases and renewals for the quarter were up 15.0% and 4.5%, respectively;

• Acquisitions totaled $28 million for the quarter and $82 million for the first nine months of 2019; and

• Dispositions totaled $162 million for the quarter and $362 million for the first nine months of 2019.

Financial Results

The Company reported Net Income of $106.7 million or $0.82 per share for the third quarter of 2019, as compared to $43.0 million or $0.34 per share for the same period in 2018. This increase was due primarily to higher gains on the sales of properties during the third quarter of 2019. Year-to-date, Net Income was $240.2 million or $1.86 per share for 2019 compared to $268.1 million or $2.08 per share for 2018, due primarily to higher gains on the sale of properties in 2018.

Core FFO for the quarter ended September 30, 2019 was $0.53 per share or $68.5 million compared to $0.58 per share or $74.8 million for the same quarter of last year. Core FFO decreased due to dispositions in 2019 and 2018 as well as an increase in general and administrative expense of $0.02 per share for the expensing of indirect leasing fees under the new leasing standard. Offsetting the dispositions impact was 1) reduced interest expense due to the reduction in debt outstanding with disposition proceeds, 2) increased capitalization of interest and property taxes on new developments, and 3) $1.0 million write-offs of below market rent intangibles in the third quarter of 2019. The intangible write-offs were related to the termination of tenant leases that had large under market rental rates recorded as intangibles upon acquisition of the shopping centers. For the nine months, Core FFO was $204.5 million or $1.57 per share for 2019 compared to $223.9 million or $1.72 per share for 2018.

NAREIT FFO was $68.5 million or $0.53 per share for the third quarter of 2019 compared to $76.5 million or $0.59 per share for 2018. Year-to-date, NAREIT FFO was $204.5 million or $1.57 per share for 2019 compared to $239.3 million or $1.84 per share for 2018.

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

Operating Results

For the period ending September 30, 2019, the Company’s operating highlights were as follows:

A reconciliation of Net Income to SPNOI is included herein.

“Operations remained strong this quarter, a reflection of our significantly improved portfolio of properties. Our increase in rental rates on new leases of 15.0% for the quarter and an increase of 30 basis points in occupancy from the prior year is a reflection of this improvement. All of the factors resulted in our Same Property NOI increasing a solid 2.9% for the quarter and 3.4% year-to-date,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Portfolio Activity

During the quarter, the Company, in partnership with Bouwinvest, purchased North Decatur Station for $53 million, which is part of a mixed use development in North Decatur, GA, a very affluent part of Atlanta. Anchored by a Whole Foods 365, the development has strong three-mile demographics with average household income of $96,500, population of 112,000 and college graduate levels above 60%. The Company owns 51% of the property. Subsequent to quarter-end, the Company purchased The Shops at Hilshire Village. This is a neighborhood center anchored by a high-volume Kroger supermarket located adjacent to the very affluent Memorial Villages in Houston, TX. The three-mile demographics are strong with a population of 135,000 people and average household income of $117,000. This brings the Company’s share of acquisitions to-date in 2019 to $113 million.

During the quarter, the Company invested $42 million in new developments and redevelopments. The majority of the investment is in the two projects in the Washington, D.C. area and the 30-story residential tower at the Company’s River Oaks Shopping Center in Houston, TX. At the Centro Arlington project, Harris Teeter opened last week and leasing of the residential units is also progressing well with 30% of the units already leased. At West Alex, also near D.C., the commencement of residential leasing activities is also underway. Construction on The Driscoll at River Oaks, a 30-story residential tower remains ahead of schedule with residential units becoming available in mid-2020. Details of these projects can be found in the Company’s Supplemental Financial Information package on its website.

During the quarter, the Company closed $162 million of dispositions including three centers in California and one each in North Carolina and Texas. Of particular note was the sale of Jess Ranch Marketplace for $89 million. Located in Apple Valley, CA, it is anchored by Winco Foods, Best Buy, Bed Bath & Beyond, PetSmart and Burlington. Selling this large power center in a tertiary market further strengthens the Company’s quality portfolio.

