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 September 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
------
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 October 20, 2000, there
were 26,807,764 common shares of beneficial interest of Weingarten Realty
Investors, $.03 par value, outstanding.
<PAGE>
<TABLE>
<CAPTION>
PART 1
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
WEINGARTEN REALTY INVESTORS
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rentals. . . . . . . . . . . . . . . . . . . . . . . . . $ 63,595 $ 57,171 $ 184,396 $ 165,593
Interest:
Affiliates . . . . . . . . . . . . . . . . . . . . . . 1,512 529 4,240 1,627
Securities and Other . . . . . . . . . . . . . . . . . 118 125 314 649
Equity in earnings (loss) of real estate joint ventures
and partnerships . . . . . . . . . . . . . . . . . . (37) 43 (135) 211
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 798 519 1,955 1,383
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . 65,986 58,387 190,770 169,463
---------- ---------- ---------- ----------
Expenses:
Depreciation and amortization. . . . . . . . . . . . . . 14,141 12,640 40,571 35,804
Interest . . . . . . . . . . . . . . . . . . . . . . . . 11,626 8,155 32,488 23,679
Operating. . . . . . . . . . . . . . . . . . . . . . . . 9,813 9,026 28,711 26,386
Ad valorem taxes . . . . . . . . . . . . . . . . . . . . 8,437 7,146 23,689 20,909
General and administrative . . . . . . . . . . . . . . . 2,107 1,843 6,020 5,633
---------- ---------- ---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . 46,124 38,810 131,479 112,411
---------- ---------- ---------- ----------
Income from Operations . . . . . . . . . . . . . . . . . . 19,862 19,577 59,291 57,052
Loss on Sales of Property. . . . . . . . . . . . . . . . . (5) (60)
---------- ---------- ---------- ----------
Income Before Extraordinary Charge . . . . . . . . . . . . 19,862 19,572 59,291 56,992
Extraordinary Charge (early retirement of debt). . . . . . (149)
---------- ---------- ---------- ----------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . 19,862 19,572 59,291 56,843
Dividends on Preferred Shares. . . . . . . . . . . . . . . 5,010 5,010 15,030 14,583
---------- ---------- ---------- ----------
Net Income Available to Common Shareholders. . . . . . . . $ 14,852 $ 14,562 $ 44,261 $ 42,260
========== ========== ========== ==========
Net Income Per Common Share - Basic:
Income Before Extraordinary Charge. . . . . . . . . $ .55 $ .55 $ 1.65 $ 1.59
Extraordinary Charge. . . . . . . . . . . . . . . . (.01)
---------- ---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . $ .55 $ .55 $ 1.65 $ 1.58
========== ========== ========== ==========
Net Income Per Common Share - Diluted:
Income Before Extraordinary Charge. . . . . . . . . $ .55 $ .54 $ 1.65 $ 1.58
Extraordinary Charge. . . . . . . . . . . . . . . . (.01)
---------- ---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . . . . . . $ .55 $ .54 $ 1.65 $ 1.57
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 2
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<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
September 30, December 31,
2000 1999
------------- -------------
(unaudited)
ASSETS
<S> <C> <C>
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,659,388 $ 1,514,139
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . (361,616) (328,645)
------------- -------------
Property - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,297,772 1,185,494
Investment in Real Estate Joint Ventures and Partnerships. . . . . . . . . . . . 2,417 2,006
------------- -------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,300,189 1,187,500
Mortgage Bonds and Notes Receivable from:
Real Estate Joint Ventures and Partnerships. . . . . . . . . . . . . . . . . 36,583 52,824
Affiliate (net of deferred gain of $3,050 in 2000 and 1999). . . . . . . . . 4,135 3,907
Unamortized Debt and Lease Costs . . . . . . . . . . . . . . . . . . . . . . . . 33,807 29,986
Accrued Rent and Accounts Receivable (net of allowance for doubtful
accounts of $1,619 in 2000 and $908 in 1999) . . . . . . . . . . . . . . . . . 14,420 16,874
Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,345 5,842
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,817 12,463
------------- -------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,410,296 $ 1,309,396
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 716,355 $ 594,185
Accounts Payable and Accrued Expenses. . . . . . . . . . . . . . . . . . . . . . 53,058 57,518
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,077 11,791
------------- -------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 778,490 663,494
------------- -------------
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 . . . . . . . . . . . . . . . . . 89 90
7.125% Series B cumulative redeemable preferred shares of
beneficial interest; 3,600 shares issued and 3,566 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 2,272 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:
26,808 in 2000 and 26,695 in 1999. . . . . . . . . . . . . . . . . . . . . 806 801
