-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JkDZAn+otvOnX7IZAKMS9N09bKudsnatD7P4jqrMENqVkAwqKw4ujgKq9q80CfgA V75OhlO1ENfyxs22x+tvgg== 0000828916-98-000025.txt : 19980803 0000828916-98-000025.hdr.sgml : 19980803 ACCESSION NUMBER: 0000828916-98-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980729 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEINGARTEN REALTY INVESTORS /TX/ CENTRAL INDEX KEY: 0000828916 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 741464203 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09876 FILM NUMBER: 98672897 BUSINESS ADDRESS: STREET 1: 2600 CITADEL PLAZA DR CITY: HOUSTON STATE: TX ZIP: 77008 BUSINESS PHONE: 7138666000 MAIL ADDRESS: STREET 1: P O BOX 924133 STREET 2: P O BOX 924133 CITY: HOUSTON STATE: TX ZIP: 77292-4133 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 ------------- 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 July 27, 1998, there were 26,666,501 common shares of beneficial interest of Weingarten Realty Investors, $.03 par value, outstanding. PART 1 FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
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, ---------------------- ----------------- 1998 1997 1998 1997 ---------- --------- -------- ------- Revenues: Rentals . . . . . . . . . . . . . . . . . . . . . $ 47,787 $ 41,613 $94,021 $81,880 Interest: Securities and Other. . . . . . . . . . . . . . 63 261 106 551 Affiliates. . . . . . . . . . . . . . . . . . . 292 370 656 731 Equity in earnings of real estate joint ventures and partnerships. . . . . . . . . . . . . . . . 91 259 186 503 Other . . . . . . . . . . . . . . . . . . . . . . 575 340 801 851 ---------- --------- -------- ------- Total. . . . . . . . . . . . . . . . . . . . 48,808 42,843 95,770 84,516 ---------- --------- -------- ------- Expenses: Depreciation and amortization . . . . . . . . . . 10,219 9,438 20,306 18,741 Interest. . . . . . . . . . . . . . . . . . . . . 8,086 7,243 16,419 14,141 Operating . . . . . . . . . . . . . . . . . . . . 7,475 6,706 14,288 12,712 Ad valorem taxes. . . . . . . . . . . . . . . . . 6,075 5,524 12,058 10,861 General and administrative. . . . . . . . . . . . 1,863 1,230 3,397 2,632 ---------- --------- -------- ------- Total. . . . . . . . . . . . . . . . . . . . 33,718 30,141 66,468 59,087 ---------- --------- -------- ------- Income from Operations. . . . . . . . . . . . . . . 15,090 12,702 29,302 25,429 Gain (loss) on sales of property and securities . . (13) 53 70 102 ---------- --------- -------- ------- Income Before Extraordinary Charge. . . . . . . . . 15,077 12,755 29,372 25,531 Extraordinary Charge (early retirement of debt) (1,392) ---------- --------- -------- ------- Net Income. . . . . . . . . . . . . . . . . . . . . 15,077 12,755 27,980 25,531 Dividends on Preferred Shares . . . . . . . . . . . 1,395 1,969 ---------- --------- -------- ------- Net Income Available to Common Shareholders . . . . $ 13,682 $ 12,755 $26,011 $25,531 ========== ========= ======== ======= Net Income Per Common Share - Basic: Income Before Extraordinary Charge. . . . . . . . . $ .51 $ .48 $ 1.03 $ .96 Extraordinary Charge. . . . . . . . . . . . . . . . (.05) ---------- --------- -------- ------- Net Income. . . . . . . . . . . . . . . . . . . . . $ .51 $ .48 $ .98 $ .96 ========== ========= ======== ======= Net Income Per Common Share - Diluted: Income Before Extraordinary Charge. . . . . . . . . $ .51 $ .48 $ 1.02 $ .95 Extraordinary Charge. . . . . . . . . . . . . . . . (.05) ---------- --------- -------- ------- Net Income. . . . . . . . . . . . . . . . . . . . . $ .51 $ .48 $ .97 $ .95 ========== ========= ======== =======
See notes to consolidated financial statements.
