Form 10-Q for 1Q2007
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
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x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the quarter ended March 31, 2007
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OR
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the transition period from [__________________] to
[________________]
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Commission
file number 1-9876
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WEINGARTEN
REALTY INVESTORS
(Exact
name of registrant as specified in its charter)
TEXAS
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74-1464203
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(State
or other jurisdiction of incorporation or
organization)
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(IRS
Employer Identification No.)
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2600
Citadel Plaza Drive
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P.O.
Box 924133
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Houston,
Texas
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77292-4133
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(Address
of principal executive offices)
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(Zip
Code)
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(713)
866-6000
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(Registrant's
telephone number)
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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
¨.
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
accelerated Filer x Accelerated
Filer ¨ Non-accelerated
Filer ¨.
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). YES
¨ NO
x.
As
of
April 30, 2007, there were 86,435,321 common shares of beneficial interest
of
Weingarten Realty Investors, $.03 par value, outstanding.
PART
I-FINANCIAL INFORMATION
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ITEM
1. Financial Statements
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WEINGARTEN
REALTY INVESTORS
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STATEMENT
OF CONDENSED CONSOLIDATED INCOME AND COMPREHENSIVE
INCOME
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(Unaudited)
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(In
thousands, except per share amounts)
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|
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Three
Months Ended
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March
31,
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2007
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2006
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Revenues:
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Rentals
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$
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144,536
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$
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129,085
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Other
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2,062
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2,208
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Total
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146,598
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131,293
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Expenses:
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Depreciation
and amortization
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32,820
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30,119
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Operating
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23,711
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18,454
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Ad
valorem taxes
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16,616
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15,405
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General
and administrative
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6,609
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5,355
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Total
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79,756
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69,333
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Operating
Income
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66,842
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61,960
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Interest
Expense
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(36,473
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) |
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(34,437
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) |
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Interest
and Other Income
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1,713
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1,452
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Equity
in Earnings of Joint Ventures, net
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3,347
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4,066
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Income
Allocated to Minority Interests
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(1,178
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) |
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(1,657
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) |
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Gain
on Sale of Properties
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2,059
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51
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Gain
on Land and Merchant Development Sales
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666
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1,676
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Benefit
(Provision) for Income Taxes
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9
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(519
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) |
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Income
from Continuing Operations
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36,985
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32,592
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Operating
Income from Discontinued Operations
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1,514
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4,930
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Gain
on Sale of Properties from Discontinued Operations
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12,886
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17,087
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Income
from Discontinued Operations
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14,400
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22,017
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Net
Income
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51,385
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54,609
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Dividends
on Preferred Shares
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(4,728
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) |
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(2,525
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) |
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Net
Income Available to Common Shareholders
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$ |
46,657
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$
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52,084
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Net
Income Per Common Share - Basic:
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Income from Continuing Operations
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$ |
0.37
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$ |
0.34
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Income
from Discontinued Operations
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0.17
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0.24
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Net
Income
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$ |
0.54
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$
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0.58
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Net
Income Per Common Share - Diluted:
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Income
from Continuing Operations
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$ |
0.37
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$
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0.34
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Income
from Discontinued Operations
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0.16
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0.23
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Net
Income
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$ |
0.53
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$
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0.57
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Net
Income
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$ |
51,385
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$
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54,609
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Other
Comprehensive Income:
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Unrealized
gain on derivatives
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25
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3,751
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Amortization
of loss on derivatives
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219
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86
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Other
Comprehensive Income
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244
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3,837
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Comprehensive
Income
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$ |
51,629
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$
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58,446
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See
Notes to Condensed Consolidated Financial
Statements.