Capital Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 754,839 753,030
Accumulated Dividends in Excess of Net Income. . . . . . . . . . . . . . . . . (124,104) (108,193)
Deferred Compensation Obligation . . . . . . . . . . . . . . . . . . . . . . . (3)
------------- -------------
Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631,806 645,902
------------- -------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,410,296 $ 1,309,396
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3
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<TABLE>
<CAPTION>
WEINGARTEN REALTY INVESTORS
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
Nine Months Ended
September 30,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,291 $ 56,843
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . 40,571 35,804
Equity in (earnings) loss of real estate joint ventures and
partnerships . . . . . . . . . . . . . . . . . . . . . . . . . 135 (211)
Loss on sales of property. . . . . . . . . . . . . . . . . . . . 60
Extraordinary charge (early retirement of debt). . . . . . . . . 149
Changes in accrued rent and accounts receivable. . . . . . . . . 2,770 2,603
Changes in other assets. . . . . . . . . . . . . . . . . . . . . (11,328) (7,542)
Changes in accounts payable and accrued expenses . . . . . . . . (4,691) (7,208)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (20) 729
----------- -----------
Net cash provided by operating activities. . . . . . . . . . . 86,728 81,227
----------- -----------
Cash Flows from Investing Activities:
Investment in properties . . . . . . . . . . . . . . . . . . . . . . . (139,229) (150,547)
Mortgage bonds and notes receivable:
Advance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,630) (6,031)
Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . 61,613 1,284
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. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,510) (1,321)
Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . 216
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
----------- -----------
Net cash used in investing activities. . . . . . . . . . . . . (111,756) (141,403)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of:
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,068 105,658
Common shares of beneficial interest . . . . . . . . . . . . . . 14 475
Preferred shares of beneficial interest. . . . . . . . . . . . . 111,263
Principal payments of debt . . . . . . . . . . . . . . . . . . . . . . (26,584) (83,993)
Common and preferred dividends paid. . . . . . . . . . . . . . . . . . (75,202) (71,435)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (765) (230)
----------- -----------
Net cash provided by financing activities. . . . . . . . . . . 26,531 61,738
----------- -----------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . . 1,503 1,562
Cash and cash equivalents at January 1 . . . . . . . . . . . . . . . . . . 5,842 1,672
----------- -----------
Cash and cash equivalents at September 30. . . . . . . . . . . . . . . . . $ 7,345 $ 3,234
=========== ===========
</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 Nine Months Ended
September 30, September 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
--------- --------- --------- ---------
Numerator:
Net income available to common shareholders - basic . . . . $ 14,852 $ 14,562 $ 44,261 $ 42,260
Income attributable to operating partnership units. . . . . 22 35 103 111
--------- --------- --------- ---------
Net income available to common shareholders - diluted . . . $ 14,874 $ 14,597 $ 44,364 $ 42,371
========= ========= ========= =========
Denominator:
Weighted average shares outstanding - basic . . . . . . . . 26,792 26,692 26,751 26,688
Effect of dilutive securities:
Share options and awards. . . . . . . . . . . . . . . 81 57 46 77
Operating partnership units . . . . . . . . . . . . . 103 142 112 142
--------- --------- --------- ---------
Weighted average shares outstanding - diluted . . . . . . . 26,976 26,891 26,909 26,907
========= ========= ========= =========
</TABLE>
Page 5
<PAGE>
4. DEBT
WRI's debt consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Fixed-rate debt payable to 2015 at 6.0% to 10.0% . . . . . . . $ 440,899 $ 423,906
Variable-rate unsecured notes payable to 2003. . . . . . . . . 50,000
Notes payable under revolving credit agreements. . . . . . . . 183,705 114,000
Obligations under capital leases . . . . . . . . . . . . . . . 33,467 48,467
Industrial revenue bonds to 2015 at 5.6% to 7.1% . . . . . . . 6,043 6,141
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,241 1,671
------------- -------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 716,355 $ 594,185
============= =============
</TABLE>
At September 30, 2000, the variable interest rate for notes payable under the
$200 million revolving credit agreement was 7.1%, and the variable interest rate
under the $20 million revolving credit agreement was 6.9%. 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 September 30, 2000, no amounts were outstanding under this
line.
