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, 2000
-------------
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
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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 31, 2000, there
were 26,783,962 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,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rentals. . . . . . . . . . . . . . . . . . . . . . . . . $ 61,362 $ 54,989 $ 120,801 $ 108,422
Interest:
Affiliates . . . . . . . . . . . . . . . . . . . . . . 1,442 623 2,728 1,098
Securities and Other . . . . . . . . . . . . . . . . . 96 1 196 524
Equity in earnings (loss) of real estate joint ventures
and partnerships . . . . . . . . . . . . . . . . . . (26) 83 (98) 168
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 709 616 1,157 864
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . 63,583 56,312 124,784 111,076
---------- ---------- ---------- ----------
Expenses:
Depreciation and amortization. . . . . . . . . . . . . . 13,231 11,527 26,430 23,164
Interest . . . . . . . . . . . . . . . . . . . . . . . . 10,668 7,491 20,862 15,524
Operating. . . . . . . . . . . . . . . . . . . . . . . . 9,969 9,182 18,898 17,360
Ad valorem taxes . . . . . . . . . . . . . . . . . . . . 7,691 6,951 15,252 13,763
General and administrative . . . . . . . . . . . . . . . 2,046 1,922 3,913 3,790
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . 43,605 37,073 85,355 73,601
---------- ---------- ---------- ----------
Income from Operations . . . . . . . . . . . . . . . . . . 19,978 19,239 39,429 37,475
Loss on Sales of Property. . . . . . . . . . . . . . . . . (55) (55)
---------- ---------- ---------- ----------
Income Before Extraordinary Charge . . . . . . . . . . . . 19,978 19,184 39,429 37,420
Extraordinary Charge (early retirement of debt). . . . . . (149)
---------- ---------- ---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . 19,978 19,184 39,429 37,271
Dividends on Preferred Shares. . . . . . . . . . . . . . . 5,010 5,010 10,020 9,573
---------- ---------- ---------- ----------
Net Income Available to Common Shareholders. . . . . . . . $ 14,968 $ 14,174 $ 29,409 $ 27,698
========== ========== ========== ==========
Net Income Per Common Share - Basic:
Income Before Extraordinary Charge. . . . . . . . . $ .56 $ .53 $ 1.10 $ 1.05
Extraordinary Charge. . . . . . . . . . . . . . . . (.01)
---------- ---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . $ .56 $ .53 $ 1.10 $ 1.04
========== ========== ========== ==========
Net Income Per Common Share - Diluted:
Income Before Extraordinary Charge. . . . . . . . . $ .56 $ .53 $ 1.10 $ 1.04
Extraordinary Charge. . . . . . . . . . . . . . . . (.01)
---------- ---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . $ .56 $ .53 $ 1.10 $ 1.03
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 2
<PAGE>
<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, December 31,
2000 1999
------------ ------------
(unaudited)
ASSETS
<S> <C> <C>
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,589,882 $ 1,514,139
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . (351,154) (328,645)
------------ ------------
Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,238,728 1,185,494
Investment in Real Estate Joint Ventures and Partnerships. . . . . . . . . 3,014 2,006
------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,241,742 1,187,500
Mortgage Bonds and Notes Receivable from:
Real Estate Joint Ventures and Partnerships. . . . . . . . . . . . . . 70,038 52,824
Affiliate (net of deferred gain of $3,050 in 2000 and 1999). . . . . . 4,085 3,907
Unamortized Debt and Lease Costs . . . . . . . . . . . . . . . . . . . . . 32,878 29,986
Accrued Rent and Accounts Receivable (net of allowance for doubtful
accounts of $1,068 in 2000 and $908 in 1999) . . . . . . . . . . . . . . 10,648 16,874
Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . 3,050 5,842
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,791 12,463
------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,377,232 $ 1,309,396
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 681,995 $ 594,185
Accounts Payable and Accrued Expenses. . . . . . . . . . . . . . . . . . . 48,615 57,518
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,805 11,791
------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740,415 663,494
------------ ------------
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 3,575 and 3,600 shares
outstanding in 2000 and 1999; liquidation preference $25 per share. 108 108
7.0% Series C cumulative redeemable preferred shares of
beneficial interest; 2,300 shares issued and 2,280 and 2,297 shares
outstanding in 2000 and 1999; liquidation preference $50 per share. 68 69
Common Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 150,000; shares issued and outstanding:
26,784 in 2000 and 26,695 in 1999. . . . . . . . . . . . . . . . . . . 803 801
Capital Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754,610 753,030
Accumulated Dividends in Excess of Net Income. . . . . . . . . . . . . . (118,861) (108,193)
Deferred Compensation Obligation . . . . . . . . . . . . . . . . . . . . (1) (3)
