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Press Release

Weingarten Realty Reports Strong Same Property NOI Growth and Rental Rate Increases

Company Release - 7/31/2019 4:30 PM ET

HOUSTON--(BUSINESS WIRE)-- Weingarten Realty (NYSE: WRI) announced today the results of its operations for the quarter ended June 30, 2019. The supplemental financial package with additional information can be found on the Company's website under the Investor Relations tab.

Second Quarter Operating and Financial Highlights

  • Net income attributable to common shareholders (“Net Income”) for the quarter increased to $0.65 per diluted share (hereinafter “per share”) from $0.61 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;
  • Same Property Net Operating Income (“SPNOI”) including redevelopments increased a strong 4.2% over the same quarter of the prior year and is up 3.7% year-to-date;
  • Occupancy increased 50 basis points to 94.8% at quarter-end from 94.3% in the prior quarter;
  • Rental rates on new leases and renewals for the quarter were up significantly 20.0% and 6.3%, respectively;
  • Acquisition of a Sprouts Farmers Market-anchored shopping center in Scottsdale, Arizona for $33 million and subsequent to quarter-end, a Whole Foods-anchored center in North Decatur, Georgia (Atlanta) for $53 million (at 100%) in a joint venture with a Dutch pension fund; and
  • Dispositions totaled $133 million for the quarter and property sales closed subsequent to quarter-end totaled $114 million.

Financial Results

The Company reported Net Income of $83.8 million or $0.65 per share for the second quarter of 2019, as compared to $78.3 million or $0.61 per share for the same period in 2018. This increase was due primarily to higher gains on sales of properties during 2019. Year-to-date, Net Income was $133.5 million or $1.03 per share for 2019 compared to $225.1 million or $1.74 per share for 2018 due primarily to higher gains on sales of properties during 2018.

Core FFO for the quarter ended June 30, 2019 was $0.53 per share or $68.7 million compared to $0.57 per share or $74.3 million for the same quarter of last year. Core FFO decreased by $0.03 per share due to the impact of 2018 and 2019 dispositions and decreased by $0.02 per share due to increased general and administrative expense for the expensing of indirect leasing fees under the new leasing standard. This was partially offset by higher operating income driven by increased base rents, bad debt recoveries and incremental income from new developments and redevelopments. For the six months, Core FFO was $136.0 million or $1.05 per share for 2019 compared to $149.1 million or $1.15 per share for 2018. Core FFO for the six months decreased by $0.06 per share due to dispositions and $0.04 per share due to an increase in general and administrative expense for the expensing of indirect leasing fees under the new leasing standard.

NAREIT FFO was $68.7 million or $0.53 per share for the second quarter of 2019 compared to $84.5 million or $0.65 per share for 2018. Included in 2018 is a benefit of $10.0 million, or $0.08 per share, from the write-off of under market rent intangibles related to terminated Toys R Us leases. Year-to-date, NAREIT FFO was $136.0 million or $1.05 per share for 2019 compared to $162.8 million or $1.25 per share for 2018.

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

Operating Results

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

 

Q2 2019

YTD 2019

Occupancy (Signed Basis):

 

 

Occupancy - Total

94.8%

 

Occupancy - Small Shop Spaces

90.4%

 

Occupancy - Same Property Portfolio

95.0%

 

 

 

 

Same Property Net Operating Income, with redevelopments

4.2%

3.7%

 

 

 

Rental Rate Growth - Total:

9.1%

6.0%

New Leases

20.0%

15.3%

Renewals

6.3%

3.8%

 

 

 

Leasing Transactions:

 

 

Number of New Leases

71

136

New Leases - Annualized Revenue (in millions)

$6.5

$11.1

Number of Renewals

121

266

Renewals - Annualized Revenue (in millions)

$9.7

$23.1

A reconciliation of Net Income to SPNOI is included herein.

“We are very pleased with operations this quarter. Our Same Property NOI increase of 4.2% is a reflection of our significantly transformed portfolio of properties. Also reflective of the quality portfolio, rental rate increases were strong and our occupancy continued to increase. With the most diversified tenant base in our sector, the impact of tenant failures continues to be muted. Given the strong performance, we are increasing our Same Property NOI guidance from a range of 2% to 3% to a range of 2 ½% to 3 ½% for the full year. It was an outstanding quarter,” said Johnny Hendrix, Executive Vice President and Chief Operating Officer.

