Weingarten Realty (NYSE: WRI) announced today the results of its
operations for the quarter ended March 31, 2020. The supplemental
financial package with additional information can be found on the
Company's website under the Investor Relations tab.
“We had a really solid first quarter from operations, but
obviously all of our attention is on the future. Our first priority
is the safety and well-being of our associates, tenants,
stakeholders and the broader community during these challenging
times. We are also very focused on communicating and working with
our tenants to get those that are closed safely open at the
appropriate time. Getting all of our tenants open and operating in
our centers is in everyone’s best interest – the tenant’s, WRI’s
and the communities they serve. With a portfolio of primarily
grocery-anchored centers providing goods and services to the
public, supported by a resilient balance sheet and strong
liquidity, we are optimistic our centers will be on the front-end
of the recovery curve. Navigating the challenges of this recovery
will undoubtedly be a significant task but with a team of talented
associates and a great portfolio of properties, we will succeed,”
said Drew Alexander, Chairman, President and Chief Executive
Officer.
First Quarter Operating and Financial Highlights
- Net income attributable to common shareholders (“Net Income”)
for the quarter was $0.41 per diluted share (hereinafter “per
share”) compared to $0.39 per share in the same quarter of
2019;
- Core Funds From Operations Attributable to Common Shareholders
("Core FFO") for the quarter was $0.44 per share compared to $0.52
per share a year ago;
- Bad debt expense/uncollectible revenue was $9.0 million related
to COVID-19
- The $9.0 million includes $7.0 million of non-cash straight
line rent receivables;
- Net Debt to EBITDA was a strong 6.1x;
- Investments in acquisitions totaled $43 million; and
- Dispositions for the quarter totaled $73 million.
Financial Results
The Company reported Net Income of $52.6 million or $0.41 per
share for the first quarter of 2020, as compared to $49.7 million
or $0.39 per share for the same period in 2019. This increase was
due primarily to higher gains on sales of properties offset by bad
debt expense/uncollectible revenue totaling $9.0 million related to
the coronavirus pandemic, which includes $7.0 million of non-cash
straight-line rent receivables.
Funds From Operations attributable to common shareholders in
accordance with the National Association of Real Estate Investment
Trusts definition (“NAREIT FFO”) was $56.9 million or $0.44 per
share for the first quarter of 2020 compared to $67.3 million or
$0.52 per share for 2019. The decrease is primarily due to
disposition activity and the bad debt expense/uncollectible
revenue. Core FFO for the quarter ended March 31, 2020 was $57.3
million or $0.44 per share compared to $67.3 million or $0.52 per
share for the same quarter of last year.
Effective this quarter, the Company changed the allocation of
gains and losses on assets held in its deferred compensation plan
to better reflect the current expense classification of the
employees in the plan. Therefore, all changes to the liability will
be recorded in general and administrative expense with no
allocation to operating expense. All gains and losses on the assets
will continue to be included in Interest and other (expense)
income, net. There is no net effect on Net Income, NAREIT FFO or
Core FFO.
Reconciliations of Net Income to NAREIT FFO and Core FFO are
included at the end of the press release.
Operating Results
For the period ending March 31, 2020, the Company’s operating
highlights were as follows:
Q1 2020
Occupancy (Signed
Basis):
Occupancy - Total
94.5
%
Occupancy - Small Shop Spaces
90.4
%
Occupancy - Same Property
Portfolio
95.2
%
Same Property Net Operating
Income, with redevelopments
0.2
%
(Note: Includes COVID-19
impact of $1.9M of bad debt/uncollectible revenue which reduced
SPNOI by 2.4%)
Rental Rate Growth -
Total:
9.9
%
New Leases
14.1
%
Renewals
9.3
%
Leasing Transactions:
Number of New Leases
56
New Leases - Annualized Revenue
(in millions)
$
4.4
Number of Renewals
144
Renewals - Annualized Revenue (in
millions)
$
16.9
A reconciliation of Net Income to SPNOI is included at the end
of the press release.
Portfolio Activity
During the quarter, the Company purchased Village Green Center,
a 70,000 square foot center in Wellington, FL. Anchored by a Trader
Joe’s with extremely strong sales, this center is adjacent to our
Wellington Green Commons center. The Company also purchased Stevens
Creek Corner, an 8,000 square foot multi-tenant building adjacent
to Stevens Creek Central shopping center in San Jose, CA which was
purchased in late 2019.