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.
Page 6
<PAGE>
WRI's debt can be summarized as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
As to interest rate (including the effects of
interest rate swaps):
Fixed-rate debt . . . . . . . . . . . $ 491,412 $ 499,919
Variable-rate debt. . . . . . . . . . 224,943 94,266
------------- -------------
Total . . . . . . . . . . . . . . . . $ 716,355 $ 594,185
============= =============
As to collateralization:
Unsecured debt. . . . . . . . . . . . $ 588,446 $ 482,671
Secured debt. . . . . . . . . . . . . 127,909 111,514
------------- -------------
Total . . . . . . . . . . . . . . . . $ 716,355 $ 594,185
============= =============
</TABLE>
5. PROPERTY
WRI's property consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Land. . . . . . . . . . . . . . . . . . . . . $ 299,312 $ 279,871
Land held for development . . . . . . . . . . 24,603 24,509
Land under development. . . . . . . . . . . . 30,765 12,139
Buildings and improvements. . . . . . . . . . 1,276,817 1,189,687
Construction in-progress. . . . . . . . . . . 27,891 7,933
------------- -------------
Total . . . . . . . . . . . . . . . . . . . . $ 1,659,388 $ 1,514,139
============= =============
</TABLE>
Interest and ad valorem taxes capitalized to land under development or buildings
under construction was $1.1 million and $1.0 million, respectively, for the
quarters ended September 30, 2000 and 1999 and $2.6 million and $2.3 million,
respectively, for the nine months ended September 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>
<S> <C> <C> <C> <C>
SHOPPING
CENTER INDUSTRIAL OTHER TOTAL
----------- ---------- ---------- ------------
Three Months Ended
September 30, 2000:
Revenues . . . . . . . . . . . $ 56,340 $ 7,176 $ 2,470 $ 65,986
Net operating income . . . . . 40,300 4,670 2,766 47,736
Total assets . . . . . . . . . 1,174,775 177,349 58,172 1,410,296
Three Months Ended
September 30, 1999:
Revenues . . . . . . . . . . . $ 49,514 $ 7,745 $ 1,128 $ 58,387
Net operating income . . . . . 35,449 5,538 1,228 42,215
Total assets . . . . . . . . . 983,697 185,717 80,724 1,250,138
Nine Months Ended
September 30, 2000:
Revenues . . . . . . . . . . . $ 162,540 $ 21,340 $ 6,890 $ 190,770
Net operating income . . . . . 116,755 14,755 6,860 138,370
Nine Months Ended
September 30, 1999:
Revenues . . . . . . . . . . . $ 145,587 $ 20,391 $ 3,485 $ 169,463
Net operating income . . . . . 103,753 14,679 3,736 122,168
</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 Nine Months Ended
September 30, September 30,
---------------------- ----------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
---------- ---------- ---------- ----------
Total segment net operating income. . . . . . . . . . . . . $ 47,736 $ 42,215 $ 138,370 $ 122,168
Less:
Depreciation and amortization . . . . . . . . . . . . 14,141 12,640 40,571 35,804
Interest. . . . . . . . . . . . . . . . . . . . . . . 11,626 8,155 32,488 23,679
General and administrative. . . . . . . . . . . . . . 2,107 1,843 6,020 5,633
---------- ---------- ---------- ----------
Income from operations. . . . . . . . . . . . . . . . . . . $ 19,862 $ 19,577 $ 59,291 $ 57,052
========== ========== ========== ==========
</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>
14
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 196 anchored shopping centers, 53
industrial properties, one multi-family residential property and one office
building at September 30, 2000. Of WRI's 251 developed properties, 185 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), Kansas (5), Colorado (5), Oklahoma (4), Tennessee (4),
Missouri (2), Florida (2), Illinois (1) and Maine (1). WRI has 4,400 leases and
3,400 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 $86.7 million for the first nine months of 2000 as
compared to $81.2 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 third quarter of 2000. Our dividend payout ratio on common equity
for the third quarter of 2000 and 1999 was 70%, based on funds from operations
for the applicable period.
