UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________________ to ____________________
Commission file number 1-9876
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WEINGARTEN REALTY INVESTORS
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Texas 74-1464203
- ---------------------------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
<S> <C>
2600 Citadel Plaza Drive, P.O. Box 924133, Houston, Texas 77292-4133
- ---------------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (713) 866-6000
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____________________________________________
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X. No.
----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes. No.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of July 27, 1998, there
were 26,666,501 common shares of beneficial interest of Weingarten Realty
Investors, $.03 par value, outstanding.
PART 1
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---------- --------- -------- -------
Revenues:
Rentals . . . . . . . . . . . . . . . . . . . . . $ 47,787 $ 41,613 $94,021 $81,880
Interest:
Securities and Other. . . . . . . . . . . . . . 63 261 106 551
Affiliates. . . . . . . . . . . . . . . . . . . 292 370 656 731
Equity in earnings of real estate joint ventures
and partnerships. . . . . . . . . . . . . . . . 91 259 186 503
Other . . . . . . . . . . . . . . . . . . . . . . 575 340 801 851
---------- --------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . 48,808 42,843 95,770 84,516
---------- --------- -------- -------
Expenses:
Depreciation and amortization . . . . . . . . . . 10,219 9,438 20,306 18,741
Interest. . . . . . . . . . . . . . . . . . . . . 8,086 7,243 16,419 14,141
Operating . . . . . . . . . . . . . . . . . . . . 7,475 6,706 14,288 12,712
Ad valorem taxes. . . . . . . . . . . . . . . . . 6,075 5,524 12,058 10,861
General and administrative. . . . . . . . . . . . 1,863 1,230 3,397 2,632
---------- --------- -------- -------
Total. . . . . . . . . . . . . . . . . . . . 33,718 30,141 66,468 59,087
---------- --------- -------- -------
Income from Operations. . . . . . . . . . . . . . . 15,090 12,702 29,302 25,429
Gain (loss) on sales of property and securities . . (13) 53 70 102
---------- --------- -------- -------
Income Before Extraordinary Charge. . . . . . . . . 15,077 12,755 29,372 25,531
Extraordinary Charge (early retirement of debt) (1,392)
---------- --------- -------- -------
Net Income. . . . . . . . . . . . . . . . . . . . . 15,077 12,755 27,980 25,531
Dividends on Preferred Shares . . . . . . . . . . . 1,395 1,969
---------- --------- -------- -------
Net Income Available to Common Shareholders . . . . $ 13,682 $ 12,755 $26,011 $25,531
========== ========= ======== =======
Net Income Per Common Share - Basic:
Income Before Extraordinary Charge. . . . . . . . . $ .51 $ .48 $ 1.03 $ .96
Extraordinary Charge. . . . . . . . . . . . . . . . (.05)
---------- --------- -------- -------
Net Income. . . . . . . . . . . . . . . . . . . . . $ .51 $ .48 $ .98 $ .96
========== ========= ======== =======
Net Income Per Common Share - Diluted:
Income Before Extraordinary Charge. . . . . . . . . $ .51 $ .48 $ 1.02 $ .95
Extraordinary Charge. . . . . . . . . . . . . . . . (.05)
---------- --------- -------- -------
Net Income. . . . . . . . . . . . . . . . . . . . . $ .51 $ .48 $ .97 $ .95
========== ========= ======== =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
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WEINGARTEN REALTY INVESTORS
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, December 31,
1998 1997
------------ --------------
(unaudited)
ASSETS
<S> <C> <C>
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,202,921 $ 1,118,758
Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . . (279,851) (262,551)
-------------- --------------
Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 923,070 856,207
Investment in Real Estate Joint Ventures and Partnerships . . . . . . . 2,506 2,824
-------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925,576 859,031
Mortgage Bonds and Notes Receivable from:
Affiliate (net of deferred gain of $4,487 in 1998 and 1997) . . . . . . 12,827 14,752
Real Estate Joint Ventures and Partnerships . . . . . . . . . . . . . . 15,289 15,250
Marketable Debt Securities. . . . . . . . . . . . . . . . . . . . . . . 12,345
Unamortized Debt and Lease Costs. . . . . . . . . . . . . . . . . . . . 24,340 23,536
Accrued Rent and Accounts Receivable (net of allowance for doubtful
accounts of $875 in 1998 and $1,000 in 1997). . . . . . . . . . . . . 9,923 14,583
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . 1,798 2,754
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,656 4,542
-------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 995,409 $ 946,793
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 499,034 $ 507,366
Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . 36,753 43,305
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,493 6,136