Portfolio Activity

During the quarter, the Company closed $133 million of dispositions which included five shopping centers and three land parcels. Subsequent to quarter-end, the Company sold two additional shopping centers for $114 million. Of particular note is the sale of Jess Ranch Marketplace for $89 million. Located in Apple Valley, California, it is anchored by Winco Foods, Best Buy, Bed Bath & Beyond, PetSmart and Burlington. While this sale was not anticipated in the Company’s business plan, selling a large power center in a tertiary market at a reasonable price was the right long-term decision.

With respect to acquisitions during the quarter, the Company purchased the 144,000 square foot Camelback Miller Plaza in the upscale Scottsdale area of greater Phoenix, Arizona for $33 million. This center is anchored by Sprouts Farmers Market and T J Maxx, each generating outstanding sales. Demographics are strong, rents at the center are below market and the property has significant densification opportunities in the future. Subsequent to quarter-end, the Company, in partnership with Bouwinvest, purchased North Decatur Station for $53 million, which is part of a mixed use development in North Decatur, a very affluent part of Atlanta. Anchored by a Whole Foods, 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 will own 51% of the venture. This brings the Company’s share of acquisitions to-date in 2019 to $81 million.

In addition, the Company invested $48 million in new developments and redevelopments during the second quarter. The majority of the investment is in two projects in the Washington D.C. area where pre-leasing activities are under way and a 30-story residential tower at its River Oaks Shopping Center in Houston. Details of these projects can be found in the Company’s Supplemental Financial Information package on its website.

“We are quite pleased to be able to dispose of properties at the bottom of our portfolio. Selling these properties generally at or above what we believe to be net asset value takes advantage of the significant disparity between public company and private market valuations. With respect to Jess Ranch, selling a large asset with multiple big box retailers in a tertiary market can be challenging, so the opportunity to sell at a price above our net asset value was clearly the right strategic decision even if it significantly contributes to increasing our disposition guidance. The harvesting of significant gains imbedded in many of our properties has resulted in distributions to our shareholders in the form of special dividends. We have returned in excess of $275 million or $2.15 per share over the last two years with an additional special dividend expected in 2019 that will further enhance shareholder returns. Through this capital recycling, we are removing significant risk from our portfolio, retaining good quality properties and adding quality acquisitions and new developments. While the strong dispositions affects FFO in the short term, it’s the right long term value creation for our shareholders as it will provide for enhanced financial stability as well as stronger opportunities for FFO growth in 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 its new development and redevelopment pipelines, its acquisitions and to further strengthen its balance sheet. On July 1, 2019, the Company paid off a $50 million life company loan with a 7% interest rate leaving no significant maturities for the balance of 2019 and 2020. At quarter-end, Net Debt to Core EBITDAre was a strong 5.05 times and Debt to Total Market Capitalization was 33.4%.

“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 growth opportunities. Our current position will further provide funding for our new development, redevelopment and acquisition programs. Our balance sheet has never been in better shape, and we are well positioned for the future,” said Steve Richter, Executive Vice President and Chief Financial Officer.

2019 Guidance

Based on the success of the Company’s year-to-date dispositions efforts with sales of $314 million and expectations for the balance of the year, the Company increased 2019 guidance for dispositions from a range of $250 to $350 million to a range of $350 to $450 million. Accordingly, guidance for Net Income was increased due to higher expected gains on property sales and guidance was reduced for NAREIT FFO and Core FFO, as set forth in the table below. Additionally, the Company has increased guidance on SPNOI based upon the strength of operating results from its transformed portfolio of quality properties. Given the improvement in the quality of the portfolio, dispositions in 2020 are expected to return to more normalized portfolio management estimated around $150 million.

Shown below is the Company’s 2019 guidance with adjusted items highlighted.