WEINGARTEN REALTY INVESTORS CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) June 30, December 31, 1998 1997 ------------ -------------- (unaudited) ASSETS Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,202,921 $ 1,118,758 Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . . (279,851) (262,551) -------------- -------------- Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 923,070 856,207 Investment in Real Estate Joint Ventures and Partnerships . . . . . . . 2,506 2,824 -------------- -------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925,576 859,031 Mortgage Bonds and Notes Receivable from: Affiliate (net of deferred gain of $4,487 in 1998 and 1997) . . . . . . 12,827 14,752 Real Estate Joint Ventures and Partnerships . . . . . . . . . . . . . . 15,289 15,250 Marketable Debt Securities. . . . . . . . . . . . . . . . . . . . . . . 12,345 Unamortized Debt and Lease Costs. . . . . . . . . . . . . . . . . . . . 24,340 23,536 Accrued Rent and Accounts Receivable (net of allowance for doubtful accounts of $875 in 1998 and $1,000 in 1997). . . . . . . . . . . . . 9,923 14,583 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . 1,798 2,754 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,656 4,542 -------------- -------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 995,409 $ 946,793 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 499,034 $ 507,366 Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . 36,753 43,305 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,493 6,136 -------------- -------------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542,280 556,807 -------------- -------------- Shareholders' Equity: Preferred Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 10,000; shares issued and outstanding: 3,000 in 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Common Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 150,000; shares issued and outstanding: 26,667 in 1998 and 26,660 in 1997 . . . . . . . . . . . . . . . . . 800 800 Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . 452,239 389,186 ------------ -------------- Shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . 453,129 389,986 ------------ -------------- Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 995,409 $ 946,793 ============== ==============
See notes to consolidated financial statements.
WEINGARTEN REALTY INVESTORS STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (AMOUNTS IN THOUSANDS) Six Months Ended June 30, -------------------- 1998 1997 --------- --------- Cash Flows from Operating Activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,980 $ 25,531 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . 20,306 18,741 Equity in earnings of real estate joint ventures and partnerships . . . . . . . . . . . . . . . . . . . . . . (138) (503) Gain on sales of property. . . . . . . . . . . . . . . . . . (70) (102) Extraordinary change (Early retirement of debt). . . . . . . 1,392 Amortization of direct financing leases. . . . . . . . . . . 336 429 Changes in accrued rents and accounts receivable . . . . . . 4,644 3,197 Changes in other assets. . . . . . . . . . . . . . . . . . . (5,285) (3,301) Changes in accounts payable and accrued expenses . . . . . . (6,271) (2,174) Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 30 63 --------- --------- Net cash provided by operating activities. . . . . . . . . . 42,924 41,881 --------- --------- Cash Flows from Investing Activities: Investment in properties . . . . . . . . . . . . . . . . . . (77,792) (48,456) Mortgage bonds and notes receivable: Advances . . . . . . . . . . . . . . . . . . . . . . . . . . (514) (1,260) Collections. . . . . . . . . . . . . . . . . . . . . . . . . 353 1,062 Proceeds from sales and disposition of property. . . . . . . 221 269 Real estate joint ventures and partnerships: Investments (46) Distributions. . . . . . . . . . . . . . . . . . . . . . . . 250 397 Proceeds from sale of marketable debt securities . . . . . . 12,269 Other, net . . . . . . . . . . . . . . . . . . . . . . . . . 281 1,089 --------- --------- Net cash used in investing activities. . . . . . . . . . . . (64,932) (46,945) --------- --------- Cash Flows from Financing Activities: Proceeds from issuance of: Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,095 55,000 Common shares of beneficial interest . . . . . . . . . . . . 124 902 Preferred shares of beneficial interest. . . . . . . . . . . 72,512 Principal payments of debt . . . . . . . . . . . . . . . . . (79,789) (13,520) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . (37,701) (34,078) Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (189) (156) --------- --------- Net cash provided by financing activities. . . . . . . . . . 21,052 8,148 --------- --------- Net (decrease)/increase in cash and cash equivalents . . . . (956) 3,084 Cash and cash equivalents at January 1 . . . . . . . . . . . 2,754 169 --------- --------- Cash and cash equivalents at June 30 . . . . . . . . . . . . $ 1,798 $ 3,253 ========= =========