-------------- --------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542,280 556,807
-------------- --------------
Shareholders' Equity:
Preferred Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 10,000; shares issued and outstanding:
3,000 in 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Common Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 150,000; shares issued and outstanding:
26,667 in 1998 and 26,660 in 1997 . . . . . . . . . . . . . . . . . 800 800
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . 452,239 389,186
------------ --------------
Shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . 453,129 389,986
------------ --------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 995,409 $ 946,793
============== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
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WEINGARTEN REALTY INVESTORS
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
Six Months Ended
June 30,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,980 $ 25,531
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 20,306 18,741
Equity in earnings of real estate joint ventures and
partnerships . . . . . . . . . . . . . . . . . . . . . . (138) (503)
Gain on sales of property. . . . . . . . . . . . . . . . . . (70) (102)
Extraordinary change (Early retirement of debt). . . . . . . 1,392
Amortization of direct financing leases. . . . . . . . . . . 336 429
Changes in accrued rents and accounts receivable . . . . . . 4,644 3,197
Changes in other assets. . . . . . . . . . . . . . . . . . . (5,285) (3,301)
Changes in accounts payable and accrued expenses . . . . . . (6,271) (2,174)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 30 63
--------- ---------
Net cash provided by operating activities. . . . . . . . . . 42,924 41,881
--------- ---------
Cash Flows from Investing Activities:
Investment in properties . . . . . . . . . . . . . . . . . . (77,792) (48,456)
Mortgage bonds and notes receivable:
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . (514) (1,260)
Collections. . . . . . . . . . . . . . . . . . . . . . . . . 353 1,062
Proceeds from sales and disposition of property. . . . . . . 221 269
Real estate joint ventures and partnerships:
Investments (46)
Distributions. . . . . . . . . . . . . . . . . . . . . . . . 250 397
Proceeds from sale of marketable debt securities . . . . . . 12,269
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 281 1,089
--------- ---------
Net cash used in investing activities. . . . . . . . . . . . (64,932) (46,945)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from issuance of:
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,095 55,000
Common shares of beneficial interest . . . . . . . . . . . . 124 902
Preferred shares of beneficial interest. . . . . . . . . . . 72,512
Principal payments of debt . . . . . . . . . . . . . . . . . (79,789) (13,520)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . (37,701) (34,078)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (189) (156)
--------- ---------
Net cash provided by financing activities. . . . . . . . . . 21,052 8,148
--------- ---------
Net (decrease)/increase in cash and cash equivalents . . . . (956) 3,084
Cash and cash equivalents at January 1 . . . . . . . . . . . 2,754 169
--------- ---------
Cash and cash equivalents at June 30 . . . . . . . . . . . . $ 1,798 $ 3,253
========= =========
</TABLE>
See notes to consolidated financial statements.
WEINGARTEN REALTY INVESTORS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
1. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements included in this report are unaudited,
except for the balance sheet as of December 31, 1997. In the opinion of the
Company, all adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted of normal recurring
items. Interim results are not necessarily indicative of results for a full
year.
The consolidated financial statements and notes are presented as permitted by
Form 10-Q, and do not contain certain information included in the Company's
annual financial statements and notes.
2. SIGNIFICANT ACCOUNTING POLICIES
On March 19, 1998, the Emerging Issues Task Force of the Financial Accounting
Standards Board ("EITF") reached a consensus decision on Issue No. 97-11,
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions"
which provides that internal costs of identifying and acquiring operating
property incurred subsequent to March 19, 1998 should be expensed. The
Company has historically capitalized the direct internal costs of identifying
and acquiring operating property and, accordingly, realized an increase in
expense for the quarter ended June 30, 1998 of $.3 million or approximately
$.01 per common share. The Company expects that this level of acquisition
costs will continue in the future.
On May 21, 1998, the EITF reached a consensus decision on Issue No. 98-9,
"Accounting for Contingent Rent In Interim Financial Periods" which provides
that recognition of rental income in interim periods must be deferred until
the specified target that triggers the contingent rental income is achieved.