The Company closed $73 million of dispositions with the sale of
three shopping centers in Texas and a center in Aurora, CO.
The Company also invested $29 million in new developments and
redevelopments during the first quarter with $18 million of the
total invested in its 30-story residential tower at its River Oaks
Shopping Center in Houston and $7 million in its two mixed-use
developments in the Washington D.C. area.
COVID-19 Update as of May 5, 2020
- 64% of total April 2020 Annualized Base Rent (“ABR”) and
recoveries has been paid to date
- 62% of tenants, based on ABR, are designated “essential
businesses”
- $501 million cash & cash equivalents currently on balance
sheet
The temporary closing of non-essential businesses and the
shelter-at-home mandates caused extreme operational and financial
hardship for many tenants. The Company’s operations were strong in
the first quarter, however, at quarter-end it was clear the
severity of the COVID-19 impact was going to cause operational and
liquidity issues for many of its tenants. Accordingly, the Company
evaluated the collectability of its receivables given these
conditions resulting in $9.0 million of bad debt/uncollectible
revenue. This additional write-off included straight-line rent
receivables of $7.0 million
With respect to April rents, cash collections totaled $24.8
million which is over 60% of the total due. As to May rent
collections, several tenants who paid in April have negotiated rent
deferrals going forward which will likely temporarily reduce the
cash collections over the next couple of months. With several
markets within the Company’s geographic footprint beginning to
reopen retail operations, the current expectation is that rent
collections will trend upward over the final two quarters of 2020
and throughout 2021. As previously announced, the Company has
withdrawn its 2020 guidance.
“As to rents still outstanding, our associates are working very
hard to obtain commitments from our tenants. Primarily, we are
negotiating deferrals only that will generally be payable in the
latter half of 2020 and in some cases into 2021. Our results
demonstrate the significance of our portfolio transformation which
resulted in a substantial upgrade in the credit quality of our
tenancy,” said Johnny Hendrix, Executive Vice President and Chief
Operating Officer.
Additional information can be found on page 41 of our
supplemental disclosure.
Balance Sheet, Liquidity and Dividends
The benefit of the Company’s best in class balance sheet has
been highlighted by this crisis. Given its low leverage and the
absence of any material maturities until the fourth quarter of
2022, the Company believes it has adequate liquidity to restore its
properties to their full operating potential. However, these
challenging times require a very measured, cautious approach to
maintaining adequate liquidity and financial flexibility.
Accordingly, the Company has drawn down the remaining $497 million
available under its $500 million Revolving Credit Facility during
the quarter.
In light of the uncertainties surrounding the pandemic, the
Company expects to substantially limit acquisitions and will
continue to monitor opportunities to dispose of additional
properties. With both of its mixed-use projects in the Washington
D.C. at or nearing completion, minimal investment will be required.
Construction of the River Oaks residential tower has continued as
leasing is scheduled to begin in mid-summer. The Company will
carefully evaluate all other capital investment requirements going
forward.
The Board of Trust Managers declared a cash dividend of $0.18
per common share payable on June 16, 2020 to shareholders of record
on June 8, 2020. As to dividend payments, it is important to
understand the Company position with respect to its 2020 dividend
obligation. With large gains realized from disposition activities
in 2019, the Company was able to eliminate a special dividend in
2019 by making an election to pay those dividends in 2020, as
allowed by IRS regulations and disclosed in its Form 10-K. This
enabled the Company to not only retain capital for reinvestment but
also to shift dividends to 2020, a year in which the Company
intended to greatly reduce disposition volumes and the related
taxable gains. There is $70 million of dividend obligation
remaining in 2020 from this election. The Company does not
anticipate an additional dividend obligation from 2020 operations,
and therefore has declared a dividend of $.18 per share. This is
one third of the $70 million remaining obligation for 2020 and
about one half of the previous dividend, consistent with the
reduction in cash collections. Currently, the Company anticipates
paying the remainder of the $70 million before year-end. The
Company believes it will have adequate liquidity to meet these
needs. The Company will continue to monitor tenant collections and
to evaluate its operations and financial position, adjusting future
dividends as appropriate.