WRI invested an additional $50.0 million for the acquisition of three shopping
centers and three industrial projects during the third quarter. In August, WRI
purchased Regency Park Shopping Center in Overland Park, Kansas. This 202,000
square foot center is anchored by Micro Center, Border's Books and Music,
Marshall's and Old Navy and represents our fifth property in this market.
Later in August, WRI in partnership with Dana Commercial Credit Corporation
acquired Rockwall Market Center located in Rockwall, Texas, a suburb of Dallas.
Rockwall Market Center contains 217,000 square feet and is anchored by Linens 'n
Things, Ross Dress for Less, Office Max, Petco, Michael's Crafts, Pier 1 Imports
and Old Navy and is 96% leased. This is the third purchase under the joint
venture relationship between WRI and Dana, bringing the total investment in
these partnerships to nearly $62 million. WRI and Dana have agreed to invest up
to $200 million under this agreement.
Page 9
<PAGE>
Also in August, WRI purchased the Market at Southside, our first shopping center
in the Orlando area. Anchored by a Walgreen's and Ross Dress for Less, this
97,000 square foot center is part of a 310,000 square foot center anchored by
Office Depot, Publix and Albertson's.
Lastly, we purchased three office/service facilities in Austin, Texas.
Collectively, these buildings added 160,000 square feet to the portfolio and
were 96% occupied at the date of purchase. With these acquisitions, we now have
seven industrial and two retail properties in Austin, comprising more than
850,000 square feet of building area.
With respect to new development, in July we purchased 23 acres of land in Baton
Rouge, Louisiana for the development of a 173,000 square foot shopping center
adjacent to a new 181,000 square foot Super Target. This project is expected to
open in the fall of 2001. In August, Miller Weingarten, our Denver-based
development partnership, entered into a ground lease in Englewood, Colorado, a
suburb of Denver, for the purpose of developing a 200,000 square foot shopping
center within an 800,000 square foot mixed use development. This development
will also contain a 130,000 square foot Super Wal Mart, a 450-unit apartment
project and a new City Hall complex, including a library and a performing arts
center. Completion is expected in mid to late 2001.
With the addition of these properties, WRI now has eleven new development
projects at various stages of completion. These projects will add 876,000
square feet to the portfolio and will represent a total investment of $103
million.
We recently announced the formation of an alliance with a North Carolina-based
developer, Bob Hughes Associates. Founded in 1980, Bob Hughes Associates will
be responsible for the identification and development of primarily
supermarket-anchored retail centers, while WRI will provide leasing and
management support. Additionally, WRI will assume leasing and management
responsibility for the majority of the retail properties currently owned by Bob
Hughes Associates, a portfolio totaling 1.4 million square feet. We will also
manage all properties developed under this alliance.
Total debt outstanding increased to $716.4 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 $716.4 at September 30, 2000 is variable-rate debt of $204.4
million, after recognizing the effect of $50.5 million of interest rate swaps
and $20.6 million of variable-rate notes receivables. WRI's debt to total
capitalization is a conservative 34.3% and the interest coverage ratio is 3.8 to
1 for the four quarters ended September 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, 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.