The Company has historically recognized rental income based on a percentage of
tenant sales ratably over the course of the year. This consensus is effective
May 21, 1998 and will require the Company to defer recognition of this income
until the date that the tenant's sales exceed the breakpoint set forth in the
lease agreement. The Company believes the impact of this consensus will be to
decrease percentage rentals in the fiscal year ending December 31, 1998 by
approximately $.4 million and increase revenue in the year ending December 31,
1999 by a like amount. Additionally, the amount of percentage rentals
recognized in each quarter of subsequent fiscal years will differ from
historical experience, with a significant concentration in the fourth quarter.
3. PER SHARE DATA
Net income per common share-basic ("Basic EPS") is computed using net income
available to common shareholders and the weighted average shares outstanding.
Net income per common share-diluted ("Diluted EPS") is also computed using net
income available to common shareholders, however, the weighted average shares
outstanding are adjusted for potentially dilutive securities for the periods
indicated, as follows (in thousands):
<PAGE>
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<CAPTION>
Three Months Ended Six Months Ended
<S> <C> <C> <C> <C>
June 30, June 30,
------------------ --------------
Weighted Average Shares: . . . . . 1998 1997 1998 1997
-------- ------- ------- -------
Basic EPS. . . . . . . . . . . . . 26,667 26,641 26,666 26,620
Effect of dilutive securities:
Employee share options . . . . . 128 150 153 144
Convertible partnership interest 39 39
Diluted EPS. . . . . . . . . . . . 26,834 26,791 26,858 26,764
======= ======= ======= =======
</TABLE>
4. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
statement requires presentation of the components of comprehensive income,
including the changes in equity from non-owner sources such as unrealized
gains on marketable securities. The Company's total comprehensive income was
as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Income. . . . . . . . . . . . . . . . . . $ 15,077 $ 12,755 $27,980 $25,531
--------- --------- --------- ---------
Unrealized gains on marketable securities:
Unrealized holding gain arising during period 214 58 362
Less: Reclassification adjustment for gain
included in net income (1)
--------- --------- --------- ---------
214 57 362
--------- --------- --------- ---------
Comprehensive Income. . . . . . . . . . . . . $ 15,077 $ 12,969 $28,037 $25,893
========= ========= ========= =========
</TABLE>
<PAGE>
5. DEBT
The Company's debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Fixed-rate debt payable to 2015 at 6.0% to 10.5% $ 355,190 $ 379,749
Notes payable under revolving credit agreements. 122,896 94,400
Repurchase agreements. . . . . . . . . . . . . . 12,176
Industrial revenue bonds to 2015 at 4.7% to 6.8%
at June 30, 1997 . . . . . . . . . . . . . . 7,372 7,437
Obligations under capital leases . . . . . . . . 12,467 12,467
Other. . . . . . . . . . . . . . . . . . . . . . 1,109 1,137
------------- -------------
Total. . . . . . . . . . . . . . . . . . . . . . $ 499,034 $ 507,366
============= =============
</TABLE>
At June 30, 1998, the variable interest rate for notes payable under the $200
million revolving credit agreement, including the cost of the related
commitment fee, was 6.2% and the variable interest rate under the $20 million
revolving credit agreement was 6.4%.
In January 1998, the Company entered into a forward Treasury lock whereby the
Company locked a ten-year Treasury rate of 5.49% until August of 1998 for a
notional amount of $35 million in anticipation of the issuance of debt at a
future date. This Treasury lock was sold in April 1998 for a gain of $.8
million. Since this financial instrument was purchased to hedge the Company's
exposure against changes in interest rates, this gain on settlement will be
deferred until the anticipated issuance of debt occurs, at which time it will
be recognized as a reduction to interest expense over the life of the debt
issued in the future.
In June 1998, the Company entered into two forward Treasury locks whereby the
Company locked ten-year Treasury rates averaging 5.50% until November and
December of 1998, for notional amounts of $25 million each, in anticipation of
the issuance of debt at a future date. These financial instruments were
purchased to hedge the Company's exposure against changes in interest rates
and, accordingly, the gain or loss upon settlement will be recognized as a
component of interest expense over the life of the debt issued in the future.
During the quarter, the Company issued $7 million of unsecured Medium Term
Notes with an average life of 9 years at an average interest rate of 6.4%.