In early March, prior to retail closures due to COVID-19
governmental mandates, the Company repurchased 847,309 of its
common shares for $18.2 million.
“The significant deleveraging of our balance sheet was an
important part of our multi-year transformation strategy. The
future remains uncertain, but the strength of our balance sheet and
our strong liquidity position will be more than sufficient to
maximize the profitability of our portfolio once again. We clearly
have the capital to continue to operate the portfolio, complete the
new developments, which require little additional capital, and pay
the announced dividend. We feel the $0.18 per share dividend was
the right balance considering the requirement to make the
distributions under the REIT rules versus paying federal income tax
on the gains. Assuming we pay the third and fourth quarter
dividends at this level or more, we would satisfy the $70 million
payout. This is very manageable, especially given our strong
liquidity position.” said Steve Richter, Executive Vice President
and Chief Financial Officer.
Conference Call Information
The Company also announced that it will host a live webcast of
its quarterly conference call on May 8, 2020 at 12:00 p.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 # 49202483). 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 March 31, 2020, 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
167 properties which are located in 16 states spanning the country
from coast to coast. These properties represent approximately 31.5
million square feet of which our interests in these properties
aggregated approximately 21.3 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. These risks and uncertainties include
those related to the COVID-19 pandemic, about which there are still
many unknowns, including the duration of the pandemic and the
extent of its impact, as well as those discussed in the Company’s
regulatory filings with the Securities and Exchange Commission,
which include other 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.
Weingarten Realty
Investors
(in thousands, except per share
amounts)
Financial Statements
Three Months Ended
March 31,
2020
2019
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Revenues: Rentals, net
$
108,050
$
119,826
Other
3,302
3,312
Total Revenues
111,352
123,138
Operating Expenses: Depreciation and amortization
36,656
33,972
Operating
23,160
24,248
Real estate taxes, net
15,008
16,131
Impairment loss
44
74
General and administrative
2,307
9,581
Total Operating Expenses
77,175
84,006
Other Income (Expense): Interest expense, net
(14,602
)
(15,289
)
Interest and other (expense) income, net
(5,828
)
4,384
Gain on sale of property
13,576
17,787
Total Other (Expense) Income
(6,854
)
6,882
Income Before Income Taxes and Equity in Earnings of Real Estate
Joint Ventures and Partnerships
27,323
46,014
Provision for Income Taxes
(172
)
(177
)
Equity in Earnings of Real Estate Joint Ventures and Partnerships,
net
27,097
5,417
Net Income
54,248
51,254
Less: Net Income Attributable to Noncontrolling Interests
(1,626
)
(1,588
)
Net Income Attributable to Common Shareholders -- Basic
$
52,622
$
49,666
Net Income Attributable to Common Shareholders -- Diluted
$
53,150
$
49,666
Earnings Per Common Share -- Basic
$
0.41
$
0.39
Earnings Per Common Share -- Diluted
$
0.41
$
0.39
______________
(1)
Reclassification of prior year's amounts
were made to conform to current year presentation.
