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, 1999
-------------
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
---------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1464203
- ---------------------------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2600 Citadel Plaza Drive, P.O. Box 924133, Houston, Texas 77292-4133
- ---------------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 866-6000
--------------
____________________________________________
(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 23, 1999, there
were 26,692,018 common shares of beneficial interest of Weingarten Realty
Investors, $.03 par value, outstanding.
<PAGE>
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,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rentals. . . . . . . . . . . . . . . . . . . . . $ 54,989 $ 47,787 $ 108,422 $ 94,021
Interest:
Securities and Other . . . . . . . . . . . . . 1 63 524 106
Affiliates . . . . . . . . . . . . . . . . . . 623 292 1,098 656
Equity in earnings of real estate joint ventures
and partnerships . . . . . . . . . . . . . . . 83 91 168 186
Other. . . . . . . . . . . . . . . . . . . . . . 616 575 864 801
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . 56,312 48,808 111,076 95,770
---------- ---------- ---------- ----------
Expenses:
Depreciation and amortization. . . . . . . . . . 11,527 10,219 23,164 20,306
Operating. . . . . . . . . . . . . . . . . . . . 9,182 7,475 17,360 14,288
Interest . . . . . . . . . . . . . . . . . . . . 7,491 8,086 15,524 16,419
Ad valorem taxes . . . . . . . . . . . . . . . . 6,951 6,075 13,763 12,058
General and administrative . . . . . . . . . . . 1,922 1,863 3,790 3,397
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . 37,073 33,718 73,601 66,468
---------- ---------- ---------- ----------
Income from Operations . . . . . . . . . . . . . . 19,239 15,090 37,475 29,302
Gain (Loss) on Sales of Property and Securities. . (55) (13) (55) 70
---------- ---------- ---------- ----------
Income Before Extraordinary Charge . . . . . . . . 19,184 15,077 37,420 29,372
Extraordinary Charge (early retirement of debt). . (149) (1,392)
---------- ---------- ---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . 19,184 15,077 37,271 27,980
Dividends on Preferred Shares. . . . . . . . . . . 5,010 1,395 9,573 1,969
---------- ---------- ---------- ----------
Net Income Available to Common Shareholders. . . . $ 14,174 $ 13,682 $ 27,698 $ 26,011
========== ========== ========== ==========
Net Income Per Common Share - Basic:
Income Before Extraordinary Charge. . . . . $ .53 $ .51 $ 1.05 $ 1.03
Extraordinary Charge. . . . . . . . . . . . (.01) (.05)
---------- ---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . $ .53 $ .51 $ 1.04 $ .98
========== ========== ========== ==========
Net Income Per Common Share - Diluted:
Income Before Extraordinary Charge. . . . . $ .53 $ .51 $ 1.04 $ 1.02
Extraordinary Charge. . . . . . . . . . . . (.01) (.05)
---------- ---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . $ .53 $ .51 $ 1.03 $ .97
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, December 31,
1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,404,132 $ 1,294,632
Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . (316,620) (296,989)
------------ ------------
Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . 1,087,512 997,643
Investment in Real Estate Joint Ventures and Partnerships . . . . . . 2,881 2,741
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 1,090,393 1,000,384
Mortgage Bonds and Notes Receivable from:
Affiliate (net of deferred gain of $4,487 in 1999 and 1998) . . . 11,925 13,444
Real Estate Joint Ventures and Partnerships . . . . . . . . . . . 21,852 23,388
Marketable Debt Securities. . . . . . . . . . . . . . . . . . . . . . 14,951
Unamortized Debt and Lease Costs. . . . . . . . . . . . . . . . . . . 26,888 25,612
Accrued Rent and Accounts Receivable (net of allowance for doubtful
accounts of $1,059 in 1999 and $888 in 1998). . . . . . . . . . . . 10,696 15,197
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . 3,892 1,672
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,428 12,395
------------ ------------
Total . . . . . . . . . . . . . . . . . . . $ 1,177,074 $ 1,107,043
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 489,328 $ 516,366
Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . 41,293 49,269
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,645 8,229
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 542,266 573,864
------------ ------------
Commitments and Contingencies
Shareholders' Equity:
Preferred Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 10,000
7.44% Series A cumulative redeemable preferred shares of
beneficial interest; 3,000 shares issued and outstanding;
liquidation preference $25 per share . . . . . . . . . . . . . 90 90
7.125% Series B cumulative redeemable preferred shares of
beneficial interest; 3,600 shares issued and outstanding;
liquidation preference $25 per share . . . . . . . . . . . . . 108 108
7.0% Series C cumulative redeemable preferred shares of
beneficial interest; 2,300 shares issued and outstanding;