------------ ------------
Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . 636,817 645,902
------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,377,232 $ 1,309,396
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
<PAGE>
<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
Six Months Ended
June 30,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,429 $ 37,271
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 26,430 23,164
Equity in (earnings) loss of real estate joint ventures and
partnerships . . . . . . . . . . . . . . . . . . . . . . . 98 (168)
Loss on sales of property. . . . . . . . . . . . . . . . . . 55
Extraordinary charge (early retirement of debt). . . . . . . 149
Changes in accrued rent and accounts receivable. . . . . . . 6,172 4,370
Changes in other assets. . . . . . . . . . . . . . . . . . . (8,290) (5,116)
Changes in accounts payable and accrued expenses . . . . . . (8,621) (8,077)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . 21 260
----------- -----------
Net cash provided by operating activities. . . . . . . . . 55,239 51,908
----------- -----------
Cash Flows from Investing Activities:
Investment in properties . . . . . . . . . . . . . . . . . . . . (70,050) (94,866)
Mortgage bonds and notes receivable:
Advances . . . . . . . . . . . . . . . . . . . . . . . . . . (18,908) (4,820)
Collections. . . . . . . . . . . . . . . . . . . . . . . . . 288 1,122
Proceeds from sales and disposition of property. . . . . . . . . 3
Proceeds from the sale of marketable debt securities . . . . . . 15,000
Real estate joint ventures and partnerships:
Investments. . . . . . . . . . . . . . . . . . . . . . . . . (1,049) (454)
Distributions. . . . . . . . . . . . . . . . . . . . . . . . 216
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
----------- -----------
Net cash used in investing activities. . . . . . . . . . . (89,719) (83,806)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of:
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,115 53,417
Common shares of beneficial interest . . . . . . . . . . . . 14 475
Preferred shares of beneficial interest. . . . . . . . . . . 111,263
Principal payments of debt . . . . . . . . . . . . . . . . . . . (25,891) (83,487)
Common and preferred dividends paid. . . . . . . . . . . . . . . (50,097) (47,474)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (453) (76)
----------- -----------
Net cash provided by financing activities. . . . . . . . . 31,688 34,118
----------- -----------
Net increase/(decrease) in cash and cash equivalents . . . . . . . (2,792) 2,220
Cash and cash equivalents at January 1 . . . . . . . . . . . . . . 5,842 1,672
----------- -----------
Cash and cash equivalents at June 30 . . . . . . . . . . . . . . . $ 3,050 $ 3,892
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 4
<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, 1999. In the opinion of WRI,
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 WRI's annual
financial statements and notes.
2. NEWLY ADOPTED ACCOUNTING PRONOUNCEMENT
Effective January 1, 2000, WRI adopted the SEC Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements" that requires recognition of
percentage rental revenue only after a tenant exceeds their sales breakpoint.
3. 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,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income available to common shareholders - basic . . . $ 14,968 $ 14,174 $ 29,409 $ 27,698
Income attributable to operating partnership units. . . . 42 35 81 76
-------- -------- -------- --------
Net income available to common shareholders - diluted . . $ 15,010 $ 14,209 $ 29,490 $ 27,774
======== ======== ======== ========
Denominator:
Weighted average shares outstanding - basic . . . . . . . 26,754 26,692 26,730 26,687
Effect of dilutive securities:
Share options and awards. . . . . . . . . . . . . . . 54 90 37 88
Operating partnership units . . . . . . . . . . . . . 103 148 117 148
-------- -------- -------- --------
Weighted average shares outstanding - diluted . . . . . . 26,911 26,930 26,884 26,923
======== ======== ======== ========
</TABLE>
Page 5
<PAGE>
4. DEBT
WRI's debt consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Fixed-rate debt payable to 2015 at 6.0% to 10.0% . . $ 427,460 $ 423,906
Notes payable under revolving credit agreements. . . 212,750 114,000
Obligations under capital leases . . . . . . . . . . 33,467 48,467
Industrial revenue bonds to 2015 at 4.9% to 7.1% . . 6,076 6,141
Other. . . . . . . . . . . . . . . . . . . . . . . . 2,242 1,671
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . $ 681,995 $ 594,185
============ ============
</TABLE>
At June 30, 2000, the variable interest rate for notes payable under the $200
million revolving credit agreement was 7.2%, and the variable interest rate
under the $20 million revolving credit agreement was 7.1%. Effective March 1,
2000, WRI finalized an unsecured $100 million revolving credit agreement with a
bank. This one-year facility is renewable at our option for an additional
two-year period. At June 30, 2000, $12 million was borrowed under this line at
a variable interest rate of 7.4%.