WEINGARTEN
REALTY INVESTORS
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CONDENSED
CONSOLIDATED BALANCE SHEETS
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(Unaudited)
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(In
thousands, except per share amounts)
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March
31,
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December
31,
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2007
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2006
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ASSETS
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Property
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$
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4,546,606
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$
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4,445,888
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Property
Held for Sale
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80,823
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Accumulated
Depreciation
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(722,195
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)
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(707,005
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)
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Property
- net
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3,905,234
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3,738,883
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Investment
in Real Estate Joint Ventures
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255,413
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203,839
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Total
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4,160,647
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3,942,722
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Notes
Receivable from Real Estate Joint Ventures and
Partnerships
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11,429
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3,971
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Unamortized
Debt and Lease Cost
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115,131
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112,873
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Accrued
Rent and Accounts Receivable (net of allowance for
doubtful
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accounts
of $6,450 in 2007 and $5,995 in 2006)
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74,208
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78,893
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Cash
and Cash Equivalents
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35,506
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71,003
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Restricted
Deposits and Mortgage Escrows
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29,309
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94,466
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Other
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91,767
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71,612
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Total
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$
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4,517,997
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$
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4,375,540
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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Debt
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$
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2,890,831
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$
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2,900,952
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Accounts
Payable and Accrued Expenses
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91,203
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132,821
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Other
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123,990
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128,306
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Total
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3,106,024
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3,162,079
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Minority
Interest
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72,197
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87,680
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Commitments
and Contingencies
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Shareholders'
Equity:
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Preferred
Shares of Beneficial Interest - par value, $.03 per share; |
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shares
authorized: 10,000
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6.75%
Series D cumulative redeemable preferred shares of
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beneficial
interest; 100 shares issued and outstanding
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in
2007 and 2006; liquidation preference $75,000
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3
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3
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6.95%
Series E cumulative redeemable preferred shares of
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beneficial
interest; 29 shares issued and outstanding in 2007
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and
2006; liquidation preference $72,500
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1
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1
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6.5%
Series F cumulative redeemable preferred shares of
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beneficial
interest; 80 shares issued and outstanding in 2007;
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liquidation
preference $200,000
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2
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Common
Shares of Beneficial Interest - par value, $.03 per share;
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shares
authorized: 150,000; shares issued and outstanding:
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86,435
in 2007 and 85,765 in 2006
|
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2,604
|
|
|
2,582
|
|
Additional
Paid-In Capital
|
|
|
|
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|
1,346,331
|
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|
1,136,481
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|
Net
Income in Excess (Less Than) Accumulated Dividends
|
|
|
|
|
|
3,091
|
|
|
(786
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)
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Accumulated
Other Comprehensive Loss
|
|
|
|
|
|
(12,256
|
)
|
|
(12,500
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)
|
Shareholders'
Equity
|
|
|
|
|
|
1,339,776
|
|
|