See notes to consolidated financial statements. WEINGARTEN REALTY INVESTORS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS) 1. INTERIM FINANCIAL STATEMENTS The consolidated financial statements included in this report are unaudited, except for the balance sheet as of December 31, 1997. In the opinion of the Company, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements and notes are presented as permitted by Form 10-Q, and do not contain certain information included in the Company's annual financial statements and notes. 2. SIGNIFICANT ACCOUNTING POLICIES On March 19, 1998, the Emerging Issues Task Force of the Financial Accounting Standards Board ("EITF") reached a consensus decision on Issue No. 97-11, "Accounting for Internal Costs Relating to Real Estate Property Acquisitions" which provides that internal costs of identifying and acquiring operating property incurred subsequent to March 19, 1998 should be expensed. The Company has historically capitalized the direct internal costs of identifying and acquiring operating property and, accordingly, realized an increase in expense for the quarter ended June 30, 1998 of $.3 million or approximately $.01 per common share. The Company expects that this level of acquisition costs will continue in the future. On May 21, 1998, the EITF reached a consensus decision on Issue No. 98-9, "Accounting for Contingent Rent In Interim Financial Periods" which provides that recognition of rental income in interim periods must be deferred until the specified target that triggers the contingent rental income is achieved. The Company has historically recognized rental income based on a percentage of tenant sales ratably over the course of the year. This consensus is effective May 21, 1998 and will require the Company to defer recognition of this income until the date that the tenant's sales exceed the breakpoint set forth in the lease agreement. The Company believes the impact of this consensus will be to decrease percentage rentals in the fiscal year ending December 31, 1998 by approximately $.4 million and increase revenue in the year ending December 31, 1999 by a like amount. Additionally, the amount of percentage rentals recognized in each quarter of subsequent fiscal years will differ from historical experience, with a significant concentration in the fourth quarter. 3. PER SHARE DATA Net income per common share-basic ("Basic EPS") is computed using net income available to common shareholders and the weighted average shares outstanding. Net income per common share-diluted ("Diluted EPS") is also computed using net income available to common shareholders, however, the weighted average shares outstanding are adjusted for potentially dilutive securities for the periods indicated, as follows (in thousands):
Three Months Ended Six Months Ended June 30, June 30, ------------------ -------------- Weighted Average Shares: . . . . . 1998 1997 1998 1997 -------- ------- ------- ------- Basic EPS. . . . . . . . . . . . . 26,667 26,641 26,666 26,620 Effect of dilutive securities: Employee share options . . . . . 128 150 153 144 Convertible partnership interest 39 39 Diluted EPS. . . . . . . . . . . . 26,834 26,791 26,858 26,764 ======= ======= ======= =======
4. COMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This statement requires presentation of the components of comprehensive income, including the changes in equity from non-owner sources such as unrealized gains on marketable securities. The Company's total comprehensive income was as follows:
Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 1998 1997 1998 1997 --------- --------- --------- --------- Net Income. . . . . . . . . . . . . . . . . . $ 15,077 $ 12,755 $27,980 $25,531 --------- --------- --------- --------- Unrealized gains on marketable securities: Unrealized holding gain arising during period 214 58 362 Less: Reclassification adjustment for gain included in net income (1) --------- --------- --------- --------- 214 57 362 --------- --------- --------- --------- Comprehensive Income. . . . . . . . . . . . . $ 15,077 $ 12,969 $28,037 $25,893 ========= ========= ========= =========
