Weingarten Realty Reports Strong Fourth Quarter Operations and Issues 2019 Guidance
HOUSTON--(BUSINESS WIRE)--Feb 20, 2019--Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended December 31, 2018. 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
In evaluating earnings, it is necessary to understand that the Company disposed of unprecedented volumes of properties during 2017 and 2018. While these dispositions have resulted in a much higher quality portfolio of properties for the Company, the negative impact of these dispositions on 2018 earnings was significant and will also materially impact 2019. Aside from the dilutive impact of the dispositions, the operating performance of the Company’s portfolio was very strong.
The Company reported Net Income of $59.5 million or $0.46 per share for the fourth quarter of 2018, as compared to $168.0 million or $1.30 per share for the same period in 2017. For the year, Net Income was $327.6 million or $2.55 per share for 2018 compared to $335.3 million or $2.60 per share for 2017.
Funds From Operations attributable to common shareholders in accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”) was $70.3 million or $0.55 per share for the fourth quarter of 2018 compared to $77.4 million or $0.60 per share for 2017. For the year, NAREIT FFO was $307.9 million or $2.40 per share for 2018 compared to $311.6 million or $2.40 per share for 2017.
Core FFO for the quarter ended December 31, 2018 was $0.55 per share or $70.2 million, as compared to $0.61 per share or $78.5 million for the same quarter of last year. Higher income driven by increased rental rates and reduced interest expense from lower levels of debt outstanding were more than offset by the impact of dispositions in 2017 and 2018. General and administrative expense was comparable to the fourth quarter of 2017 but $1.4 million higher than the third quarter of 2018. This was the result of a $0.02 per share increase in expense related to a true-up of the accrual for restricted share grants. The significant drop in the Company’s share price at year-end 2018 resulted in more shares being granted in accordance with the Company’s Long Term Incentive program, thus the increase in expense. This was offset by a decrease of $0.01 per share related to assets held in its deferred compensation plan. For the full year, Core FFO was $292.5 million or $2.28 per share for 2018 compared to $318.4 million or $2.45 per share for 2017.
Additionally, the $1.40 per share special dividend paid in December caused our operating partnership units to be antidilutive which reduced Core FFO per share in the fourth quarter by around a penny per share had those shares been considered in the dilutive calculation.
A reconciliation of Net Income to NAREIT FFO and Core FFO is included herein.
For the period ending December 31, 2018, 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 37.4% for the quarter and 18.7% for the full year is a reflection of this improvement. We have done a great job in leasing three of our four Toys R Us spaces,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.
During the quarter, the Company sold seven properties and two land parcels for $241 million. This included two properties in Nevada, two in Arizona and one each in Colorado, Florida and Texas. For all of 2018, WRI sold $635 million of assets with the disposition of 23 shopping centers, an office building and other real estate.
As for acquisitions in 2018, the Company purchased one land parcel which is adjacent to existing shopping centers for $1.3 million. No acquisitions have been closed to-date in 2019.
The Company invested $139 million in new developments and redevelopments in 2018 and expects to spend around $200 million in 2019, 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.
“While the recent disposition volume reduces Funds From Operations in the short-term, Weingarten remains focused on maximizing long-term value to our shareholders. Our dispositions improve the overall quality of our portfolio by reducing exposure to tertiary markets and power centers, and provide capital for future growth including our redevelopment and new development programs. We expect our disposition volumes to decrease significantly in 2019, however we will continue to monitor the market and adjust our strategy appropriately,” said Drew Alexander, Chairman, President and Chief Executive Officer.
Proceeds from the Company’s dispositions were used to strengthen its balance sheet. Net Debt to Core EBITDAre was a strong 5.00 times and Debt to Total Market Capitalization was 35.8% at year end.
“As we remain dedicated to maintaining a strong capital structure supported by low leverage, the amount of capital we allocate to various opportunities, including repurchasing our common shares, will be carefully considered. With one of the strongest balance sheets in our sector, we are well positioned to pursue growth opportunities as they arise,” said Steve Richter, Executive Vice President and Chief Financial Officer.
The Company’s guidance for 2019 is as follows:
Other issues which will impact 2019 results include:
A rollforward detailing the components of the change in 2018 Core FFO per share to 2019 Core FFO per share guidance is included on page 10 of the Company’s Supplemental.
The Board of Trust Managers declared a quarterly cash dividend of $0.395 per common share payable on March 15, 2019 to shareholders of record on March 8, 2019. The Company also paid a special dividend of $1.40 per common share in December 2018.
New Officer Elections
The Board of Trust Managers elected Stanford Alexander Chairman Emeritus. Additionally, Andrew M. “Drew” Alexander was elected Chairman of the Board and will continue as President and Chief Executive Officer. “As the founder of Weingarten Realty, I am very proud of the outstanding Company we created and the wonderful things we have accomplished. Looking ahead, I will continue to provide advice and consultation to my associates and look forward to the future,” said Stanford Alexander, Chairman Emeritus.
Conference Call Information
The Company also announced that it will host a live webcast of its quarterly conference call on February 21, 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 # 47807259). 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, 2018, 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 178 properties which are located in 17 states spanning the country from coast to coast. These properties represent approximately 35.1 million square feet of which our interests in these properties aggregated approximately 22.9 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.
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, non-operating 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, 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 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 operating 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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Michelle Wiggs, Phone: (713) 866-6050
KEYWORD: UNITED STATES NORTH AMERICA TEXAS
INDUSTRY KEYWORD: DISCOUNT/VARIETY REIT URBAN PLANNING RETAIL CONSTRUCTION & PROPERTY SUPERMARKET COMMERCIAL BUILDING & REAL ESTATE OTHER CONSTRUCTION & PROPERTY OTHER RETAIL
SOURCE: Weingarten Realty
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PUB: 02/20/2019 04:15 PM/DISC: 02/20/2019 04:15 PM