1,125,781
|
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Total
|
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|
$
|
4,517,997
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|
$
|
4,375,540
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|
See
Notes to Condensed Consolidated Financial
Statements
WEINGARTEN
REALTY INVESTORS
|
|
STATEMENTS
OF CONDENSED CONSOLIDATED CASH FLOWS
|
|
(Unaudited)
|
|
(In
thousands)
|
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|
|
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|
Three
Months Ended
|
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|
March
31,
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|
2007
|
|
2006
|
|
Cash
Flows from Operating Activities:
|
|
|
|
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|
Net
Income
|
|
$
|
51,385
|
|
$
|
54,609
|
|
Adjustments
to reconcile net income to net cash provided by
|
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operating
activities:
|
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|
|
|
|
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Depreciation
and amortization
|
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|
33,384
|
|
|
32,672
|
|
Equity
in earnings of joint ventures, net
|
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|
(3,347
|
)
|
|
(4,066
|
)
|
Income
allocated to minority interests
|
|
|
1,178
|
|
|
1,657
|
|
Gain
on land and merchant development sales
|
|
|
(666
|
)
|
|
(1,676
|
)
|
Gain
on sales of properties
|
|
|
(14,945
|
)
|
|
(17,138
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)
|
Distributions
of income from unconsolidated entities
|
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|
1,121
|
|
|
315
|
|
Changes
in accrued rent and accounts receivable
|
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|
1,805
|
|
|
12,524
|
|
Changes
in other assets
|
|
|
(23,699
|
)
|
|
(14,245
|
)
|
Changes
in accounts payable and accrued expenses
|
|
|
(45,648
|
)
|
|
(26,997
|
)
|
Other,
net
|
|
|
(53
|
)
|
|
437
|
|
Net
cash provided by operating activities
|
|
|
515
|
|
|
38,092
|
|
|
|
|
|
|
|
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|
Cash
Flows from Investing Activities:
|
|
|
|
|
|
|
|
Investment
in properties
|
|
|
(225,656
|
)
|
|
(59,942
|
)
|
Proceeds
from sales and disposition of property, net
|
|
|
17,848
|
|
|
36,788
|
|
Change
in restricted deposits and mortgage escrows
|
|
|
64,587
|
|
|
(20,132
|
)
|
Mortgage
bonds and notes receivable:
|
|
|
|
|
|
|
|
Advances
|
|
|
(18,427
|
)
|
|
(8,378
|
)
|
Collections
|
|
|
178
|
|
|
1,369
|
|
Real
estate joint ventures and partnerships:
|
|
|
|
|
|
|
|
Investments
|
|
|
(21,165
|
)
|
|
(5,925
|
)
|
Distributions
|
|
|
1,612
|
|
|
3,781
|
|
Net
cash used in investing activities
|
|
|
(181,023
|
)
|
|
(52,439
|
)
|
|
|
|
|
|
|
|
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
Proceeds
from issuance of:
|
|
|
|
|
|
|
|
Debt
|
|
|
522
|
|
|
56,922
|
|
Common
shares of beneficial interest
|
|
|
2,263
|
|
|
7
|
|
Preferred
shares of beneficial interest
|
|
|
194,162
|
|
|
|
|
Principal
payments of debt
|
|
|
(4,731
|
)
|
|
(3,897
|
)
|
Common
and preferred dividends paid
|
|
|
(47,508
|
)
|
|
(44,174
|
)
|
Debt
issuance cost paid
|
|
|
(140
|
)
|
|
|
|
Other,
net
|
|
|
443
|
|
|
245
|
|
Net
cash provided by financing activities
|
|
|
145,011
|
|
|
9,103
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(35,497
|
)
|
|
(5,244
|
)
|
Cash
and cash equivalents at January 1
|
|
|
71,003
|
|
|
42,690
|
|
Cash
and cash equivalents at March 31
|
|
$
|
35,506
|
|
$
|
37,446
|
|
See
Notes to Condensed Consolidated Financial Statements
WEINGARTEN
REALTY INVESTORS
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1. Interim
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, 2006 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 do not contain certain information included in our annual
financial statements and notes. These Condensed Consolidated Financial
Statements should be read in conjunction with our Annual Report on Form 10-K
for
the year ended December 31, 2006.
Business
Weingarten
Realty Investors is a real estate investment trust organized under the Texas
Real Estate Investment Trust Act. 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 which includes neighborhood and community
shopping centers and industrial properties of approximately 66 million square
feet. We have a diversified tenant base with our largest tenant comprising
only
3% of total rental revenues during 2007.
We
currently operate, and intend to operate in the future, as a real estate
investment trust.
Basis
of Presentation
Our
condensed consolidated financial statements include the accounts of our
subsidiaries and certain partially owned joint ventures or partnerships which
meet the guidelines for consolidation. All significant intercompany balances
and
transactions have been eliminated.
Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States. Such statements require management
to
make estimates and assumptions that affect the reported amounts on our condensed
consolidated financial statements.
Revenue
Recognition
Rental
revenue is generally recognized on a straight-line basis over the life of the
lease, which begins the date the leasehold improvements are substantially
complete, if owned by us, or the date the tenant takes control of the space,
if
the leasehold improvements are owned by the tenant. Revenue from tenant
reimbursements of taxes, maintenance expenses and insurance is recognized in
the
period the related expense is recognized. Revenue based on a percentage of
tenants' sales is recognized only after the tenant exceeds their sales
breakpoint.
Partially
Owned Joint Ventures and Partnerships
To
determine the method of accounting for partially owned joint ventures or
partnerships, we first apply the guidelines set forth in FASB Interpretation
No.
46R, “Consolidation of Variable Interest Entities.” Based upon our analysis, we
have determined that we have no variable interest entities.
Partially
owned joint ventures or partnerships over which we exercise financial and
operating control are consolidated in our financial statements. In determining
if we exercise financial and operating control, we consider factors such as
ownership interest, authority to make decisions, kick-out rights and substantive
participating rights. Partially owned joint ventures and partnerships where
we
have the ability to exercise significant influence, but do not exercise
financial and operating control, are accounted for using the equity
method.
Property
Real
estate assets are stated at cost less accumulated depreciation, which, in the
opinion of management, is not in excess of the individual property's estimated
undiscounted future cash flows, including estimated proceeds from disposition.
Depreciation is computed using the straight-line method, generally over
estimated useful lives of 18-40 years for buildings and 10-20 years for parking
lot surfacing and equipment. Major replacements where the betterment extends
the
useful life of the asset are capitalized and the replaced asset and
corresponding accumulated depreciation are removed from the accounts. All other
maintenance and repair items are charged to expense as incurred.