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<PAGE>
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 - diluted for the three months and nine months ended
September 30, 1999 and 2000 is calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Numerator:
Net income available to common shareholders. . . . . . $ 14,852 $ 14,562 $ 44,261 $ 42,260
Depreciation and amortization. . . . . . . . . . . . . 14,032 12,554 40,258 35,544
Loss on sales of property. . . . . . . . . . . . . . . 5 60
Extraordinary charge - early retirement of debt. . . . 149
--------- --------- --------- ---------
Funds from Operations - Basic. . . . . . . . . 28,884 27,121 84,519 78,013
Funds from operations attributable to operating
partnership units. . . . . . . . . . . . . . . . . . 69 79 239 243
--------- --------- --------- ---------
Funds from Operations - Diluted. . . . . . . . $ 28,953 $ 27,200 $ 84,758 $ 78,256
========= ========= ========= =========
Denominator:
Weighted average shares outstanding - basic. . . . . . 26,792 26,692 26,751 26,688
Effect of dilutive securities:
Share options and awards . . . . . . . . . . . . 81 57 46 77
Operating partnership units. . . . . . . . . . . 103 142 112 142
--------- --------- --------- ---------
Weighted average shares outstanding - diluted. . . . . 26,976 26,891 26,909 26,907
========= ========= ========= =========
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000
Net income available to common shareholders increased to $14.9 million from
$14.6 million for the third quarter of 2000 as compared with the same quarter of
1999. Net income per common share-basic was $.55 in 2000 and 1999, while net
income per share-diluted increased to $.55 in 2000 from $.54 in 1999.
Rental revenues were $63.6 million in 2000, as compared to $57.2 million in
1999, representing an increase of approximately $6.4 million or 11.2%. Of these
increases, property acquisitions and new development contributed $5.3 million in
2000, as compared to $6.5 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 92.8% as compared to 91.3% as of
December 31, 1999. The occupancy of the retail portfolio was also 92.8%, up
from 91.3% at year-end 1999, while the industrial portfolio increased from 91.0%
at year-end to 92.5%. This increase in occupancy results from significant
leasing activity during the last several months. During the first nine months
of 2000, WRI completed 704 renewals or leases comprising 3.6 million square feet
at an average rental rate increase of 10.2%. Net of the amortized portion of
capital costs for tenant improvements, the increased averaged 7.2%. Retail
sales on the same-store basis increased by 1.5% based on sales reported during
the last twelve months.
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<PAGE>
Gross interest costs, before capitalization of interest, increased by $3.7
million from $9.0 million in the third quarter of 1999 to $12.7 million in the
third quarter of 2000. The increase is due primarily to an increase in the
average debt outstanding between periods of $512.5 in 1999 to $690.8 million in
2000. The average interest rate increased from 7.1% in 1999 to 7.3% in 2000.
The amount of interest capitalized during the period was $1.0 million and $.9
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.
NINE MONTHS ENDED SEPTEMBER 30, 2000
Net income available to common shareholders increased to $44.3 million from
$42.3 million for the first nine months of 2000 as compared with the same period
of 1999. Net income per common share-basic increased to $1.65 in 2000 from
$1.58 in 1999, while net income per share-diluted also increased to $1.65 in
2000 from $1.57 in 1999.
Rental revenues were $184.4 million in 2000, as compared to $165.6 million in
1999, representing an increase of approximately $18.8 million or 11.4%. Of
these increases, property acquisitions and new development contributed $17.1
million in 2000, as compared to $19.0 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 $9.1
million from $25.8 million for the first nine months of 1999 to $34.9 million
for the same period of 2000. The increase was due primarily to an increase in
the average debt outstanding between periods from $482.2 million in 1999 to
$644.6 million in 2000. The average interest rate remained unchanged at 7.1%.
The amount of interest capitalized during the period increased to $2.4 million
in 2000 from $2.1 million in 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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<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).
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<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/Chief
Financial Officer
(Principal Accounting Officer)
DATE: October 24, 2000
------------------
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<PAGE>