 

Previous Guidance

Revised Guidance

Net Income (per share)

$1.77 - $1.89

$2.40 - $2.50

NAREIT FFO (per share)

$2.09 - $2.17

$2.05 - $2.11

Core FFO (per share)

$2.09 - $2.17

$2.05 - $2.11

Acquisitions

$50 - $150 million

$50 - $150 million

Re / New Development

$175 - $225 million

$175 - $225 million

Dispositions

$250 - $350 million

$350 - $450 million

Same Property NOI with redevelopments

2.0% - 3.0%

2.5% - 3.5%

Same Property NOI w/o redevelopments

1.5% - 2.5%

2.0% - 3.0%

Dividends

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

Conference Call Information

The Company also announced that it will host a live webcast of its quarterly conference call on August 1, 2019 at 11:00 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 # 47864596). 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 June 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 173 properties which are located in 17 states spanning the country from coast to coast. These properties represent approximately 33.9 million square feet of which our interests in these properties aggregated approximately 22.2 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.

Weingarten Realty Investors

(in thousands, except per share amounts)

Financial Statements

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018 (1)

 

2019

 

2018 (1)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

(Unaudited)

Revenues:

 

 

 

 

 

 

 

Rentals, net

$

119,462

 

 

$

138,737

 

 

$

239,288

 

 

$

267,885

 

Other

3,198

 

 

3,349

 

 

6,510

 

 

6,653

 

Total Revenues

122,660

 

 

142,086

 

 

245,798

 

 

274,538

 

Operating Expenses:

 

 

 

 

 

 

 

Depreciation and amortization

34,967

 

 

50,421

 

 

68,939

 

 

88,516

 

Operating

22,767

 

 

24,104

 

 

47,015

 

 

47,374

 

Real estate taxes, net

15,736

 

 

17,466

 

 

31,867

 

 

35,105

 

Impairment loss

 

 

 

 

74

 

 

 

General and administrative

8,880

 

 

6,149

 

 

18,461

 

 

11,744

 

Total Operating Expenses

82,350

 

 

98,140

 

 

166,356

 

 

182,739

 

Other Income (Expense):

 

 

 

 

 

 

 

Interest expense, net

(14,953

)

 

(17,017

)

 

(30,242

)

 

(31,689

)

Interest and other income (expense)

1,921

 

 

1,355

 

 

6,305

 

 

2,888

 

Gain on sale of property

52,061

 

 

46,953

 

 

69,848

 

 

155,998

 

Total Other Income

39,029

 

 

31,291

 

 

45,911

 

 

127,197

 

Income Before Income Taxes and Equity in Earnings of Real Estate Joint Ventures and Partnerships

79,339

 

 

75,237

 

 

125,353

 

 

218,996

 

Provision for Income Taxes

(484

)

 

(684

)

 

(661

)

 

(1,467

)

Equity in Earnings of Real Estate Joint Ventures and Partnerships, net

6,665

 

 

5,318

 

 

12,082

 

 

11,311

 

Net Income

85,520

 

 

79,871

 

 

136,774

 

 

228,840

 

Less: Net Income Attributable to Noncontrolling Interests

(1,711

)

 

(1,582

)

 

(3,299

)

 

(3,727

)

Net Income Attributable to Common Shareholders -- Basic

$

83,809

 

 

$

78,289

 

 

$

133,475

 

 

$

225,113

 

Net Income Attributable to Common Shareholders -- Diluted

$

84,337

 

 

$

78,817

 

 

$

134,531

 

 

$

226,169

 

Earnings Per Common Share -- Basic

$

.66

 

 

$

.61

 

 

$

1.04

 

 

$

1.76

 

Earnings Per Common Share -- Diluted

$

.65

 

 

$

.61

 

 

$

1.03

 

 

$

1.74

 

_____________

(1) Reclassification of prior year's amounts were made to conform to current year presentation.

Weingarten Realty Investors

(in thousands)

Financial Statements

 

 

 

 

 

June 30,
2019

 

December 31,
2018

 

(Unaudited)

 

(Audited)

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

ASSETS

 

 

 

Property

$

4,084,476

 

 

$

4,105,068

 

Accumulated Depreciation

(1,119,866

)

 

(1,108,188

)

Investment in Real Estate Joint Ventures and Partnerships, net

377,590

 

 

353,828

 

Unamortized Lease Costs, net

136,960

 

 

142,014

 

Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net

74,784

 

 

97,924

 

Cash and Cash Equivalents

118,222

 

 

65,865

 

Restricted Deposits and Mortgage Escrows

14,854

 

 

10,272

 

Other, net

200,634

 

 

160,178

 