liquidation preference $50 per share . . . . . . . . . . . . . 69
Common Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 150,000; shares issued and outstanding:
26,693 in 1999 and 26,673 in 1998 . . . . . . . . . . . . . . . . 801 800
Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . 633,813 532,254
Deferred Compensation Obligation. . . . . . . . . . . . . . . . . . (73) (73)
------------ ------------
Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . 634,808 533,179
------------ ------------
Total . . . . . . . . . . . . . . . . . . . $ 1,177,074 $ 1,107,043
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
Six Months Ended
June 30,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 37,271 $ 27,980
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization. . . . . . . . . . . . . 23,164 20,306
Equity in earnings of real estate joint ventures and
partnerships . . . . . . . . . . . . . . . . . . . . (168) (138)
(Gain) loss on sales of property and securities. . . . 55 (70)
Extraordinary charge (early retirement of debt). . . . 149 1,392
Changes in accrued rents and accounts receivable . . . 4,370 4,644
Changes in other assets. . . . . . . . . . . . . . . . (5,116) (5,285)
Changes in accounts payable and accrued expenses . . . (8,077) (6,271)
Other, net . . . . . . . . . . . . . . . . . . . . . . 260 366
---------- ----------
Net cash provided by operating activities. . . . . . 51,908 42,924
---------- ----------
Cash Flows from Investing Activities:
Investment in properties . . . . . . . . . . . . . . . . . (94,866) (77,792)
Mortgage bonds and notes receivable:
Advances . . . . . . . . . . . . . . . . . . . . . . . (4,820) (514)
Collections. . . . . . . . . . . . . . . . . . . . . . 1,122 353
Proceeds from sales and disposition of property. . . . . . 3 221
Proceeds from marketable debt securities . . . . . . . . . 15,000 12,269
Real estate joint ventures and partnerships:
Investments. . . . . . . . . . . . . . . . . . . . . . (454)
Distributions. . . . . . . . . . . . . . . . . . . . . 216 250
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (7) 281
---------- ----------
Net cash used in investing activities. . . . . . . . (83,806) (64,932)
---------- ----------
Cash Flows from Financing Activities:
Proceeds from issuance of:
Debt . . . . . . . . . . . . . . . . . . . . . . . . . 53,417 66,095
Common shares of beneficial interest . . . . . . . . . 475 124
Preferred shares of beneficial interest. . . . . . . . 111,263 72,512
Principal payments of debt . . . . . . . . . . . . . . . . (83,487) (79,789)
Common and preferred dividends paid. . . . . . . . . . . . (47,474) (37,701)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . (76) (189)
---------- ----------
Net cash provided by financing activities. . . . . . 34,118 21,052
---------- ----------
Net (decrease)/increase in cash and cash equivalents . . . . 2,220 (956)
Cash and cash equivalents at January 1 . . . . . . . . . . . 1,672 2,754
---------- ----------
Cash and cash equivalents at June 30 . . . . . . . . . . . . $ 3,892 $ 1,798
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
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, 1998. 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. PER SHARE DATA
Net income per common share - basic is computed using net income available to
common shareholders and the weighted average shares outstanding. Net income per
common share - diluted includes the effect of potentially dilutive securities
for the periods indicated, as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income available to common shareholders - basic . . $ 14,174 $ 13,682 $ 27,698 $ 26,011
Income attributable to operating partnership units. . . 35 76
-------- -------- -------- --------
Net income available to common shareholders - diluted . $ 14,209 $ 13,682 $ 27,774 $ 26,011
======== ======== ======== ========
Denominator:
Weighted average shares outstanding - basic . . . . . . 26,692 26,667 26,687 26,666
Effect of dilutive securities:
Share options and awards. . . . . . . . . . . . . . 90 128 88 153
Operating partnership units . . . . . . . . . . . . 148 39 148 39
-------- -------- -------- --------
Weighted average shares outstanding - diluted . . . . . 26,930 26,834 26,923 26,858
======== ======== ======== ========
</TABLE>
<PAGE>
3. DEBT
The Company's debt consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Fixed-rate debt payable to 2015 at 6.0% to 10.5% . . $ 405,722 $ 404,061
Variable-rate unsecured notes payable to 2000. . . . 82,000
Notes payable under revolving credit agreements. . . 63,450 10,250
Obligations under capital leases . . . . . . . . . . 12,467 12,467
Industrial revenue bonds to 2015 at 3.6% to 5.8%
at June 30, 1999 . . . . . . . . . . . . . . . 6,202 6,262
Other. . . . . . . . . . . . . . . . . . . . . . . . 1,487 1,326
------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . $ 489,328 $ 516,366
============ ============
</TABLE>
At June 30, 1999, the variable interest rate for notes payable under the $200
million revolving credit agreement was 5.8%, and the variable interest rate
under the $20 million revolving credit agreement was 5.3%.