Weingarten Realty
Investors
(in thousands)
Financial Statements
March 31,
December 31,
2020
2019
(Unaudited)
(Audited)
CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS Property
$
4,205,978
$
4,145,249
Accumulated Depreciation
(1,130,846)
(1,110,675)
Investment in Real Estate Joint Ventures and Partnerships, net
401,641
427,947
Unamortized Lease Costs, net
151,844
148,479
Accrued Rent, Accrued Contract Receivables and Accounts Receivable,
net
61,407
83,639
Cash and Cash Equivalents
484,697
41,481
Restricted Deposits and Escrows
30,804
13,810
Other, net
179,263
188,004
Total Assets
$
4,384,788
$
3,937,934
LIABILITIES AND EQUITY Debt, net
$
2,229,193
$
1,732,338
Accounts Payable and Accrued Expenses
84,212
111,666
Other, net
205,138
217,770
Total Liabilities
2,518,543
2,061,774
Commitments and Contingencies
—
—
EQUITY Common Shares of Beneficial Interest
3,890
3,905
Additional Paid-In Capital
1,767,559
1,779,986
Net Income Less Than Accumulated Dividends
(73,317)
(74,293)
Accumulated Other Comprehensive Loss
(11,207)
(11,283)
Shareholders' Equity
1,686,925
1,698,315
Noncontrolling Interests
179,320
177,845
Total Liabilities and Equity
$
4,384,788
$
3,937,934
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):
Three Months Ended
March 31,
2020
2019
(Unaudited)
Net income attributable to common shareholders
$
52,622
$
49,666
Depreciation and amortization of real estate
36,475
33,743
Depreciation and amortization of real estate of unconsolidated real
estate joint ventures and partnerships
3,797
2,952
Impairment of properties and real estate equity investments
44
74
(Gain) on sale of property, investment securities and interests in
real estate equity investments
(13,574
)
(18,949
)
(Gain) on dispositions of unconsolidated real estate joint ventures
and partnerships
(22,372
)
(274
)
Noncontrolling interests and other (1)
(575
)
(489
)
NAREIT FFO – basic
56,417
66,723
Income attributable to operating partnership units
528
528
NAREIT FFO – diluted
56,945
67,251
Adjustments for Core FFO: Contract terminations
340
—
Core FFO – diluted
$
57,285
$
67,251
FFO weighted average shares outstanding – basic
127,862
127,756
Effect of dilutive securities: Share options and awards
943
834
Operating partnership units
1,432
1,432
FFO weighted average shares outstanding – diluted
130,237
130,022
NAREIT FFO per common share – basic
$
.44
$
.52
NAREIT FFO per common share – diluted
$
.44
$
.52
Core FFO per common share – diluted
$
.44
$
.52
______________
(1)
Related to gains, impairments and
depreciation on operating properties and unconsolidated real estate
joint ventures, where applicable.
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:
Three Months Ended March 31, 2020 Beginning of the
period
155
Properties removed: Redevelopments
(2
)
Dispositions
(4
)
End of the period
149
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):
Three Months Ended
March 31,
2020
2019
(Unaudited)
Net income attributable to common shareholders
$
52,622
$
49,666
Add: Net income attributable to noncontrolling interests
1,626
1,588
Provision for income taxes
172
177
Interest expense, net
14,602
15,289
Property management fees
1,078
873
Depreciation and amortization
36,656
33,972
Impairment loss
44
74
General and administrative
2,307
9,581
Other (1)
88
444
Less: Gain on sale of property
(13,576
)
(17,787
)
Equity in earnings of real estate joint ventures and partnership
interests, net
(27,097
)
(5,417
)
Interest and other expense (income), net
5,828
(4,384
)
Revenue adjustments (2)
3,125
(3,219
)
Adjusted income
77,475
80,857
Less: Adjusted income related to consolidated entities not defined
as same property and noncontrolling interests
(4,772
)
(7,674
)
Add: Pro rata share of unconsolidated entities defined as same
property
7,756
7,122
Same Property Net Operating Income
$
80,459
$
80,305
______________
(1)
Other includes items such as environmental
abatement costs, demolition expenses and lease termination
fees.
(2)
Revenue adjustments consist primarily of
straight-line rentals, lease cancellation income and fee income
primarily from real estate joint ventures and partnerships.
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):
Three Months Ended
March 31,
2020
2019
Earnings Before Interest, Taxes, Depreciation and Amortization
for Real Estate (EBITDAre): Net income
$
54,248
$
51,254
Interest expense, net
14,602
15,289
Provision for income taxes
172
177
Depreciation and amortization of real estate
36,656
33,972
Impairment loss on operating properties and real estate equity
investments
44
74
Gain on sale of property and investment securities (1)
(13,574
)
(18,970
)
EBITDAre adjustments of unconsolidated real estate joint ventures
and partnerships, net (2)
(17,637
)
3,624
Total EBITDAre
74,511
85,420
Adjustments for Core EBITDAre: Contract terminations
340
—
Total Core EBITDAre
$
74,851
$
85,420
______________
(1)
Includes a $.2 million gain on sale of
non-operating assets for the three months ended March 31, 2019.
(2)
Includes a $22.4 million gain on sale of
property for the three months ended March 31, 2020 and a $.3
million gain on sale of non-operating assets for the three months
ended March 31, 2019.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200507006022/en/
Information: Michelle Wiggs, Phone: (713) 866-6050
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