Acquisitions
of properties are accounted for utilizing the purchase method and, accordingly,
the results of operations of an acquired property are included in our results
of
operations from the respective dates of acquisition. We have used estimates
of
future cash flows and other valuation techniques to allocate the purchase price
of acquired property among land, buildings on an "as if vacant" basis, and
other
identifiable intangibles. Other identifiable intangible assets and liabilities
include the effect of out-of-market leases, the value of having leases in place
(lease origination and absorption costs), out-of-market assumed mortgages and
tenant relationships.
Property
also includes costs incurred in the development of new operating properties
and
properties in our merchant development program. These properties are carried
at
cost and no depreciation is recorded on these assets. These costs include
preacquisition costs directly identifiable with the specific project,
development and construction costs, interest and real estate taxes. Indirect
development costs, including salaries and benefits, travel and other related
costs that are clearly attributable to the development of the property, are
also
capitalized. The capitalization of such costs ceases at the earlier of one
year
from the completion of major construction or when the property, or any completed
portion, becomes available for occupancy.
Property
also includes costs for tenant improvements paid by us, including reimbursements
to tenants for improvements that are owned by us and will remain our property
after the lease expires.
Our
properties are reviewed for impairment if events or changes in circumstances
indicate that the carrying amount of the property may not be recoverable. In
such an event, a comparison is made of either the current and projected
operating cash flows of each such property into the foreseeable future on an
undiscounted basis or the estimated net sales price to the carrying amount
of
such property. Such carrying amount is adjusted, if necessary, to the estimated
fair value less cost to sell to reflect an impairment in the value of the
asset.
Some
of
our properties are held in single purpose entities. A single purpose entity
is a
legal entity typically established at the request of a lender solely for the
purpose of owning a property or group of properties subject to a mortgage.
There
may be restrictions limiting the entity’s ability to engage in an activity other
than owning or operating the property, assume or guarantee the debt of any
other
entity, or dissolve itself or declare bankruptcy before the debt has been
repaid. Most of our single purpose entities are 100% owned by us and are
consolidated in our financial statements.
Interest
Capitalization
Interest
is capitalized on land under development and buildings under construction based
on rates applicable to borrowings outstanding during the period and the weighted
average balance of qualified assets under development/construction during the
period.
Deferred
Charges
Debt
and
lease costs are amortized primarily on a straight-line basis, which approximates
the effective interest method, over the terms of the debt and over the lives
of
leases, respectively. Lease costs represent the initial direct costs incurred
in
origination, negotiation and processing of a lease agreement. Such costs include
outside broker commissions and other independent third party costs as well
as
salaries and benefits, travel and other related internal costs incurred in
completing the leases. Costs related to supervision, administration,
unsuccessful origination efforts and other activities not directly related
to
completed lease agreements are charged to expense as incurred.
Sales
of Real Estate
Sales
of
real estate include the sale of shopping center pads, property adjacent to
shopping centers, shopping center properties, merchant development properties,
investments in real estate ventures and partial sales to joint ventures in
which
we participate.
We
recognize profit on sales of real estate, including merchant development sales,
in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” Profits
are not recognized until (a) a sale is consummated; (b) the buyer’s initial and
continuing investments are adequate to demonstrate a commitment to pay; (c)
the
seller’s receivable is not subject to future subordination; and (d) we have
transferred to the buyer the usual risks and rewards of ownership in the
transaction, and we do not have a substantial continuing involvement with the
property.
We
recognize gains on the sale of real estate to joint ventures in which we
participate to the extent we receive cash from the joint venture.
Accrued
Rent and Accounts Receivable
Receivable
balances outstanding include base rents, tenant reimbursements and receivables
attributable to the straight lining of rental commitments. An allowance for
the
uncollectible portion of accrued rents and accounts receivable is determined
based upon an analysis of balances outstanding, historical bad debt levels,
customer credit worthiness and current economic trends. Additionally, estimates
of the expected recovery of pre-petition and post-petition claims with respect
to tenants in bankruptcy are considered in assessing the collectibility of
the
related receivables.
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 in a qualified escrow account for the purposes of completing
like-kind exchange transactions. At March 31, 2007 and December 31, 2006, we
had
$14.8 million and $79.4 million held for like-kind exchange transactions,
respectively, and $14.5 million and $15.1 million held in escrow related to
our
mortgages, respectively.