In January 2000, WRI issued $10.5 million of ten-year 8.25% fixed-rate,
unsecured medium term notes. In connection with this debt issuance, we entered
into a ten-year interest rate swap agreement with a notional amount of $10.5
million to swap 8.25% fixed-rate interest for floating-rate interest.
Additionally, WRI has three interest rate swap contracts with an aggregate
notional amount of $40 million which swap floating-rate interest for fixed-rate
interest. Such contracts, which expire through 2004, have been outstanding
since their purchase in 1992. These interest rate swaps have an effective
interest rate of 8.1%.
In July 2000, WRI issued $50 million of variable-rate, unsecured medium term
notes. Of the $50 million issued, $25 million is a two-year variable-rate note
that bears interest at 50 basis points over LIBOR. The other $25 million is a
three-year variable-rate note that bears interest at 60 basis points over LIBOR.
At the time of issuance, the interest rates were 7.23% and 7.33%, respectively.
In July 2000, we filed a $400 million shelf registration statement, of which
$350 million is currently available.
WRI's debt can be summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
As to interest rate (including the effects of
interest rate swaps):
Fixed-rate debt . . . . . . . . . . . . . . . $ 477,972 $ 499,919
Variable-rate debt. . . . . . . . . . . . . . 204,023 94,266
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . $ 681,995 $ 594,185
============ ============
As to collateralization:
Unsecured debt. . . . . . . . . . . . . . . . $ 567,493 $ 482,671
Secured debt. . . . . . . . . . . . . . . . . 114,502 111,514
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . $ 681,995 $ 594,185
============ ============
</TABLE>
Page 6
<PAGE>
5. PROPERTY
WRI's property consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Land . . . . . . . . . . . . . $ 287,291 $ 279,871
Land held for development. . . 24,567 24,509
Land under development . . . . 29,530 12,139
Buildings and improvements . . 1,224,087 1,189,687
Construction in-progress . . . 24,407 7,933
------------ ------------
Total. . . . . . . . . . . . . $ 1,589,882 $ 1,514,139
============ ============
</TABLE>
Interest and ad valorem taxes capitalized to land under development or buildings
under construction was $1.0 and $.8 million, respectively, for the quarter
ending June 30, 2000 and 1999 and $1.5 and $1.3 million, respectively, for the
six months ended June 30, 2000 and 1999.
6. SEGMENT INFORMATION
The operating segments presented are the segments of WRI 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. WRI 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, Arkansas, New
Mexico, Oklahoma, Tennessee, Kansas, Colorado, Missouri, Illinois, Florida and
Maine. 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 7
<PAGE>
Information concerning WRI'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, 2000:
Revenues . . . . . . . . . $ 54,056 $ 7,219 $ 2,308 $ 63,583
Net operating income . . . 38,710 5,143 2,070 45,923
Total assets . . . . . . . 1,103,151 176,176 97,905 1,377,232
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
Six Months Ended
June 30, 2000:
Revenues . . . . . . . . . $ 106,200 $ 14,164 $ 4,420 $ 124,784
Net operating income . . . 76,455 10,085 4,094 90,634
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
</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,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total segment net operating income. . . $ 45,923 $ 40,179 $ 90,634 $ 79,953
Less:
Depreciation and amortization . . . 13,231 11,527 26,430 23,164
Interest. . . . . . . . . . . . . . 10,668 7,491 20,862 15,524
General and administrative. . . . . 2,046 1,922 3,913 3,790
-------- -------- -------- --------
Income from operations. . . . . . . . . $ 19,978 $ 19,239 $ 39,429 $ 37,475
======== ======== ======== ========
</TABLE>
Equity in earnings (loss) 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.
