Interim Financial Statements

9 Months Ended

Sep. 30, 2011

Interim Financial Statements [Abstract]

Note 1.

Interim Financial Statements

Business

Weingarten Realty Investors is a real estate investment trust ("REIT") organized under the Texas Business Organizations Code. We, and our predecessor entity, began the ownership and development of shopping centers and other commercial real estate in 1948. Our primary business is leasing space to tenants in the shopping and industrial centers we own or lease. We also manage centers for joint ventures in which we are partners or for other outside owners for which we charge fees.

We operate a portfolio of properties that include neighborhood and community shopping centers and industrial properties of approximately 74.7 million square feet. We have a diversified tenant base with our largest tenant comprising only 3.2% of total rental revenues during the first nine months of 2011.

We currently operate, and intend to operate in the future, as a REIT.

Basis of Presentation

Our condensed consolidated financial statements include the accounts of our subsidiaries, certain partially owned real estate joint ventures or partnerships and variable interest entities which meet the guidelines for consolidation. All intercompany balances and transactions have been eliminated. We have evaluated subsequent events for recognition or disclosure in our condensed consolidated financial statements.

The condensed consolidated financial statements included in this report are unaudited; however, amounts presented in the condensed consolidated balance sheet as of December 31, 2010 are derived from our audited financial statements at that date. In our opinion, 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 condensed consolidated financial statements and notes are presented as permitted by Form 10-Q and certain information included in our annual financial statements and notes has been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2010.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Such statements require management to make estimates and assumptions that affect the reported amounts on our consolidated financial statements. Actual results could differ from these estimates.

Impairment

Our property is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property, including any capitalized costs and any identifiable intangible assets, may not be recoverable.

If such an event occurs, a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future, with consideration of applicable holding periods, on an undiscounted basis to the carrying amount of such property. If we determine the carrying amount is not recoverable, our basis in the property is reduced to its estimated fair value to reflect impairment in the value of the asset. Fair values are determined by management utilizing cash flow models, market capitalization rates and market discount rates, or by obtaining third-party broker or appraisal estimates in accordance with our fair value measurements accounting policy.

We continuously review economic considerations at each reporting period, including the effects of tenant bankruptcies, the suspension of tenant expansion plans for new development projects, declines in real estate values, and any changes to plans related to our new development properties including land held for development, to identify properties where we believe market values may be deteriorating. Determining whether a property is impaired and, if impaired, the amount of write-down to fair value requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation. If market conditions deteriorate or management's plans for certain properties change, additional write-downs could be required in the future.

Our investment in partially owned real estate joint ventures and partnerships is reviewed for impairment each reporting period. The ultimate realization is dependent on a number of factors, including the performance of each investment and market conditions. We will record an impairment charge if we determine that a decline in the estimated fair value of an investment below its carrying amount is other than temporary. There is no certainty that impairments will not occur in the future if market conditions worsen or if management's plans for these investments change.

Our investments in tax increment revenue bonds are reviewed for impairment, if events or circumstances change indicating that the carrying amount of the investment may not be recoverable. Realization is dependent on a number of factors, including investment performance, market conditions and payment structure. We will record an impairment charge if we determine that a decline in the value of the investment below its carrying amount is other than temporary, recovery of its cost basis is uncertain, and/or it is uncertain if the investment will be held to maturity. As of September 30, 2011, the reissued tax increment revenue bonds have been classified as held to maturity.

Restricted Deposits and Mortgage Escrows

Restricted deposits and mortgage escrows consist of escrow deposits held by lenders primarily for property taxes, insurance and replacement reserves and restricted cash that is held for a specific use or in a qualified escrow account for the purposes of completing like-kind exchange transactions. At September 30, 2011, we had $1.7 million of restricted cash and $9.3 million held in escrow related to our mortgages. At December 31, 2010, we had $1.8 million of restricted cash and $8.4 million held in escrow related to our mortgages.