5. DEBT The Company's debt consists of the following:
June 30, December 31, 1998 1997 ------------- ------------- Fixed-rate debt payable to 2015 at 6.0% to 10.5% $ 355,190 $ 379,749 Notes payable under revolving credit agreements. 122,896 94,400 Repurchase agreements. . . . . . . . . . . . . . 12,176 Industrial revenue bonds to 2015 at 4.7% to 6.8% at June 30, 1997 . . . . . . . . . . . . . . 7,372 7,437 Obligations under capital leases . . . . . . . . 12,467 12,467 Other. . . . . . . . . . . . . . . . . . . . . . 1,109 1,137 ------------- ------------- Total. . . . . . . . . . . . . . . . . . . . . . $ 499,034 $ 507,366 ============= =============
At June 30, 1998, the variable interest rate for notes payable under the $200 million revolving credit agreement, including the cost of the related commitment fee, was 6.2% and the variable interest rate under the $20 million revolving credit agreement was 6.4%. In January 1998, the Company entered into a forward Treasury lock whereby the Company locked a ten-year Treasury rate of 5.49% until August of 1998 for a notional amount of $35 million in anticipation of the issuance of debt at a future date. This Treasury lock was sold in April 1998 for a gain of $.8 million. Since this financial instrument was purchased to hedge the Company's exposure against changes in interest rates, this gain on settlement will be deferred until the anticipated issuance of debt occurs, at which time it will be recognized as a reduction to interest expense over the life of the debt issued in the future. In June 1998, the Company entered into two forward Treasury locks whereby the Company locked ten-year Treasury rates averaging 5.50% until November and December of 1998, for notional amounts of $25 million each, in anticipation of the issuance of debt at a future date. These financial instruments were purchased to hedge the Company's exposure against changes in interest rates and, accordingly, the gain or loss upon settlement will be recognized as a component of interest expense over the life of the debt issued in the future. During the quarter, the Company issued $7 million of unsecured Medium Term Notes with an average life of 9 years at an average interest rate of 6.4%. Including the effect of amortizing a prorata portion of the deferred gain on the settlement of the Treasury lock discussed above, the average rate is 6.2%. The Company's debt can be summarized as follows:
June 30, December 31, 1998 1997 ------------ ------------ As to interest rate: Fixed-rate debt (including amounts fixed through interest rate swaps). . . . . . . $ 395,204 $ 419,792 Variable-rate debt. . . . . . . . . . . . 103,830 87,574 ------------ ------------ Total . . . . . . . . . . . . . . . . . . $ 499,034 $ 507,366 ============ ============ As to collateralization: Secured debt. . . . . . . . . . . . . . . $ 75,366 $ 107,152 Unsecured debt. . . . . . . . . . . . . . 423,668 400,214 ---------- ---------- Total . . . . . . . . . . . . . . . . . . $ 499,034 $ 507,366 ============ ============
6. PROPERTY The Company's property consists of the following:
June 30, December 31, 1998 1997 ------------ ------------ Land . . . . . . . . . . . . . . . . . $ 220,531 $ 208,512 Land held for development. . . . . . . 33,954 31,679 Land under development . . . . . . . . 8,880 5,958 Buildings and improvements . . . . . . 926,285 863,567 Construction in-progress . . . . . . . 6,564 1,940 Property under direct financing leases 6,707 7,102 ------------ ------------ Total. . . . . . . . . . . . . . . . . $ 1,202,921 $ 1,118,758 ============ ============
7. CARRYING CHARGES CAPITALIZED During the periods shown, the following carrying charges were capitalized:
Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 1998 1997 1998 1997 ------- ------- ------- ------- Interest . . . . . . . $ 378 $ 172 $ 650 $ 297 Ad valorem taxes . . . 11 9 21 17 ------- ------- ------- ------- Total. . . . . . . . . $ 389 $ 181 $ 671 $ 314 ======= ======= ======= =======
