Weingarten Realty Reports Strong Fourth Quarter Operations and Issues 2020 Guidance

Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter and year ended December 31, 2019. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.

Fourth Quarter and Full Year Operating and Financial Highlights

• Net income attributable to common shareholders (“Net Income”) was $0.58 per diluted share (hereinafter “per share”) for the quarter and $2.44 per share for the year compared to $0.46 and $2.55 per share for each respective period in 2018;

• Core Funds From Operations Attributable to Common Shareholders ("Core FFO”) was $0.53 per share for the quarter and $2.10 per share for the year compared to $0.55 and $2.28 per share for each respective period in 2018;

• Same Property Net Operating Income (“SPNOI”) including redevelopments increased by 2.5% over the fourth quarter of 2018 and by 3.3% over the full year 2018;

• Rental rates on new leases and renewals completed during the quarter were up 16.3% and 10.2%, respectively;

• Signed occupancy at year-end was 95.2%, an increase of 0.8% from 94.4% at the end of 2018;

• Acquisitions totaled $165 million in the quarter and $246 million for the full year;

• Dispositions totaled $90 million in the quarter and $452 million for the full year;

• Balance sheet leverage remained among the lowest in the sector with Net Debt to Adjusted EBITDAre of 5.17 times; and

• Common dividends per share of $0.395 per quarter were declared or $1.58 per share on an annualized basis.

Financial Results

The Company reported Net Income of $75.2 million or $0.58 per share for the fourth quarter of 2019, as compared to $59.5 million or $0.46 per share for the same period in 2018. For the year, Net Income was $315.4 million or $2.44 per share for 2019 compared to $327.6 million or $2.55 per share for 2018.

Funds From Operations attributable to common shareholders in accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”) was $69.2 million or $0.53 per share for the fourth quarter of 2019 compared to $70.3 million or $0.55 per share for 2018. For the year, NAREIT FFO was $273.7 million or $2.10 per share for 2019 compared to $307.9 million or $2.40 per share for 2018.

Core FFO for the quarter ended December 31, 2019 was $0.53 per share or $69.2 million, as compared to $0.55 per share or $70.2 million for the same quarter of last year. The decrease from the prior year was primarily due to dispositions of $241 million in the fourth quarter of 2018 and an additional $452 million during the year ended December 31, 2019. Also contributing to the decrease was an increase in general and administrative expense due to the cessation of the capitalization of indirect leasing and legal costs of $0.02 per share in the fourth quarter of 2019 and $0.07 per share for the year ended December 31, 2019 due to the new lease accounting standard adopted in 2019. Partially offsetting these decreases was an increase in SPNOI including redevelopments of 2.5% as well as acquisitions totaling $246 million in 2019. Additionally, increases in the fair value of the Company’s deferred compensation plan assets resulted in increases in interest income, general and administrative expense, and operating expense, however these changes have no net effect on FFO as shown on page 7 of the Company’s Supplemental. For the full year, Core FFO was $273.7 million or $2.10 per share for 2019 compared to $292.5 million or $2.28 per share for 2018.

The effect of the 2019 dispositions will impact 2020 Core FFO as well. However, with more normalized disposition activity beginning in 2020, investments in mixed-use new developments totaling $485 million coming on line in 2020 and 2021 and the Company’s much improved portfolio of properties, earnings are expected to trend up beginning in the second half of 2020.

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

Operating Results

For the period ending December 31, 2019, the Company’s operating highlights were as follows:

A reconciliation of Net Income to SPNOI is included herein.

“Our greatly transformed portfolio continues to produce solid operating results. Leasing activity was strong, generating increased rental rates on new leases during the quarter of 16%. Coupled with low tenant fallout, this resulted in an 80 basis points increase over the prior year in total occupancy with our shop space rising to a record 90.8%. Same Property NOI was also strong, increasing 3.3% during the year. While there are continued challenges in the retail marketplace, the improved quality of our portfolio clearly enables us to respond to these challenges much more effectively,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Portfolio Activity

During the quarter, the Company acquired three shopping centers for $165 million. Stevens Creek Central shopping center is located in San Jose, CA. The property is anchored by Safeway, Marshalls and Total Wine & More. The population in a three-mile radius is 260,000 with average household incomes in excess of $141,000. The Shops at Hilshire Village is a Kroger anchored shopping center located adjacent to the very affluent Memorial Villages in Houston, TX. The population in a three-mile radius is 135,000 people with average household incomes of $117,000. Covington Esplanade located in the Seattle metropolitan area is a 187,000 square foot center anchored by Home Depot and includes many strong service retailers. Acquisitions for the full year totaled $246 million, including five grocery anchored centers in urban, infill locations with strong demographics. Within a three-mile radius, average household incomes for all properties purchased this year averaged $116,000 with a population of 155,000 people.

In addition, the Company sold three properties during the quarter for $90 million including a power center in Las Vegas, a center in Houston and the Company’s last property in Arkansas. For all of 2019, WRI sold $452 million of assets with the disposition of 15 shopping centers and other real estate.

The Company invested $173 million in new developments and redevelopments in 2019 and expects to spend around $100 million in 2020, with the majority of the investment in its two projects in the Washington D.C. area and its 30-story residential tower at its River Oaks Shopping Center in Houston.

“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 are very excited to add the three quality acquisitions in the fourth quarter to our transformed portfolio. As we reduce our disposition volumes going into 2020 and accelerate the addition of NOI from our new development projects, we are well positioned to grow FFO beginning in the second half of 2020,” said Drew Alexander, Chairman, President and Chief Executive Officer.

Balance Sheet

During the quarter, the Company amended and extended its $500 million unsecured revolving credit facility. The facility will mature in March 2024, with a provision to extend the maturity date for two consecutive six-month periods, at the Company’s option. The Company was successful in reducing the margin over LIBOR that it will pay under the facility.

Net Debt to Core EBITDAre was a strong 5.17 times and Debt to Total Market Capitalization was a very low 29.9% at year end.

“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. We are pleased with the support of our bank group and their continued support through the renewal of our unsecured credit facility. With no significant maturities until 2022, our financial position is excellent,” said Steve Richter, Executive Vice President and Chief Financial Officer.

2020 Guidance

The Company’s guidance for 2020 is as follows:

A rollforward detailing the components of the change in 2019 Core FFO per share to 2020 Core FFO per share guidance is included on page 10 of the Company’s Supplemental.

Dividends

The Board of Trust Managers declared a quarterly cash dividend to $0.395 per common share payable on March 13, 2020 to shareholders of record on March 6, 2020. Annualized, the dividend will be $1.58 per common share.

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on February 26, 2020 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 (800) 447-0521 (conference ID #49202482). 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 December 31, 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 16 states spanning the country from coast to coast. These properties represent approximately 32.5 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), changes in control of real estate equity investments, 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):

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