Including the effect of amortizing a prorata portion of the deferred gain on
the settlement of the Treasury lock discussed above, the average rate is 6.2%.
<PAGE>
The Company's debt can be summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
As to interest rate:
Fixed-rate debt (including amounts fixed
through interest rate swaps). . . . . . . $ 395,204 $ 419,792
Variable-rate debt. . . . . . . . . . . . 103,830 87,574
------------ ------------
Total . . . . . . . . . . . . . . . . . . $ 499,034 $ 507,366
============ ============
As to collateralization:
Secured debt. . . . . . . . . . . . . . . $ 75,366 $ 107,152
Unsecured debt. . . . . . . . . . . . . . 423,668 400,214
---------- ----------
Total . . . . . . . . . . . . . . . . . . $ 499,034 $ 507,366
============ ============
</TABLE>
6. PROPERTY
The Company's property consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . $ 220,531 $ 208,512
Land held for development. . . . . . . 33,954 31,679
Land under development . . . . . . . . 8,880 5,958
Buildings and improvements . . . . . . 926,285 863,567
Construction in-progress . . . . . . . 6,564 1,940
Property under direct financing leases 6,707 7,102
------------ ------------
Total. . . . . . . . . . . . . . . . . $ 1,202,921 $ 1,118,758
============ ============
</TABLE>
7. CARRYING CHARGES CAPITALIZED
During the periods shown, the following carrying charges were capitalized:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest . . . . . . . $ 378 $ 172 $ 650 $ 297
Ad valorem taxes . . . 11 9 21 17
------- ------- ------- -------
Total. . . . . . . . . $ 389 $ 181 $ 671 $ 314
======= ======= ======= =======
</TABLE>
<PAGE>
8. RELATED PARTY TRANSACTION
During the second quarter of 1998, the Company purchased 13.7 acres of
undeveloped land from WRI Holdings, Inc. ("Holdings") to be used for the
development of a luxury apartment complex in Conroe, Texas, a suburb of
Houston. The Company and Holdings share certain directors and are under
common management. The purchase price was $2.2 million and was based upon an
independent third party appraisal.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto and the comparative summary of selected
financial data appearing elsewhere in this report. Historical results and
trends which might appear should not be taken as indicative of future
operations.
Weingarten Realty Investors owned and operated 175 anchored shopping centers,
25 industrial properties, one multi-family residential project and one office
building at June 30, 1998. Of the Company's 202 developed properties, 153 are
located in Texas (including 93 in Houston and Harris County). The Company's
remaining properties are located in Louisiana (11), Arizona (10), Nevada (5),
Arkansas (5), New Mexico (5), Oklahoma (4), Kansas (3), Colorado (2), Missouri
(1), Illinois (1), Maine (1) and Tennessee (1). The Company has nearly 3,300
leases and 2,500 different tenants. Leases for the Company's properties range
from less than a year for smaller spaces to over 25 years for larger tenants;
leases generally include minimum lease payments and contingent rentals for
payment of taxes, insurance and maintenance and for an amount based on a
percentage of the tenants' sales. The majority of the Company's anchor
tenants are supermarkets, drugstores and other retailers which generally sell
basic necessity-type items.
CAPITAL RESOURCES AND LIQUIDITY
The Company anticipates that cash flows from operating activities will
continue to provide adequate capital for all dividend payments in accordance
with REIT requirements, and that cash on hand, borrowings under its existing
credit facilities, issuance of unsecured debt and the use of project financing
as well as other debt and equity alternatives will provide the necessary
capital to achieve growth. Cash flow from operating activities as reported in
the Statements of Consolidated Cash Flows was $42.9 million for the first six
months of 1998 as compared to $41.9 million for the same period of 1997. The
increase was due primarily to the Company's acquisition and new development
programs.
The Company's Board of Trust Managers approved a quarterly dividend per common
share of $.67 for the second quarter of 1998. The percentage of funds from
operations paid out in cash dividends, or dividend payout ratio, was 75% and
77% for the second quarters of 1998 and 1997, respectively.