8. RELATED PARTY TRANSACTION During the second quarter of 1998, the Company purchased 13.7 acres of undeveloped land from WRI Holdings, Inc. ("Holdings") to be used for the development of a luxury apartment complex in Conroe, Texas, a suburb of Houston. The Company and Holdings share certain directors and are under common management. The purchase price was $2.2 million and was based upon an independent third party appraisal. PART I FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and notes thereto and the comparative summary of selected financial data appearing elsewhere in this report. Historical results and trends which might appear should not be taken as indicative of future operations. Weingarten Realty Investors owned and operated 175 anchored shopping centers, 25 industrial properties, one multi-family residential project and one office building at June 30, 1998. Of the Company's 202 developed properties, 153 are located in Texas (including 93 in Houston and Harris County). The Company's remaining properties are located in Louisiana (11), Arizona (10), Nevada (5), Arkansas (5), New Mexico (5), Oklahoma (4), Kansas (3), Colorado (2), Missouri (1), Illinois (1), Maine (1) and Tennessee (1). The Company has nearly 3,300 leases and 2,500 different tenants. Leases for the Company's properties range from less than a year for smaller spaces to over 25 years for larger tenants; leases generally include minimum lease payments and contingent rentals for payment of taxes, insurance and maintenance and for an amount based on a percentage of the tenants' sales. The majority of the Company's anchor tenants are supermarkets, drugstores and other retailers which generally sell basic necessity-type items. CAPITAL RESOURCES AND LIQUIDITY The Company anticipates that cash flows from operating activities will continue to provide adequate capital for all dividend payments in accordance with REIT requirements, and that cash on hand, borrowings under its existing credit facilities, issuance of unsecured debt and the use of project financing as well as other debt and equity alternatives will provide the necessary capital to achieve growth. Cash flow from operating activities as reported in the Statements of Consolidated Cash Flows was $42.9 million for the first six months of 1998 as compared to $41.9 million for the same period of 1997. The increase was due primarily to the Company's acquisition and new development programs. The Company's Board of Trust Managers approved a quarterly dividend per common share of $.67 for the second quarter of 1998. The percentage of funds from operations paid out in cash dividends, or dividend payout ratio, was 75% and 77% for the second quarters of 1998 and 1997, respectively. The Company invested an additional $33.5 million in the portfolio through acquisitions, new development and redevelopment's of existing properties, bringing the 1998 total to $82.7 million. Acquisitions during the quarter added .8 million square feet to the portfolio, representing an investment of $18.7 million. The Company purchased three industrial projects during the quarter, including two facilities in Dallas which represent the Company's first industrial properties in this market. Regal Distribution Center is an office/distribution facility totaling 203,000 square feet which was 100% leased at the time of purchase. Also located in Dallas is Space Center Industrial Park, a 265,000 square foot office/service center which was also 100% leased at the date of acquisition. The Company purchased the 128,000 square foot Houston Cold Storage Warehouse, located at the Company's master-planned Railwood Industrial Park. In late June, the Company purchased two buildings formerly occupied by Wal-Mart, both of which are adjacent to shopping centers owned by the Company. With respect to new development, construction continues at the two retail locations where the Company is constructing retail space adjacent to occupant-owned supermarkets or other national retailers. Arrowhead Festival Shopping Center in Glendale, Arizona, a suburb of Phoenix, came on line during the quarter. Construction is nearly complete at the bulk warehouse facility located at Railwood Industrial Park. A lease on approximately 100,000 square feet of this 162,000 square foot facility has been signed and is expected to commence in early August and firm prospects exist for the remainder of the space. Construction is underway on the first of three buildings which will be developed on 11.5 acres of land in southwest Houston purchased in the first quarter of 1998. The first building of this 158,000 square foot industrial facility will be completed in the fourth quarter of 1998, with the remainder projected to be finished in 1999. Debt to total market capitalization at June 30, 1998 was unchanged at 30% from December 31, 1997. Total debt outstanding decreased to $499.0 million