“We continue to upgrade the quality of our portfolio by successfully disposing of assets that are in the bottom portion of our portfolio and reinvesting these proceeds in quality acquisitions as well as our new development and redevelopment projects. We continue to identify quality acquisition prospects, and NOI from our new development projects will begin to accelerate in 2020. Coupled with reduced dispositions next year which should not exceed $150 million, we are well positioned to grow FFO going forward. With the quality of our portfolio along with our low leveraged balance sheet, we are well positioned to accelerate this growth into the future,” said Drew Alexander, President and Chief Executive Officer.

Balance Sheet

Proceeds from the Company’s 2018 and 2019 dispositions were used to fund new development, redevelopment, acquisitions and to further strengthen the Company’s balance sheet. The Company has nothing outstanding under its $500 million revolving credit facility and had $109 million of excess cash invested at quarter-end. Net Debt to Core EBITDAre was a strong 4.97 times and Debt to Total Market Capitalization was 31.4%.

“We continue to maintain one of the strongest balance sheets in our sector which not only provides significant security for our shareholders in the event of unexpected market events, but also positions us to pursue additional growth opportunities. With no significant maturities till 2022 our financial position is excellent.” said Steve Richter, Executive Vice President and Chief Financial Officer.

2019 Guidance

With respect to 2019 guidance, the Company has increased its guidance for Acquisitions to a range of $175 to $275 million. It also increased guidance for Net Income, NAREIT FFO and Core FFO due to the increased acquisitions and higher gains on sales than previously estimated. The Company also communicated that its dispositions will likely end up at the higher end of the guidance range. All other guidance remains unchanged.

Dividends

The Board of Trust Managers declared a quarterly cash dividend of $0.395 per common share payable on December 13, 2019 to shareholders of record on December 6, 2019.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on October 30, 2019 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 # 47864599). 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, 2019, 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 170 properties which are located in 17 states spanning the country from coast to coast. These properties represent approximately 33.0 million square feet of which our interests in these properties aggregated approximately 21.5 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

Effective January 1, 2019, 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 gains or losses from sales of certain real estate assets (including: depreciable real estate with land, land, development property and securities), change in control, and interests in real estate equity investments and their applicable taxes, plus depreciation and amortization related to real estate and impairment of certain real estate assets 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, non-operating assets and other transactions or 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 and transactional costs associated with development activities. 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 that have been sold. 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:

We calculate SPNOI using net income attributable to common shareholders excluding net income attributable to noncontrolling interests, other income (expense), income taxes and equity in earnings of real estate joint ventures and partnerships. Additionally to reconcile to SPNOI, we exclude the effects of 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 and amortization, impairment losses, general and administrative expenses 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 attributable to common shareholders to SPNOI is as follows (in thousands):

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate

NAREIT defines EBITDAre as net income computed in accordance with GAAP, plus interest expense, income tax expense (benefit), depreciation and amortization and impairment of depreciable real estate and in substance real estate equity investments; plus or minus gains or losses from sales of certain real estate assets and interests in real estate equity investments; and adjustments to reflect our share of unconsolidated real estate joint ventures and partnerships for these items. The Company calculates EBITDAre in a manner consistent with the NAREIT definition.

As mentioned above, NAREIT FFO is a widely recognized measure of REIT operating performance which provides our shareholders with a relevant basis for comparing earnings performance among other REITs based upon the unique capital structure of each REIT. However as a basis of comparability that is independent of a company's capital structure, management believes that since EBITDA is a widely known and understood measure of performance, EBITDAre will represent an additional supplemental non-GAAP performance measure that will provide investors with a relevant basis for comparing REITs. There can be no assurance that EBITDAre as presented by the Company is comparable to similarly titled measures of other REITs.

The Company also presents Core EBITDAre as an additional supplemental measure as it is more reflective of the core operating performance of our portfolio of properties. Core EBITDAre is defined as NAREIT EBITDAre 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 EBITDAre include, but are not limited to, gains or losses associated with the extinguishment of debt or other liabilities, and transactional costs associated with development activities. EBITDAre and Core EBITDAre 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. EBITDAre and Core EBITDAre do not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

EBITDAre and Core EBITDAre is calculated as follows (in thousands):

View source version on businesswire.com: https://www.businesswire.com/news/home/20191029006102/en/