The Company invested an additional $33.5 million in the portfolio through
acquisitions, new development and redevelopment's of existing properties,
bringing the 1998 total to $82.7 million. Acquisitions during the quarter
added .8 million square feet to the portfolio, representing an investment of
$18.7 million. The Company purchased three industrial projects during the
quarter, including two facilities in Dallas which represent the Company's
first industrial properties in this market. Regal Distribution Center is an
office/distribution facility totaling 203,000 square feet which was 100%
leased at the time of purchase. Also located in Dallas is Space Center
Industrial Park, a 265,000 square foot office/service center which was also
100% leased at the date of acquisition. The Company purchased the 128,000
square foot Houston Cold Storage Warehouse, located at the Company's
master-planned Railwood Industrial Park. In late June, the Company purchased
two buildings formerly occupied by Wal-Mart, both of which are adjacent to
shopping centers owned by the Company.
With respect to new development, construction continues at the two retail
locations where the Company is constructing retail space adjacent to
occupant-owned supermarkets or other national retailers. Arrowhead Festival
Shopping Center in Glendale, Arizona, a suburb of Phoenix, came on line during
the quarter. Construction is nearly complete at the bulk warehouse facility
located at Railwood Industrial Park. A lease on approximately 100,000 square
feet of this 162,000 square foot facility has been signed and is expected to
commence in early August and firm prospects exist for the remainder of the
space. Construction is underway on the first of three buildings which will be
developed on 11.5 acres of land in southwest Houston purchased in the first
quarter of 1998. The first building of this 158,000 square foot industrial
facility will be completed in the fourth quarter of 1998, with the remainder
projected to be finished in 1999.
<PAGE>
Debt to total market capitalization at June 30, 1998 was unchanged at 30% from
December 31, 1997. Total debt outstanding decreased to $499.0 million at
quarter-end from $507.4 at December 31, 1997. This decrease was primarily due
to the retirement of debt with the $72.5 million of proceeds from the
Company's first quarter preferred share offering, offset by acquisitions in
the first six months of this year and the Company's ongoing development and
redevelopment efforts.
During the second quarter of 1998, the Company sold a $35 million forward
Treasury lock with a notional amount of $35 million which it had purchased in
the first quarter of 1998, resulting in a gain of $.8 million. As this
Treasury lock was purchased in anticipation of the sale of additional debt in
the future, the gain from the sale of the lock has been deferred and will
effectively reduce the interest cost of future debt issued by the Company
going forward. In the second quarter of 1998, the Company purchased an
additional notional amount of $50 million of forward Treasury locks which lock
the ten-year Treasury rate at an average of 5.5% These locks will mature in
equal amounts in November and December of 1998 and were also purchased in
anticipation of the sale of additional debt by the Company in the future.
In June, the Company issued $7 million of Medium Term Notes. These unsecured
notes have an average life of nine years and an average interest rate of 6.4%.
Including the effect of the deferred gain on the sale of the Treasury lock
discussed above, the average rate is 6.2%.
At quarter-end, the Company has protection against interest rate increases
through fixed-rate loans and interest rate swap agreements on $395.2 million
of the total debt outstanding at June 30, 1998. For the quarter ended June
30, 1998, the Company's average interest rate was 7.1% as compared to 7.2% for
the same period of the prior year and its cash flow covered its interest costs
3.75 times for the twelve months ended June 30, 1998.
FUNDS FROM OPERATIONS
The Company considers funds from operations to be an alternate measure of the
performance of an equity REIT since such measure does not recognize
depreciation and amortization of real estate assets as operating expenses.
Management believes that reductions for these charges are not meaningful in
evaluating income-producing real estate, which historically has not
depreciated. The National Association of Real Estate Investment Trusts
defines funds from operations as net income plus depreciation and amortization
of real estate assets, less gains and losses on sales of properties and
securities. Funds from operations does not represent cash flows from
operations as defined by generally accepted accounting principles and should
not be considered as an alternative to net income as an indicator of the
Company's operating performance or to cash flows from operations as a measure
of liquidity.
Funds from operations increased to $23.8 million for the second quarter of
1998, as compared to $22.0 million for the same period of 1997. For the six
months ended June 30, 1998, funds from operations increased to $47.4 million
from $44.0 million. These increases relate primarily to the impact of the
Company's acquisitions and, to a lesser degree, new development and activity
at its existing properties.
RESULTS OF OPERATIONS
Net income available to common shareholders increased to $13.7 million, or
$.51 per share, from $12.8 million, or $.48 per share, for the second quarter
of 1998 as compared with the same quarter of 1997. This increase is due
primarily to the Company's acquisitions and new developments during the past
twelve months.