Page 8
<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 193 anchored shopping centers, 50
industrial properties, one multi-family residential property and one office
building at June 30, 2000. Of WRI's 245 developed properties, 181 are located
in Texas (including 100 in Houston and Harris County). Our remaining properties
are located in Louisiana (11), Arizona (11), Nevada (8), Arkansas (6), New
Mexico (6), Oklahoma (4), Tennessee (4), Kansas (4), Colorado (5), Missouri (2),
Illinois (1), Florida (1) and Maine (1). WRI has nearly 4,300 leases and 3,300
different tenants. Leases for our 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 our anchor tenants are supermarkets, value-oriented apparel and
discount stores and other retailers, which generally sell basic necessity-type
items.
CAPITAL RESOURCES AND LIQUIDITY
WRI anticipates that cash flows from operating activities will continue to
provide adequate capital for all dividend payments in accordance with REIT
requirements. Cash on hand, borrowings under our 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 $55.2 million for the first six months of 2000 as
compared to $51.9 million for the same period of 1999. The increase was due
primarily to WRI's acquisition and new development programs and improvements in
the performance of its existing portfolio of properties.
Our Board of Trust Managers approved a quarterly dividend per common share of
$.75 for the second quarter of 2000. Our dividend payout ratio on common equity
for the second quarter of 2000 and 1999 was 71% and 74%, respectively, based on
funds from operations for the applicable period.
WRI invested an additional $22.9 million for the acquisition of three shopping
centers during the second quarter. In April, we acquired Kohl's Shopping Center
in Topeka, Kansas. This 116,000 square foot shopping center is anchored by an
80,700 square foot Kohl's Department Store and a 35,000 square foot Barnes and
Noble.
In March, WRI formed a strategic joint venture with Dana Commercial Credit
Corporation to acquire $200 million of real estate assets using limited
leverage. As general partner in the joint venture, WRI is responsible for the
acquisition process, as well as, the on-going leasing and management activities
of the acquired properties. In June, two shopping centers were acquired with
Dana Commercial Credit Corporation. Our first purchase was the Pavilions at San
Mateo in Albuquerque, New Mexico. This 196,000 square foot center is anchored
by Circuit City, Linens 'n Things, CompUSA and Old Navy. This represents WRI's
fifth property in Albuquerque and our sixth in New Mexico. The second shopping
center is Lone Star Pavilion in College Station, Texas. This 107,000 square
foot shopping center is anchored by Best Buy, Barnes and Noble and Office Depot.
With respect to new development, we purchased land for three new projects. In
April, twenty-five acres of land in Shreveport, Louisiana was purchased for the
development of a 196,000 square foot shopping center adjacent to a new 176,000
square foot tenant-owned Super Target. This project is expected to open in the
fall of 2001. In May, we purchased land in Arizona adjacent to a 65,000 square
foot tenant-owned Fry's Supermarket on which we will develop 12,000 square feet
of restaurant/small shop space. In June, we purchased approximately 13 acres of
land in Las Vegas for the development of 60,000 square feet of retail space
surrounding a 140,000 square foot tenant-owned Super Kmart. Construction
continues to progress at several other locations, highlighted by the opening of
the 66,000 square foot King Soopers supermarket anchoring the 134,000 square
foot center owned in a joint venture with our Denver-based development partner.
The projects under construction represent an estimated investment by WRI of
approximately $76 million and will add over 700,000 square feet to the
portfolio.
Page 9
<PAGE>
Total debt outstanding increased to $682.0 million at quarter-end from $594.2 at
December 31, 1999. This increase was primarily due to acquisitions and WRI's
ongoing development and redevelopment efforts. Included in total debt
outstanding of $682.0 at June 30, 2000 is variable-rate debt of $154.9 million,
after recognizing the effect of $50.5 million of interest rate swaps and $49.1
million of variable-rate notes receivables. WRI's debt to total capitalization
is a conservative 33.4% and the interest coverage ratio is 4.0 to 1 for the four
quarters ended June 30, 2000.
In January 2000, WRI issued $10.5 million of ten-year 8.25% fixed-rate,
unsecured medium term notes. In connection with this debt issuance, we entered
into a ten-year interest rate swap agreement with a notional amount of $10.5
million to swap 8.25% fixed-rate interest for floating-rate interest.
Effective March 1, 2000, WRI finalized an unsecured $100 million revolving
credit agreement with a bank. This one-year facility is renewable at our option
for an additional two-year period.