at quarter-end from $507.4 at December 31, 1997. This decrease was primarily due to the retirement of debt with the $72.5 million of proceeds from the Company's first quarter preferred share offering, offset by acquisitions in the first six months of this year and the Company's ongoing development and redevelopment efforts. During the second quarter of 1998, the Company sold a $35 million forward Treasury lock with a notional amount of $35 million which it had purchased in the first quarter of 1998, resulting in a gain of $.8 million. As this Treasury lock was purchased in anticipation of the sale of additional debt in the future, the gain from the sale of the lock has been deferred and will effectively reduce the interest cost of future debt issued by the Company going forward. In the second quarter of 1998, the Company purchased an additional notional amount of $50 million of forward Treasury locks which lock the ten-year Treasury rate at an average of 5.5% These locks will mature in equal amounts in November and December of 1998 and were also purchased in anticipation of the sale of additional debt by the Company in the future. In June, the Company issued $7 million of Medium Term Notes. These unsecured notes have an average life of nine years and an average interest rate of 6.4%. Including the effect of the deferred gain on the sale of the Treasury lock discussed above, the average rate is 6.2%. At quarter-end, the Company has protection against interest rate increases through fixed-rate loans and interest rate swap agreements on $395.2 million of the total debt outstanding at June 30, 1998. For the quarter ended June 30, 1998, the Company's average interest rate was 7.1% as compared to 7.2% for the same period of the prior year and its cash flow covered its interest costs 3.75 times for the twelve months ended June 30, 1998. FUNDS FROM OPERATIONS The Company considers funds from operations to be an alternate measure of the performance of an equity REIT since such measure does not recognize depreciation and amortization of real estate assets as operating expenses. Management believes that reductions for these charges are not meaningful in evaluating income-producing real estate, which historically has not depreciated. The National Association of Real Estate Investment Trusts defines funds from operations as net income plus depreciation and amortization of real estate assets, less gains and losses on sales of properties and securities. Funds from operations does not represent cash flows from operations as defined by generally accepted accounting principles and should not be considered as an alternative to net income as an indicator of the Company's operating performance or to cash flows from operations as a measure of liquidity. Funds from operations increased to $23.8 million for the second quarter of 1998, as compared to $22.0 million for the same period of 1997. For the six months ended June 30, 1998, funds from operations increased to $47.4 million from $44.0 million. These increases relate primarily to the impact of the Company's acquisitions and, to a lesser degree, new development and activity at its existing properties. RESULTS OF OPERATIONS Net income available to common shareholders increased to $13.7 million, or $.51 per share, from $12.8 million, or $.48 per share, for the second quarter of 1998 as compared with the same quarter of 1997. This increase is due primarily to the Company's acquisitions and new developments during the past twelve months. Rental revenues were $47.8 million for 1998, as compared to $41.6 million for 1997, representing an increase of approximately $6.2 million or 14.8%. This increase relates primarily to acquisitions and, to a lesser degree, new development and activity at the Company's existing properties. Occupancy of the Company's total portfolio increased to 93.4% at June 30, 1998 from 92.5% at the end of the second quarter of the prior year and was up from 91.8% at year-end 1997. During the first six months of 1998, the Company completed 379 renewals or leases comprising 1.7 million square feet of space. Rental rates increased an average of 7.5% over the rates charged to the prior tenants. Net of capital costs for tenant improvements, the increase averaged 4.5%. Retail sales on a same-store basis increased by 1% based on sales reported during the last twelve months. Gross interest costs, before capitalization of interest, increased by $1.1 million from $7.4 million in the second quarter of 1997 to $8.5 million