In February 1999, the Company retired $82 million of variable-rate unsecured
Medium Term Notes resulting in an extraordinary charge to earnings of $.1
million.
The Company has three interest rate swap contracts with an aggregate notional
amount of $40 million. Such contracts, which expire through 2004, have been
outstanding since their purchase in 1992. The interest rate swaps have an
effective interest rate of 8.1%.
The Company's debt can be summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
As to interest rate:
Fixed-rate debt (including amounts fixed
through interest rate swaps). . . . . . $ 445,735 $ 444,060
Variable-rate debt. . . . . . . . . . . . 43,593 72,306
------------ ------------
Total . . . . . . . . . . . . . . . . . . $ 489,328 $ 516,366
============ ============
As to collateralization:
Unsecured debt. . . . . . . . . . . . . . $ 411,718 $ 440,433
Secured debt. . . . . . . . . . . . . . . 77,610 75,933
------------ ------------
Total . . . . . . . . . . . . . . . . . . $ 489,328 $ 516,366
============ ============
</TABLE>
<PAGE>
4. PROPERTY
The Company's property consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Land . . . . . . . . . . . . . . $ 252,330 $ 236,221
Land held for development. . . . 30,212 30,156
Land under development . . . . . 16,586 13,024
Buildings and improvements . . . 1,073,146 1,009,166
Construction in-progress . . . . 31,858 6,065
------------ ------------
Total. . . . . . . . . . . . . . $ 1,404,132 $ 1,294,632
============ ============
</TABLE>
Interest and ad valorem taxes capitalized to land under development or buildings
under construction was $.8 million and $.4 million for the quarter ending June
30, 1999 and 1998 and $1.3 and $.7 million for the six months ended June 30,
1999 and 1998.
5. SEGMENT INFORMATION
The operating segments presented are the segments of the Company for which
separate financial information is available and operating performance is
evaluated regularly by senior management in deciding how to allocate resources
and in assessing performance. The Company evaluates the performance of its
operating segments based on net operating income that is defined as total
revenues less operating expenses and ad valorem taxes.
The shopping center segment is engaged in the acquisition, development and
management of real estate, primarily anchored neighborhood and community
shopping centers located in Texas, Louisiana, Arizona, Nevada, New Mexico,
Oklahoma, Arkansas, Kansas, Colorado, Missouri, Illinois, Maine and Tennessee.
The customer base includes supermarkets, drugstores and other retailers who
generally sell basic necessity-type commodities. The industrial segment is
engaged in the acquisition, development and management of bulk warehouses and
office/service centers. Its properties are located in Texas, Nevada and
Tennessee, and the customer base is diverse. Included in "Other" are
corporate-related items, insignificant operations and costs that are not
allocated to the reportable segments.
<PAGE>
Information concerning the Company's reportable segments is as follows (in
thousands):
<TABLE>
<CAPTION>
SHOPPING
CENTER INDUSTRIAL OTHER TOTAL
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Three Months Ended
June 30, 1999:
Revenues . . . . . . . . $ 48,707 $ 6,559 $ 1,046 $ 56,312
Net operating income . . 34,429 4,717 1,033 40,179
Total assets . . . . . . 949,049 153,340 74,685 1,177,074
Three Months Ended
June 30, 1998:
Revenues . . . . . . . . $ 43,733 $ 4,302 $ 773 $ 48,808
Net operating income . . 31,384 3,115 759 35,258
Total assets . . . . . . 854,000 101,086 40,323 995,409
Six Months Ended
June 30, 1999:
Revenues . . . . . . . . $ 96,074 $ 12,645 $ 2,357 $ 111,076
Net operating income . . 68,305 9,141 2,507 79,953
Six Months Ended
June 30, 1998:
Revenues . . . . . . . . $ 85,909 $ 8,266 $ 1,595 $ 95,770
Net operating income . . 61,741 6,003 1,680 69,424
</TABLE>
Net operating income reconciles to income from operations as shown on the
Statements of Consolidated Income as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total segment net operating income . . $ 40,179 $ 35,258 $ 79,953 $ 69,424
Less:
Depreciation and amortization. . . 11,527 10,219 23,164 20,306
Interest . . . . . . . . . . . . . 7,491 8,086 15,524 16,419
General and administrative . . . . 1,922 1,863 3,790 3,397
-------- -------- -------- --------
Income from operations $ 19,239 $ 15,090 $ 37,475 $ 29,302
======== ======== ======== ========
</TABLE>
<PAGE>
Equity in earnings of real estate joint ventures and partnerships as shown on
the Statements of Consolidated Income and the corresponding investment balances
relate exclusively to the shopping center segment.