Other
Assets
Other
assets in our condensed consolidated financial statements include investments
held in grantor trusts, prepaid expenses, the value of above-market leases
and
assumed mortgages and the related accumulated amortization, deferred tax assets
and other miscellaneous receivables. Investments held in grantor trusts are
adjusted to fair market value at each period end. Above-market leases and
assumed mortgages are amortized over terms of the acquired leases and the
remaining life of the mortgages, respectively.
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):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Net
income available to common shareholders
|
|
$
|
46,657
|
|
$
|
52,084
|
|
Income
attributable to operating partnership units
|
|
|
1,106
|
|
|
1,399
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders - diluted
|
|
$
|
47,763
|
|
$
|
53,483
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
86,005
|
|
|
89,515
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
Share
options and awards
|
|
|
1,123
|
|
|
850
|
|
Operating
partnership units
|
|
|
2,681
|
|
|
3,151
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - diluted
|
|
|
89,809
|
|
|
93,516
|
|
Options
to purchase 2,020
and
900 common shares for the three months ended March 31, 2007 and 2006,
respectively, were not included in the calculation of net income per common
share - diluted as the exercise prices were greater than the average market
price for the period.
Income
Taxes
We
have
elected to be treated as a real estate investment trust (“REIT”) under the
Internal Revenue Code of 1986, as amended. As a REIT, we generally will not
be
subject to corporate level federal income tax on taxable income we distribute
to
our shareholders. To be taxed as a REIT we must meet a number of requirements
including meeting defined percentage tests concerning the amount of our assets
and revenues that come from, or are attributable to, real estate operations.
As
long as we distribute at least 90% of the taxable income of the REIT to our
shareholders as dividends, we will not be taxed on the portion of our income
we
distribute as dividends unless we have ineligible transactions.
The
Tax
Relief Extension Act of 1999 gave REITs the ability to conduct activities which
a REIT was previously precluded from doing as long as they are performed in
entities which have elected to be treated as taxable REIT subsidiaries under
the
IRS code. These activities include buying or developing properties with the
express purpose of selling them. We conduct certain of these activities in
taxable REIT subsidiaries that we have created. We calculate and record income
taxes in our financial statements based on the activities in those entities.
We
also record deferred taxes for the temporary tax differences that have resulted
from those activities as
required under SFAS No. 109, “Accounting for Income Taxes.”
Cash
Flow Information
All
highly liquid investments with original maturities of three months or less
are
considered cash equivalents. We issued common shares of beneficial interest
valued at $12.6 million and $2.2 million during the first quarter ending March
31, 2007 and 2006, respectively, in exchange for interests in limited
partnerships, which had been formed to acquire properties. Cash payments for
interest on debt, net of amounts capitalized, of $62.4 million and $55.3 million
were made during the first quarter of 2007 and 2006, respectively. A cash
payment of $.2 million for federal income taxes was made during the first
quarter of 2006, and no federal income tax payments were made during the first
quarter of 2007. In association with property acquisitions and investments
in
unconsolidated joint ventures, items assumed were as follows (in
thousands):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Debt
|
|
$
|
19,061
|
|
$
|
|
|
Net
Assets and Liabilities
|
|
|
3,086
|
|
|
4,652
|
|
Net
assets and liabilities were reduced $59.8 million during the first quarter
of
2007 from the reorganization of three joint ventures to tenancy-in-common
arrangements where we have a 50% interest. We also accrued $7.2 million and
$4.7
million during the first quarter of 2007 and 2006, respectively, associated
with
the construction of property.
Reclassifications
Reclassifications
of prior years’ amounts have been made to conform to the current year
presentation, which includes the reclassification of the operating results
of
certain properties to discontinued operations. For additional information see
Note 8, “Discontinued Operations.”
Note
2. Newly
Adopted Accounting Pronouncements
In
June
2006 the FASB issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.” FIN 48
clarifies the accounting for uncertainty in income taxes recognized in the
financial statements. The interpretation prescribes a recognition threshold
and
measurement attribute for the financial statement recognition of a tax position
taken, or expected to be taken, in a tax return. A tax position may only be
recognized in the financial statements if it is more likely than not that the
tax position will be sustained upon examination. There are also several
disclosure requirements. The interpretation is effective for fiscal years
beginning after December 15, 2006. We adopted FIN 48 as of January 1, 2007,
and
its adoption did not have a material effect on our financial position, results
of operations or cash flows.