Rental revenues were $47.8 million for 1998, as compared to $41.6 million for
1997, representing an increase of approximately $6.2 million or 14.8%. This
increase relates primarily to acquisitions and, to a lesser degree, new
development and activity at the Company's existing properties. Occupancy of
the Company's total portfolio increased to 93.4% at June 30, 1998 from 92.5%
at the end of the second quarter of the prior year and was up from 91.8% at
year-end 1997. During the first six months of 1998, the Company completed 379
renewals or leases comprising 1.7 million square feet of space. Rental rates
increased an average of 7.5% over the rates charged to the prior tenants. Net
of capital costs for tenant improvements, the increase averaged 4.5%. Retail
sales on a same-store basis increased by 1% based on sales reported during the
last twelve months.
<PAGE>
Gross interest costs, before capitalization of interest, increased by $1.1
million from $7.4 million in the second quarter of 1997 to $8.5 million in the
second quarter of 1998. The increase was due primarily to the increase in the
average debt outstanding between periods from $411.1 million in 1997 to $476.1
million in 1998. The average interest rate between periods decreased from
7.2% in 1997 to 7.1% in 1998. The amount of interest capitalized during the
period increased from $.2 million in 1997 to $.4 million in 1998 due to an
increase in new development activity.
General and administrative expenses increased by $.6 million to $1.8 million
in the second quarter of 1998 from $1.2 million in the same quarter of 1997.
The increase is partly due to the expensing of $.3 million of direct costs of
acquiring operating properties in 1998, while such costs were capitalized in
1997. Also contributing to the increase is an increase in staffing
necessitated by the growth in the portfolio and the increased activity in
acquisitions and new development.
The increases in depreciation and amortization, operating expenses and ad
valorem taxes were primarily the result of the Company's acquisition and new
development programs.
SIX MONTHS ENDED JUNE 30, 1998
Net income increased by $.5 million to $26.0 million, or $.98 per share, for
the first six months of 1998 from $25.5 million, or $.96 per share, for the
comparable period in 1997. Included in net income for 1998 is an
extraordinary loss of $1.4 million, or $.05 per share, on the early retirement
of debt.
Rental revenues increased 14.8% to $94.0 million, compared with $81.9 million
for the same period of the prior year. This increase relates primarily to
acquisitions and, to a lesser degree, new development and activity at the
Company's existing properties.
Gross interest costs, before capitalization of interest, increased by $2.7
million to $17.1 million in the first six months of 1998 from $14.4 million in
the same period of 1997, or 18.8%. The increase was due primarily to an
increase in the average debt outstanding between periods, from $400.0 million
in 1997 to $475.0 million in 1998. The average interest rate remained
unchanged at 7.2%. The amount of interest capitalized during the period
increased from $.3 million in 1997 to $.6 million in 1998 due to an increase
in new development activity.
General and administrative expense increased by $.8 million, from $2.6 million
in 1997 to $3.4 million in 1998. The increase is partly due to the expensing
of $.3 million of direct costs of acquiring operating properties in 1998,
while such costs were capitalized in 1997. Also contributing to the increase
is an increase in staffing necessitated by the growth in the portfolio and the
increased activity in acquisitions and new development.
The increases in depreciation and amortization, operating expenses and ad
valorem taxes were primarily the result of the Company's acquisition and new
development programs.
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
(12) A statement of ratios of earnings and funds from
operationsto fixed charges.
(27.1) Article 5 Financial Data Schedule (EDGAR filing only).
(27.2) Article 5 Financial Data Schedule (EDGAR filing only).
(27.3) Article 5 Financial Data Schedule (EDGAR filing only).
(27.4) Article 5 Financial Data Schedule (EDGAR filing only).
(27.5) Article 5 Financial Data Schedule (EDGAR filing only).
(27.6) Article 5 Financial Data Schedule (EDGAR filing only).