6. SUBSEQUENT EVENT
On July 19, 1999, the Company issued $20 million of ten year 7.35% fixed-rate,
unsecured Medium Term Notes. Including the effect of a loss of $1.2 million on
the sale of Treasury locks which were designated as a hedge against the future
issuance of fixed-rate notes, the effective interest rate is 8.2%.
<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 184 anchored shopping centers, 43
industrial properties, one office building and one apartment complex at June 30,
1999. Of the Company's 229 developed properties, 172 are located in Texas
(including 100 in Houston and Harris County). The Company's remaining
properties are located in Louisiana (11), Arizona (11), Nevada (8), Arkansas
(6), New Mexico (5), Oklahoma (4), Tennessee (4), Kansas (3), Colorado (2),
Missouri (1), Illinois (1), and Maine (1). The Company has nearly 4,000 leases
and 3,000 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 $51.9 million for the first six months
of 1999 as compared to $42.9 million for the same period of 1998. 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 $.71 for the second quarter. The Company's dividend payout ratio on
common equity was 74% and 75% for the second quarters of 1999 and 1998 based on
funds from operations for the applicable period.
The Company invested an additional $36.2 million in the portfolio through
acquisitions and new development. Acquisitions during the quarter added .7
million square feet to the portfolio, representing an investment of $21.9
million. The Company purchased a shopping center and five industrial projects.
Bell Plaza, a 144,000 square foot shopping center in Amarillo, Texas, is our
sixth property in Amarillo and is anchored by a 63,500 square foot United
Supermarket. This center was 87% occupied when purchased. Sherman Plaza
Business Park is a 100,000 square foot office/service center in Richardson,
Texas, a suburb of Dallas. The Company also acquired three office/service
facilities in Austin, Texas that totaled 148,000 square feet. With the addition
of these facilities, we now own two retail and four industrial properties
totaling nearly 700,000 square feet in Austin. Lastly, the Company purchased a
40.4 acre tract in the Claywood Industrial Park in Houston. Included with this
acquisition is a 330,000 square foot warehouse that was 100% leased when
purchased. Additionally, the surplus land at this site allows for development
of an additional 400,000 square feet of warehouse space.
With respect to new development, construction continues at the eight retail
locations and one industrial facility. The projects will total about 575,000
square feet upon completion and will represent an investment of approximately
$47.5 million. Additionally, we are finishing construction of a 260-unit luxury
apartment complex on previously undeveloped land of the Company, which will
represent an investment of about $14 million. With the exception of the newly
acquired site in Denver, the balance of the projects will be substantially
completed prior to year-end.
<PAGE>
Total debt outstanding decreased to $489.3 million at quarter-end from $516.4 at
December 31, 1998. This decrease was primarily due to the retirement of debt
with the $111.3 million of net 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. The
Company's debt to total capitalization is a conservative 26.0% and its cash flow
covers its interest costs a strong 4.2 times for the four quarters ended June
30, 1999.
During the quarter, the Company announced that it was negotiating the sale of
130 acres of unimproved land at Railwood, the Company's master-planned
industrial park, and an 80% interest in nearly two million square feet of bulk
warehouse facilities. The Company will continue to provide leasing and property
management services for the improved properties and also retain the right to
develop the unimproved land in joint ventures with the purchaser. Assuming the
transaction is finalized, it is expected to close in the fourth quarter and the
total cash proceeds to the Company are projected to be approximately $59
million. The effect of this transaction on funds from operations will be
neutral in 1999 but will be accretive over the long-term as the proceeds are
reinvested.