Per Share Data

Earnings per common share – basic is computed using net (loss) income attributable to common shareholders and the weighted average shares outstanding. Earnings per common share – diluted include the effect of potentially dilutive securities. (Loss) income from continuing operations attributable to common shareholders includes gain on sale of property in accordance with SEC guidelines. Earnings per common share – basic and diluted components for the periods indicated are as follows (in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2011				2010				2011				2010
Numerator:
Continuing Operations:
(Loss) income from continuing operations		$	(23,493	)		$	17,328			$	(8,925	)		$	36,661
Gain on sale of property			6				126				239				689
Net loss (income) attributable to noncontrolling interests			2,738				(1,712	)			410				(3,093	)
Preferred share dividends			(8,869	)			(8,869	)			(26,607	)			(26,607	)

(Loss) income from continuing operations attributable to common shareholders – basic and diluted		$	(29,618	)		$	6,873			$	(34,883	)		$	7,650


Discontinued Operations:
(Loss) income from discontinued operations attributable to common shareholders – basic and diluted		$	(12,471	)		$	1,787			$	(7,145	)		$	5,683


Denominator:
Weighted average shares outstanding – basic			120,413				119,978				120,301				119,899
Effect of dilutive securities:
Share options and awards			-				839				-				811

Weighted average shares outstanding – diluted			120,413				120,817				120,301				120,710

Anti-dilutive securities of our common shares of beneficial interest ("common shares"), which are excluded from the calculation of net (loss) income per common share –diluted are as follows (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2011

2010

2011

2010

Share options (1)

3,163

3,553

2,846

3,553

Operating partnership units

1,607

1,649

1,626

1,667

Share options and awards

894

940

Total anti-dilutive securities

5,664

5,202

5,412

5,220

(1)

Exclusion results as exercise prices were greater than the average market price for each respective period.

Cash Flow Information

We issued common shares valued at $.7 million during the nine months ended September 30, 2010, in exchange for interests in real estate joint ventures and partnerships, which had been formed to acquire properties. No such shares were issued during the first nine months of 2011. We also accrued $11.5 million and $6.0 million as of September 30, 2011 and 2010, respectively, associated with the construction of our property. Cash payments for interest on debt, net of amounts capitalized, of $117.4 million and $113.7 million were made during the nine months ended September 30, 2011 and 2010, respectively. Cash payments of $1.6 million and $2.1 million for income taxes were made during the nine months ended September 30, 2011 and 2010, respectively.

We have acquired our partners' noncontrolling interests in consolidated real estate joint ventures that increased shareholders' equity by $1.7 million during the first nine months of 2011. Also, we acquired an outside partner's equity interest in a consolidated real estate joint venture that decreased shareholders' equity by $.9 million during the first nine months of 2010.

Effective April 13, 2011 and April 1, 2010, previously unconsolidated joint ventures were consolidated within our consolidated financial statements (see Note 4 for further information). The non-cash investing and financing activities are as follows (in thousands):


	Nine Months Ended September 30,
	2011		2010
Increase in other assets	$	-	$	148,255
Decrease in notes receivable from real estate joint ventures and partnerships		21,872		123,912
Increase in debt, net		-		101,741
Increase in property, net		32,307		32,940
Decrease in other liabilities, net		-		21,858
Decrease in noncontrolling interests		-		18,573
Decrease in investment in real estate joint ventures and partnerships		10,092		-

In association with property acquisitions and investments in unconsolidated real estate joint ventures, the non-cash investing and financing activities are as follows (in thousands):


	Nine Months Ended
	September 30,
	2011		2010
Increase in debt	$	24,383	$	-
Decrease in property		3,812		1,666
Decrease in real estate joint ventures and partnerships – investments		153		-
Increase in other, net		22		130

During the first nine months of 2011, debt was reduced by $22.9 million associated with our guaranty of debt service on tax increment revenue bonds.

In connection with the sale of an 80% interest in two properties during the first quarter of 2010, we retained a 20% unconsolidated investment of $9.8 million. In addition, this transaction resulted in the unconsolidated joint venture assuming debt totaling $28.1 million.

Accumulated Other Comprehensive Loss

As of September 30, 2011, the balance in accumulated other comprehensive loss relating to derivatives and our retirement liability was $10.6 million and $10.1 million, respectively. As of December 31, 2010, the balance in accumulated other comprehensive loss relating to derivatives and our retirement liability was $11.7 million and $10.1 million, respectively.

Reclassifications

The reclassification of prior years' operating results for the three and nine months ended September 30, 2010 for certain properties to discontinued operations was made to conform to the current year presentation. This reclassification had no impact on previously reported net income, earnings per share, the consolidated balance sheet or cash flows.