(b) Reports on Form 8-K
A Form 8-K, dated April 24, 1998, was filed to report significant
acquisitions in response to Item 2., Acquisition or Disposition
of Assets and Item 7., Financial Statements, Pro orma Financial
Information and Exhibits.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEINGARTEN REALTY INVESTORS
-----------------------------
(Registrant)
BY: /s/ Stanford Alexander
-------------------------------
Stanford Alexander
Chairman/Chief Executive Officer
(Principal Executive Officer)
BY: /s/ Stephen C. Richter
--------------------------------
Stephen C. Richter
Senior Vice President/Financial
Administration and Treasurer
(Principal Accounting Officer)
DATE: July 29, 1998
---------------
<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
COMPUTATION OF RATIOS OF EARNINGS
AND FUNDS FROM OPERATIONS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1998 1997 1998 1997
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income. . . . . . . . . . . . . . . . . . . . . . . $13,682 $12,755 $26,011 $25,531
Add:
Portion of rents representative of the interest factor. 199 155 402 317
Interest on indebtedness. . . . . . . . . . . . . . . . 8,086 7,243 16,420 14,141
Preferred Dividends . . . . . . . . . . . . . . . . . . 1,395 0 1,969 0
Amortization of debt cost . . . . . . . . . . . . . . . 91 100 190 210
------- -------- -------- --------
Net income as adjusted. . . . . . . . . . . . . . . $23,453 $20,253 $44,992 $40,199
======= ======== ======== ========
Fixed charges:
Interest on indebtedness. . . . . . . . . . . . . . . . $ 8,086 $ 7,243 $16,420 $14,141
Capitalized interest. . . . . . . . . . . . . . . . . . 377 172 649 297
Preferred Dividends . . . . . . . . . . . . . . . . . . 1,395 0 1,969 0
Amortization of debt cost . . . . . . . . . . . . . . . 91 100 190 210
Portion of rents representative of the interest factor. 199 155 402 317
------- -------- -------- --------
Fixed charges . . . . . . . . . . . . . . . . . . . $10,148 $ 7,670 $19,630 $14,965
======= ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES. . . . . . . . . . . 2.31 2.64 2.29 2.69
======= ======== ======== ========
Net income. . . . . . . . . . . . . . . . . . . . . . . $13,682 $12,755 $26,011 $25,531
Depreciation and amortization . . . . . . . . . . . . . 10,127 9,338 20,114 18,531
(Gain) loss on sales of property. . . . . . . . . . . . 13 (53) (70) (102)
Extraordinary charge (early retirement of debt) . . . . 1,392
Funds from operations . . . . . . . . . . . . . . . 23,822 22,040 47,447 43,960
Add:
Portion of rents representative of the interest factor. 199 155 402 317
Interest on indebtedness. . . . . . . . . . . . . . . . 8,086 7,243 16,420 14,141
Amortization of debt cost . . . . . . . . . . . . . . . 91 100 190 210
------- -------- -------- --------
Funds from operations as adjusted . . . . . . . . . $32,198 $29,538 $64,459 $58,628
======= ======== ======== ========
RATIO OF FUNDS FROM OPERATIONS TO FIXED CHARGES . . . . 3.17 3.85 3.28 3.92
======= ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM WEINGARTEN REALTY INVESTORS' QUARTERLY REPORT FOR THE PERIOD
ENDED JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,798
<SECURITIES> 0
<RECEIVABLES> 10,798
<ALLOWANCES> 875
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,202,921
<DEPRECIATION> 279,851
<TOTAL-ASSETS> 995,409
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
90
<COMMON> 800
<OTHER-SE> 452,239
<TOTAL-LIABILITY-AND-EQUITY> 995,409
<SALES> 0
<TOTAL-REVENUES> 95,770
<CGS> 0
<TOTAL-COSTS> 26,346
<OTHER-EXPENSES> 23,703
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,419
<INCOME-PRETAX> 29,302
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,980
<EPS-PRIMARY> .98
<EPS-DILUTED> .97
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM WEINGARTEN REALTY INVESTORS' ANNUAL REPORT FOR THE PERIOD
ENDED DECEMBER 31, 1995. IT HAS BEEN AMENDED FOR THE RESTATEMENT
OF EARNINGS PER SHARE CALCULATED UNDER SFAS 128.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,355
<SECURITIES> 16,262
<RECEIVABLES> 14,793
<ALLOWANCES> 1,436