Subsequent to quarter-end, the Company issued $20 million of ten-year 7.35%
fixed-rate, unsecured Medium Term Notes. Including the effect of a loss of $1.2
million on the sale of Treasury locks which were designated as a hedge against
the future issuance of fixed-rate notes, the effective interest rate is 8.2%.
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 $25.7 million for the second quarter of 1999,
as compared to $23.8 million for the same period of 1998. For the six months
ended June 30, 1999, funds from operations increased to $50.9 million from $47.4
million. These increases primarily relate 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 $14.2 million from
$13.7 million for the second quarter of 1999 as compared with the same quarter
of 1998. Net income per common share-basic increased to $.53 in 1999 from $.51
in 1998, while net income per share-diluted also increased to $.53 in 1999 from
$.51 in 1998.
Rental revenues were $55.0 million in 1999, as compared to $47.8 million in
1998, representing an increase of approximately $7.2 million or 15.1%. 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 retail properties was 92.4% at the end of the second quarter of 1999
as compared to 93.1% at June 30, 1998. Occupancy of the Company's total
portfolio was 92.7% at June 30, 1999 as compared to 93.4% at the end of the
second quarter of the prior year. During the first six months of 1999, the
Company completed 390 renewals or leases comprising 1.8 million square feet of
space. Rental rates increased an average of 9.3% over the rates charged to the
prior tenants. Net of capital costs for tenant improvements, the increase
averaged 6.5%. Retail sales on a same-store basis increased by 1.6% based on
sales reported during the last twelve months.
<PAGE>
Gross interest costs, before capitalization of interest, decreased by $.2
million from $8.5 million in the second quarter of 1998 to $8.3 million in the
second quarter of 1999. The decrease was due primarily to a decrease in the
average debt outstanding between periods from $476.1 million in 1998 to $461.8
million in 1999. The amount of interest capitalized during the period increased
from $.4 million in 1998 to $.8 million in 1999 due to an increase in new
development activity.
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, 1999
Net income available to common shareholders increased by $1.7 million to $27.7
million for the first six months of 1999 from $26.0 million for the comparable
period in 1998. Net income per common share-basic increased to $1.04 in 1999
from $.98 in 1998, while net income per share-diluted increased to $1.03 in 1999
from $.97 in 1998. 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 15.3% to $108.4 million, compared with $94.0 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, decreased by $.1
million to $17.0 million in the first six months of 1999 from $17.1 million in
the same period of 1998. The decrease was due primarily to a decrease in the
average debt outstanding between periods, from $475.0 million in 1998 to $469.1
million in 1999. The average interest rate remained unchanged at 7.2%. The
amount of interest capitalized during the period increased from $.6 million in
1998 to $1.3 million in 1999 due to an increase in new development activity.
General and administrative expenses increased by $.4 million to $3.8 million for
the first six months of 1999 from $3.4 million for the comparable period of
1998. The increase is due to the Company's adoption of the new Emerging Issues
Task Force Consensus decision which provides that internal costs of identifying
and acquiring operating property incurred subsequent to March 19, 1998 should be
expensed. Also, contributing to the increase is an increase in staffing
necessitated by the growth in the portfolio.
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.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. These date code fields
will need to be amended to allow the system to distinguish 21st century dates
from the 20th century dates. The use of software and computer systems that are
not Year 2000 compliant could result in system failures or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions or engage in normal business activities. As a
result, many companies' software and computer systems may need to be upgraded or
replaced in order to comply with Year 2000 requirements.
The Company has completed a review of its software and hardware and determined
that all mission-critical systems are Year 2000 compliant. Non-mission critical
software and hardware have also been reviewed, and the Company has identified
certain personal computers, local area networks and file servers which are
scheduled for upgrades or replacement as part of the Company's ongoing
maintenance of its information system technology. The Company has also
completed a review of Year 2000 issues not related to information technology
including, but not limited to, the use of imbedded chips or internal clocks in
machinery or equipment. As the Company owns primarily single-story industrial
buildings and neighborhood retail centers without enclosed common areas, the use
of this technology is very limited and, accordingly, the Company believes that
it is Year 2000 compliant. The Company has no incremental costs in addressing
these Year 2000 issues.
<PAGE>
The Company has communicated with its major tenants, financial institutions and
utility companies to determine the extent to which the Company is vulnerable to
third parties' failures to resolve their Year 2000 issues. Based on the
representations received from these third parties, the Company does not believe
this represents a material risk to the Company. Nevertheless, the Company has
no guarantee that such third party systems will operate as represented. In the
event significant systems of one of these third parties fails, the operating
results and financial condition of the Company could be adversely effected.