Total Assets

$

3,887,654

 

 

$

3,826,961

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Debt, net

$

1,787,400

 

 

$

1,794,684

 

Accounts Payable and Accrued Expenses

95,296

 

 

113,175

 

Other, net

210,108

 

 

168,403

 

Total Liabilities

2,092,804

 

 

2,076,262

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

EQUITY

 

 

 

Common Shares of Beneficial Interest

3,904

 

 

3,893

 

Additional Paid-In Capital

1,778,320

 

 

1,766,993

 

Net Income Less Than Accumulated Dividends

(154,597

)

 

(186,431

)

Accumulated Other Comprehensive Loss

(10,402

)

 

(10,549

)

Shareholders' Equity

1,617,225

 

 

1,573,906

 

Noncontrolling Interests

177,625

 

 

176,793

 

Total Liabilities and Equity

$

3,887,654

 

 

$

3,826,961

 

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):

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(Unaudited)

 

(Unaudited)

Net income attributable to common shareholders

$

83,809

 

 

$

78,289

 

 

$

133,475

 

 

$

225,113

 

Depreciation and amortization of real estate

34,732

 

 

50,110

 

 

68,475

 

 

87,875

 

Depreciation and amortization of real estate of unconsolidated real estate joint ventures and partnerships

2,789

 

 

3,261

 

 

5,741

 

 

6,445

 

Impairment of properties and real estate equity investments

 

 

 

 

74

 

 

 

(Gain) on sale of property, investment securities and interests in real estate equity investments

(51,605

)

 

(46,701

)

 

(70,554

)

 

(155,739

)

(Gain) on dispositions of unconsolidated real estate joint ventures and partnerships

(1,106

)

 

(1,219

)

 

(1,380

)

 

(3,582

)

Provision for income taxes (1)

44

 

 

322

 

 

44

 

 

483

 

Noncontrolling interests and other (2)

(484

)

 

(85

)

 

(973

)

 

1,125

 

NAREIT FFO – basic (3)

68,179

 

 

83,977

 

 

134,902

 

 

161,720

 

Income attributable to operating partnership units

528

 

 

528

 

 

1,056

 

 

1,056

 

NAREIT FFO – diluted (3)

68,707

 

 

84,505

 

 

135,958

 

 

162,776

 

Adjustments for Core FFO:

 

 

 

 

 

 

 

Loss (gain) on extinguishment of debt including related swap activity

 

 

99

 

 

 

 

(3,458

)

Lease terminations

 

 

(10,023

)

 

 

 

(10,023

)

Other

 

 

(240

)

 

 

 

(240

)

Core FFO – diluted

$

68,707

 

 

$

74,341

 

 

$

135,958

 

 

$

149,055

 

 

 

 

 

 

 

 

 

FFO weighted average shares outstanding – basic

127,856

 

 

127,505

 

 

127,807

 

 

127,714

 

Effect of dilutive securities:

 

 

 

 

 

 

 

Share options and awards

847

 

 

813

 

 

841

 

 

799

 

Operating partnership units

1,432

 

 

1,432

 

 

1,432

 

 

1,432

 

FFO weighted average shares outstanding – diluted

130,135

 

 

129,750

 

 

130,080

 

 

129,945

 

 

 

 

 

 

 

 

 

NAREIT FFO per common share – basic

$

.53

 

 

$

.66

 

 

$

1.06

 

 

$

1.27

 

 

 

 

 

 

 

 

 

NAREIT FFO per common share – diluted

$

.53

 

 

$

.65

 

 

$

1.05

 

 

$

1.25

 

 

 

 

 

 

 

 

 

Core FFO per common share – diluted

$

.53

 

 

$

.57

 

 

$

1.05

 

 

$

1.15

 

 

(1) The applicable taxes related to gains and impairments of properties.

(2) Related to gains, impairments and depreciation on operating properties and unconsolidated real estate joint ventures, where applicable.

(3) 2019 Nareit FFO is presented in accordance with 2018 Restatement of "Nareit's Funds from Operations White Paper."