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 849,894
<DEPRECIATION> 216,657
<TOTAL-ASSETS> 734,824
<CURRENT-LIABILITIES> 0
<BONDS> 0
796
0
<COMMON> 0
<OTHER-SE> 410,803
<TOTAL-LIABILITY-AND-EQUITY> 734,824
<SALES> 0
<TOTAL-REVENUES> 134,197
<CGS> 0
<TOTAL-COSTS> 37,666
<OTHER-EXPENSES> 30,060
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,707
<INCOME-PRETAX> 44,802
<INCOME-TAX> 0
<INCOME-CONTINUING> 44,802
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,802
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.69
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM WEINGARTEN REALTY INVESTORS' ANNUAL
REPORT FOR THE PERIOD ENDED DECEMBER 31, 1996. IT HAS BEEN
AMENDED FOR THE RESTAREMENT OF EARNINGS PER SHARE
CALCULATED UNDER SFAS 128.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 169
<SECURITIES> 13,806
<RECEIVABLES> 14,400
<ALLOWANCES> 1,236
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 970,418
<DEPRECIATION> 233,514
<TOTAL-ASSETS> 831,097
<CURRENT-LIABILITIES> 0
<BONDS> 0
797
0
<COMMON> 0
<OTHER-SE> 400,201
<TOTAL-LIABILITY-AND-EQUITY> 831,097
<SALES> 0
<TOTAL-REVENUES> 151,123
<CGS> 0
<TOTAL-COSTS> 41,895
<OTHER-EXPENSES> 33,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,975
<INCOME-PRETAX> 53,938
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,938
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,938
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 2.03
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM WEINGARTEN REALTY INVESTORS' QUARTERLY REPORT FOR THE
PERIOD ENDED MARCH 31, 1997. IT HAS BEEN AMENDED FOR THE
RESTATEMENT OF EARNINGS PER SHARE CALCULATED UNDER SFAS 128
AND FOR ALL INCORRECT CAPTIONS.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,242
<SECURITIES> 0
<RECEIVABLES> 8,687
<ALLOWANCES> 1,523
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 985,165
<DEPRECIATION> 241,073
<TOTAL-ASSETS> 833,018
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 799
<OTHER-SE> 396,758
<TOTAL-LIABILITY-AND-EQUITY> 833,018
<SALES> 41,673
<TOTAL-REVENUES> 41,673
<CGS> 0
<TOTAL-COSTS> 11,343
<OTHER-EXPENSES> 10,705
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,898
<INCOME-PRETAX> 12,727
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,776
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM WEINGARTEN REALTY INVESTORS' QUARTERLY REPORT FOR THE PERIOD
ENDED JUNE 30, 1997. IT HAS BEEN AMENDED FOR THE RESTATEMENT OF
EARNINGS PER SHARE CALCULATED UNDER SFAS 128.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,253
<SECURITIES> 13,061
<RECEIVABLES> 10,830
<ALLOWANCES> 1,495
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,018,395
<DEPRECIATION> 248,583
<TOTAL-ASSETS> 861,614
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 799
<OTHER-SE> 393,708
<TOTAL-LIABILITY-AND-EQUITY> 861,614
<SALES> 0
<TOTAL-REVENUES> 84,616
<CGS> 0
<TOTAL-COSTS> 23,302
<OTHER-EXPENSES> 21,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,141
<INCOME-PRETAX> 25,429
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,531
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,531
<EPS-PRIMARY> .96
<EPS-DILUTED> .95
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM WEINGARTEN REALTY INVESTORS' ANNUAL REPORT FOR THE PERIOD
ENDED MARCH 31, 1998. IT HAS BEEN AMENDED FOR THE RESTATEMENT
OF EARNINGS PER SHARE CALCULATED UNDER SFAS 128.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,214
<SECURITIES> 0
<RECEIVABLES> 7,291
<ALLOWANCES> 959
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,166,820
<DEPRECIATION> 271,077
<TOTAL-ASSETS> 969,011
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
90
<COMMON> 800
<OTHER-SE> 456,334
<TOTAL-LIABILITY-AND-EQUITY> 969,011
<SALES> 0
<TOTAL-REVENUES> 46,962
<CGS> 0
<TOTAL-COSTS> 12,726
<OTHER-EXPENSES> 11,537
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,334
<INCOME-PRETAX> 14,295
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,295
<DISCONTINUED> 0
<EXTRAORDINARY> 1,392
<CHANGES> 0
<NET-INCOME> 12,903
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