Based on the Company's assessment of the readiness of its own systems and those
of significant third parties, it has not deemed it necessary to develop a formal
contingency plan. In the event additional information comes to the Company's
attention which would change its current assessment, it will consider the need
for a contingency plan at that time.
<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 computation of ratios of earnings and funds
from operations to combined fixed charges and preferred
dividends.
(27) Article 5 Financial Data Schedule (EDGAR filing only).
<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 27, 1999
---------------
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
COMPUTATION OF RATIOS OF EARNINGS AND FUNDS FROM OPERATIONS
TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(AMOUNTS IN THOUSANDS)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income available to common shareholders . . . . . . . . $ 14,174 $ 13,682 $ 27,698 $ 26,011
Add:
Portion of rents representative of the interest factor. . . 363 199 692 402
Interest on indebtedness. . . . . . . . . . . . . . . . . . 7,491 8,086 15,524 16,419
Preferred dividends . . . . . . . . . . . . . . . . . . . . 5,010 1,395 9,573 1,969
Amortization of debt cost . . . . . . . . . . . . . . . . . 80 92 174 192
--------- --------- --------- ---------
Net income as adjusted. . . . . . . . . . . . . . . . . $ 27,118 $ 23,454 $ 53,661 $ 44,993
========= ========= ========= =========
Fixed charges:
Interest on indebtedness. . . . . . . . . . . . . . . . . . $ 7,491 $ 8,086 $ 15,524 $ 16,419
Capitalized interest. . . . . . . . . . . . . . . . . . . . 808 377 1,255 649
Preferred dividends . . . . . . . . . . . . . . . . . . . . 5,010 1,395 9,573 1,969
Amortization of debt cost . . . . . . . . . . . . . . . . . 80 92 174 192
Portion of rents representative of the interest factor. . . 363 199 692 402
--------- --------- --------- ---------
Fixed charges . . . . . . . . . . . . . . . . . . . . . $ 13,752 $ 10,149 $ 27,218 $ 19,631
========= ========= ========= =========
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED DIVIDENDS . . . . . . . . . . . . . . 1.97 2.31 1.97 2.29
========= ========= ========= =========
Net income available to common shareholders . . . . . . . . $ 14,174 $ 13,682 $ 27,698 $ 26,011
Depreciation and amortization . . . . . . . . . . . . . . . 11,447 10,127 22,990 20,114
(Gain) loss on sales of property and securities . . . . . . 55 13 55 (70)
Extraordinary charge (early retirement of debt) . . . . . . 149 1,392
--------- --------- --------- ---------
Funds from operations . . . . . . . . . . . . . . . . . 25,676 23,822 50,892 47,447
Add:
Portion of rents representative of the interest factor. . . 363 199 692 402
Preferred dividends . . . . . . . . . . . . . . . . . . . . 5,010 1,395 9,573 1,969
Interest on indebtedness. . . . . . . . . . . . . . . . . . 7,491 8,086 15,524 16,419
Amortization of debt cost . . . . . . . . . . . . . . . . . 80 92 174 192
--------- --------- --------- ---------
Funds from operations as adjusted . . . . . . . . . . . $ 38,620 $ 33,594 $ 76,855 $ 66,429
========= ========= ========= =========
RATIO OF FUNDS FROM OPERATIONS TO COMBINED
FIXED CHARGES AND PREFERRED DIVIDENDS . . . . . . . . . . . 2.81 3.31 2.82 3.38
========= ========= ========= =========
</TABLE>
<PAGE>
<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, 1999.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3892
<SECURITIES> 0
<RECEIVABLES> 11755
<ALLOWANCES> 1059
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1404132
<DEPRECIATION> 316620
<TOTAL-ASSETS> 1177074
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 801
0
267
<OTHER-SE> 633740
<TOTAL-LIABILITY-AND-EQUITY> 1177074
<SALES> 0
<TOTAL-REVENUES> 108422
<CGS> 0
<TOTAL-COSTS> 31123
<OTHER-EXPENSES> 26954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15524
<INCOME-PRETAX> 37420
<INCOME-TAX> 0
<INCOME-CONTINUING> 37420
<DISCONTINUED> 0
<EXTRAORDINARY> 149
<CHANGES> 0
<NET-INCOME> 37271
<EPS-BASIC> 1.04
<EPS-DILUTED> 1.03
</TABLE>