 

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
June 30, 2019

 

Six Months Ended
June 30, 2019

Beginning of the period

168

 

 

171

 

Properties added:

 

 

 

New Developments

 

 

1

 

Properties removed:

 

 

 

Dispositions

(4

)

 

(8

)

End of the period

164

 

 

164

 

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
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

 

(Unaudited)

 

(Unaudited)

Net income attributable to common shareholders

$

83,809

 

 

$

78,289

 

 

$

133,475

 

 

$

225,113

 

Add:

 

 

 

 

 

 

 

Net income attributable to noncontrolling interests

1,711

 

 

1,582

 

 

3,299

 

 

3,727

 

Provision for income taxes

484

 

 

684

 

 

661

 

 

1,467

 

Interest expense, net

14,953

 

 

17,017

 

 

30,242

 

 

31,689

 

Property management fees

683

 

 

630

 

 

1,556

 

 

1,497

 

Depreciation and amortization

34,967

 

 

50,421

 

 

68,939

 

 

88,516

 

Impairment loss

 

 

 

 

74

 

 

 

General and administrative

8,880

 

 

6,149

 

 

18,461

 

 

11,744

 

Other (1)

743

 

 

218

 

 

1,989

 

 

1,018

 

Less:

 

 

 

 

 

 

 

Gain on sale of property

(52,061

)

 

(46,953

)

 

(69,848

)

 

(155,998

)

Equity in earnings of real estate joint ventures and partnership interests, net

(6,665

)

 

(5,318

)

 

(12,082

)

 

(11,311

)

Interest and other income/expense

(1,921

)

 

(1,355

)

 

(6,305

)

 

(2,888

)

Revenue adjustments (2)

(3,060

)

 

(14,108

)

 

(6,279

)

 

(18,040

)

Adjusted income

82,523

 

 

87,256

 

 

164,182

 

 

176,534

 

Less: Adjusted income related to consolidated entities not defined as same property and noncontrolling interests

(2,828

)

 

(10,816

)

 

(5,285

)

 

(23,756

)

Add: Pro rata share of unconsolidated entities defined as same property

8,621

 

 

8,345

 

 

16,908

 

 

16,699

 

Same Property Net Operating Income

88,316

 

 

84,785

 

 

175,805

 

 

169,477

 

Less: Redevelopment Net Operating Income

(8,219

)

 

(6,839

)

 

(15,991

)

 

(13,902

)

Same Property Net Operating Income excluding Redevelopments

$

80,097

 

 

$

77,946

 

 

$

159,814

 

 

$

155,575

 

___________________

(1)

Other includes items such as environmental abatement costs, demolition expenses, lease termination fees and ground rent.

(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
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (EBITDAre):

 

 

 

 

 

 

 

Net income

$

85,520

 

 

$

79,871

 

 

$

136,774

 

 

$

228,840

 

Interest expense, net (1)

14,953

 

 

17,017

 

 

30,242

 

 

31,689

 

Provision for income taxes

484

 

 

684

 

 

661

 

 

1,467

 

Depreciation and amortization of real estate

34,967

 

 

50,421

 

 

68,939

 

 

88,516

 

Impairment loss on operating properties and real estate equity investments

 

 

 

 

74

 

 

 

Gain on sale of property and investment securities (2)

(51,619

)

 

(46,953

)

 

(70,589

)

 

(155,998

)

EBITDAre adjustments of unconsolidated real estate joint ventures and partnerships, net (3)

2,643

 

 

3,319

 

 

6,267

 

 

5,807

 

Total EBITDAre

86,948

 

 

104,359

 

 

172,368

 

 

200,321

 

Adjustments for Core EBITDAre:

 

 

 

 

 

 

 

Lease terminations

 

 

(10,023

)

 

 

 

(10,023

)

Total Core EBITDAre

$

86,948

 

 

$

94,336

 

 

$

172,368

 

 

$

190,298

 

(1)

Includes a $3.8 million gain on extinguishment of debt including related swap activity for the six months ended June 30, 2018.

(2)

Includes a $.2 million gain on sale of non-operating assets for the six months ended June 30, 2019. Includes a $.2 million gain on sale of non-operating assets for both the three and six months ended June 30, 2018.

(3)

Includes a $.3 million gain on sale of non-operating assets for the six months ended June 30, 2019 and a $.1 million and $.3 million loss on extinguishment of debt for the three and six months ended June 30, 2018, respectively.

 

Information: Michelle Wiggs, Phone: (713) 866-6050

Source: Weingarten Realty