In July 2000, the Company issued $50 million of variable-rate, unsecured medium
term notes. Of the $50 million issued, $25 million is a two-year variable-rate
note that bears interest at 50 basis points over LIBOR. The other $25 million
is a three-year variable-rate note that bears interest at 60 basis points over
LIBOR. At the time of issuance, the interest rates were 7.23% and 7.33%,
respectively.
FUNDS FROM OPERATIONS
Industry analysts generally consider funds from operations to be an appropriate
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 WRI's operating
performance or to cash flows from operations as a measure of liquidity.
Funds from operations increased to $28.1 million for the second quarter of 2000,
as compared to $25.7 million for the same period of 1999. For the six months
ended June 30, 2000, funds from operations increased to $55.6 million from $50.9
million in 1999. These increases primarily relate to the impact of WRI's
acquisitions, new development and activity at its existing properties. For
further information on changes between years, see "Results of Operations" below.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000
Net income available to common shareholders increased to $15.0 million from
$14.2 million for the second quarter of 2000 as compared with the same quarter
of 1999. Net income per common share-basic increased to $.56 in 2000 from $.53
in 1999, while net income per share-diluted also increased to $.56 in 2000 from
$.53 in 1999.
Rental revenues were $61.4 million in 2000, as compared to $55.0 million in
1999, representing an increase of approximately $6.4 million or 11.6%. Of these
increases, property acquisitions and new development contributed $5.9 million in
2000, as compared to $6.2 million for the same period of 1999. The remaining
portion of these increases is due to activity at our existing properties.
Occupancy of the total portfolio increased to 92.7% as compared to 91.3% as of
December 31, 1999. The occupancy of the retail portfolio was also 92.7%, up
from 91.3% at year-end 1999, while the industrial portfolio increased from 91.0%
at year-end to 92.7%. This increase in occupancy results primarily from the
lease-up of several large spaces that were vacated in the latter half of 1999.
During the first six months of 2000, WRI completed 420 renewals or leases
comprising 2.3 million square feet at an average rental rate of 10.7%. Net of
the amortized portion of capital costs for tenant improvements, the increased
averaged 7.3%. Retail sales on the same-store basis increased by 1.5% based on
sales reported during the last twelve months.
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Gross interest costs, before capitalization of interest, increased by $3.2
million from $8.3 million in the second quarter of 1999 to $11.5 million in the
second quarter of 2000. The increase is due primarily to an increase in the
average debt outstanding between periods of $461.8 in 1999 to $638.5 million in
2000. The average interest rate remained unchanged at 7.2%. The amount of
interest capitalized during the period was $.8 million in 2000 and 1999.
The increases in depreciation and amortization, operating expenses and ad
valorem taxes were primarily the result of WRI's acquisitions and new
development programs.
SIX MONTHS ENDED JUNE 30, 2000
Net income available to common shareholders increased to $29.4 million from
$27.7 million for the first six months of 2000 as compared with the same period
of 1999. Net income per common share-basic increased to $1.10 in 2000 from
$1.04 in 1999, while net income per share-diluted also increased to $1.10 in
2000 from $1.03 in 1999.
Rental revenues were $120.8 million in 2000, as compared to $108.4 million in
1999, representing an increase of approximately $12.4 million or 11.4%. Of
these increases, property acquisitions and new development contributed $11.8
million in 2000, as compared to $12.9 million for the same period of 1999. The
remaining portion of these increases is due to activity at our existing
properties.
Gross interest costs, before capitalization of interest, increased by $5.4
million from $16.8 million for the first six months of 1999 to $22.2 million for
the same period of 2000. The increase was due primarily to an increase in the
average debt outstanding between periods from $469.1 million in 1999 to $616.2
million in 2000. The average interest rate remained unchanged at 7.2%. The
amount of interest capitalized during the period was $1.3 million in 2000 and
1999.
The increases in depreciation and amortization, operating expenses and ad
valorem taxes were primarily the result of WRI's acquisition and new development
programs.
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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).
(b) Reports on Form 8-K
A Form 8-K, dated April 26, 2000, was filed with the Securities
and Exchange Commission to file the Independent Auditors' Consent
of Deloitte & Touche LLP relating to the Registration Statement
No. 333-35174 on Form S-3.
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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/Chief
Financial Officer
(Principal Accounting Officer)
DATE: August 4, 2000
----------------
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