in the second quarter of 1998. The increase was due primarily to the increase in the average debt outstanding between periods from $411.1 million in 1997 to $476.1 million in 1998. The average interest rate between periods decreased from 7.2% in 1997 to 7.1% in 1998. The amount of interest capitalized during the period increased from $.2 million in 1997 to $.4 million in 1998 due to an increase in new development activity. General and administrative expenses increased by $.6 million to $1.8 million in the second quarter of 1998 from $1.2 million in the same quarter of 1997. The increase is partly due to the expensing of $.3 million of direct costs of acquiring operating properties in 1998, while such costs were capitalized in 1997. Also contributing to the increase is an increase in staffing necessitated by the growth in the portfolio and the increased activity in acquisitions and new development. The increases in depreciation and amortization, operating expenses and ad valorem taxes were primarily the result of the Company's acquisition and new development programs. SIX MONTHS ENDED JUNE 30, 1998 Net income increased by $.5 million to $26.0 million, or $.98 per share, for the first six months of 1998 from $25.5 million, or $.96 per share, for the comparable period in 1997. Included in net income for 1998 is an extraordinary loss of $1.4 million, or $.05 per share, on the early retirement of debt. Rental revenues increased 14.8% to $94.0 million, compared with $81.9 million for the same period of the prior year. This increase relates primarily to acquisitions and, to a lesser degree, new development and activity at the Company's existing properties. Gross interest costs, before capitalization of interest, increased by $2.7 million to $17.1 million in the first six months of 1998 from $14.4 million in the same period of 1997, or 18.8%. The increase was due primarily to an increase in the average debt outstanding between periods, from $400.0 million in 1997 to $475.0 million in 1998. The average interest rate remained unchanged at 7.2%. The amount of interest capitalized during the period increased from $.3 million in 1997 to $.6 million in 1998 due to an increase in new development activity. General and administrative expense increased by $.8 million, from $2.6 million in 1997 to $3.4 million in 1998. The increase is partly due to the expensing of $.3 million of direct costs of acquiring operating properties in 1998, while such costs were capitalized in 1997. Also contributing to the increase is an increase in staffing necessitated by the growth in the portfolio and the increased activity in acquisitions and new development. The increases in depreciation and amortization, operating expenses and ad valorem taxes were primarily the result of the Company's acquisition and new development programs. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K) (12) A statement of ratios of earnings and funds from operationsto fixed charges. (27.1) Article 5 Financial Data Schedule (EDGAR filing only). (27.2) Article 5 Financial Data Schedule (EDGAR filing only). (27.3) Article 5 Financial Data Schedule (EDGAR filing only). (27.4) Article 5 Financial Data Schedule (EDGAR filing only). (27.5) Article 5 Financial Data Schedule (EDGAR filing only). (27.6) Article 5 Financial Data Schedule (EDGAR filing only). (b) Reports on Form 8-K A Form 8-K, dated April 24, 1998, was filed to report significant acquisitions in response to Item 2., Acquisition or Disposition of Assets and Item 7., Financial Statements, Pro orma Financial Information and Exhibits. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WEINGARTEN REALTY INVESTORS ----------------------------- (Registrant) BY: /s/ Stanford Alexander ------------------------------- Stanford Alexander Chairman/Chief Executive Officer (Principal Executive Officer) BY: /s/ Stephen C. Richter -------------------------------- Stephen C. Richter Senior Vice President/Financial Administration and Treasurer (Principal Accounting Officer) DATE: July 29, 1998 --------------- EX-12 2
WEINGARTEN REALTY INVESTORS COMPUTATION OF RATIOS OF EARNINGS AND FUNDS FROM OPERATIONS TO FIXED CHARGES (DOLLAR AMOUNTS IN THOUSANDS) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 1998 1997 1998 1997 ------- -------- -------- -------- Net income. . . . . . . . . . . . . . . . . . . . . . . $13,682 $12,755 $26,011 $25,531 Add: Portion of rents representative of the interest factor. 199 155 402 317 Interest on indebtedness. . . . . . . . . . . . . . . . 8,086 7,243 16,420 14,141 Preferred Dividends . . . . . . . . . . . . . . . . . . 1,395 0 1,969 0 Amortization of debt cost . . . . . . . . . . . . . . . 91 100 190 210 ------- -------- -------- -------- Net income as adjusted. . . . . . . . . . . . . . . $23,453 $20,253 $44,992 $40,199 ======= ======== ======== ======== Fixed charges: Interest on indebtedness. . . . . . . . . . . . . . . . $ 8,086 $ 7,243 $16,420 $14,141 Capitalized interest. . . . . . . . . . . . . . . . . . 377 172 649 297 Preferred Dividends . . . . . . . . . . . . . . . . . . 1,395 0 1,969 0 Amortization of debt cost . . . . . . . . . . . . . . . 91 100 190 210 Portion of rents representative of the interest factor. 199 155 402 317 ------- -------- -------- -------- Fixed charges . . . . . . . . . . . . . . . . . . . $10,148 $ 7,670 $19,630 $14,965 ======= ======== ======== ======== RATIO OF EARNINGS TO FIXED CHARGES. . . . . . . . . . . 2.31 2.64 2.29 2.69 ======= ======== ======== ======== Net income. . . . . . . . . . . . . . . . . . . . . . . $13,682 $12,755 $26,011 $25,531 Depreciation and amortization . . . . . . . . . . . . . 10,127 9,338 20,114 18,531 (Gain) loss on sales of property. . . . . . . . . . . . 13 (53) (70) (102) Extraordinary charge (early retirement of debt) . . . . 1,392 Funds from operations . . . . . . . . . . . . . . . 23,822 22,040 47,447 43,960 Add: Portion of rents representative of the interest factor. 199 155 402 317 Interest on indebtedness. . . . . . . . . . . . . . . . 8,086 7,243 16,420 14,141 Amortization of debt cost . . . . . . . . . . . . . . . 91 100 190 210 ------- -------- -------- -------- Funds from operations as adjusted . . . . . . . . . $32,198 $29,538 $64,459 $58,628 ======= ======== ======== ======== RATIO OF FUNDS FROM OPERATIONS TO FIXED CHARGES . . . . 3.17 3.85 3.28 3.92 ======= ======== ======== ========
EX-27.1 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WEINGARTEN REALTY INVESTORS' QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 1998. 1,000
6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1,798 0 10,798 875 0 0 1,202,921 279,851 995,409 0 0 0 90 800 452,239 995,409 0 95,770 0 26,346 23,703 0 16,419 29,302 0 29,372 0 0 0 27,980 .98 .97
EX-27.2 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WEINGARTEN REALTY INVESTORS' ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 1995. IT HAS BEEN AMENDED FOR THE RESTATEMENT OF EARNINGS PER SHARE CALCULATED UNDER SFAS 128. 1,000
12-MOS DEC-31-1995 DEC-01-1995 DEC-31-1995 3,355 16,262 14,793 1,436 0 0 849,894 216,657 734,824 0 0 796 0 0 410,803 734,824 0 134,197 0 37,666 30,060 0 16,707 44,802 0 44,802 0 0 0 44,802 1.69 1.69
EX-27.3 5
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WEINGARTEN REALTY INVESTORS' ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 1996. IT HAS BEEN AMENDED FOR THE RESTAREMENT OF EARNINGS PER SHARE CALCULATED UNDER SFAS 128. 1,000
12-MOS DEC-31-1996 DEC-01-1996 DEC-31-1996 169 13,806 14,400 1,236 0 0 970,418 233,514 831,097 0 0 797 0 0 400,201 831,097 0 151,123 0 41,895 33,769 0 21,975 53,938 0 53,938 0 0 0 53,938 2.03 2.03
EX-27.4 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WEINGARTEN REALTY INVESTORS' QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 1997. IT HAS BEEN AMENDED FOR THE RESTATEMENT OF EARNINGS PER SHARE CALCULATED UNDER SFAS 128 AND FOR ALL INCORRECT CAPTIONS. 1,000
3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1,242 0 8,687 1,523 0 0 985,165 241,073 833,018 0 0 0 0 799 396,758 833,018 41,673 41,673 0 11,343 10,705 0 6,898 12,727 0 12,776 0 0 0 12,776 .48 .48
EX-27.5 7
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WEINGARTEN REALTY INVESTORS' QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 1997. IT HAS BEEN AMENDED FOR THE RESTATEMENT OF EARNINGS PER SHARE CALCULATED UNDER SFAS 128. 1,000
6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 3,253 13,061 10,830 1,495 0 0 1,018,395 248,583 861,614 0 0 0 0 799 393,708 861,614 0 84,616 0 23,302 21,644 0 14,141 25,429 0 25,531 0 0 0 25,531 .96 .95
EX-27.6 8
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WEINGARTEN REALTY INVESTORS' ANNUAL REPORT FOR THE PERIOD ENDED MARCH 31, 1998. IT HAS BEEN AMENDED FOR THE RESTATEMENT OF EARNINGS PER SHARE CALCULATED UNDER SFAS 128. 1,000
3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 3,214 0 7,291 959 0 0 1,166,820 271,077 969,011 0 0 0 90 800 456,334 969,011 0 46,962 0 12,726 11,537 0 8,334 14,295 0 14,295 0 1,392 0 12,903 .46 .46
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