In
September 2006 the FASB issued SFAS No. 157, “Fair Value Measurements.” This
Statement defines fair value and establishes a framework for measuring fair
value in generally accepted accounting principles. The key changes to current
practice are (1) the definition of fair value, which focuses on an exit price
rather than an entry price; (2) the methods used to measure fair value, such
as
emphasis that fair value is a market-based measurement, not an entity-specific
measurement, as well as the inclusion of an adjustment for risk, restrictions
and credit standing and (3) the expanded disclosures about fair value
measurements. This Statement does not require any new fair value measurements.
This
Statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. We are required to adopt SFAS No. 157 in the first quarter of 2008,
and
we are currently evaluating the impact that this Statement will have on our
financial position, results of operations or cash flows.
In
September 2006 the FASB issued FASB Statement No. 158, “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans - An Amendment of
FASB Statements No. 87, 88, 106, and 132R.” This new standard requires an
employer to: (a) recognize in its statement of financial position an asset
for a
plan’s over-funded status or a liability for a plan’s under-funded status; (b)
measure a plan’s assets and its obligations that determine its funded status as
of the end of the employer’s fiscal year (with limited exceptions); and (c)
recognize changes in the funded status of a defined benefit postretirement
plan
in the year in which the changes occur. These changes will be reported in
comprehensive income of a business entity. The requirement to recognize the
funded status of a benefit plan and the disclosure requirements (the
“Recognition Provision”) were effective for us as of December 31, 2006, and as a
result we recognized an additional liability of $803,000. The requirement to
measure plan assets and benefit obligations as of the date of the employer’s
fiscal year-end statement of financial position (the “Measurement Provision”) is
effective for fiscal years ending after December 15, 2008. We have assessed
the
potential impact of the Measurement Provision of SFAS No. 158 and concluded
that
its adoption will not have a material effect on our financial position, results
of operations or cash flows.
In
September 2006 the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”),
which became effective for us as of December 31, 2006. SAB 108 provides guidance
on the consideration of the effects of prior period misstatements in quantifying
current year misstatements for the purpose of a materiality assessment. SAB
108
provides for the quantification of the impact of correcting all misstatements,
including both the carryover and reversing effects of prior year misstatements,
on the current year financial statements. The adoption of SAB 108 on December
31, 2006 did not have a material effect on our financial position, results
of
operations or cash flows.
In
February 2007 the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” SFAS No. 159 expands opportunities
to use fair value measurement in financial reporting and permits entities to
choose to measure many financial instruments and certain other items at fair
value. This Statement is effective for fiscal years beginning after November
15,
2007. We have not decided if we will choose to measure any eligible financial
assets and liabilities at fair value under the provisions of SFAS No. 159.
Note
3. Derivatives
and Hedging
We
occasionally hedge the future cash flows of our debt transactions, as well
as
changes in the fair value of our debt instruments, principally through interest
rate swaps with major financial institutions. At March 31, 2007, we had five
interest rate swap contracts designated as fair value hedges with an aggregate
notional amount of $75.0 million that convert fixed interest payments at rates
ranging from 4.2% to 6.8% to variable interest payments. We have determined
that
they are highly effective in limiting our risk of changes in the fair value
of
fixed-rate notes attributable to changes in variable interest rates. Also,
at
March 31, 2007, we had two forward-starting interest rate swap contracts with
an
aggregate notional amount of $118.6 million which lock the swap rate at 5.2%
until January 2008. The purpose of these forward-starting swaps, which are
designated as cash flow hedges, is to mitigate the risk of future fluctuations
in interest rates on forecasted issuances of long-term debt. We have determined
that they are highly effective in offsetting future variable interest cash
flows
on anticipated long-term debt issuances.
Changes
in the market value of fair value hedges as well as changes in the market value
of the hedged item are recorded in earnings each reporting period. For the
quarter ended March 31, 2007 and 2006, these changes in fair market value offset
with minimal impact to earnings. The derivative instruments at March 31, 2007
and December 31, 2006 were reported at their fair values in Other Assets, net
of
accrued interest, of $.1 million in both periods, and as Other Liabilities,
net
of accrued interest, of $2.9 million and $3.2 million,
respectively.
As
of
March 31, 2007 and December 31, 2006, the balance in Accumulated Other
Comprehensive Loss relating to derivatives was $7.4 million and $7.6 million,
respectively. Amounts amortized to interest expense were $.2 million and $.1
million during the first quarter of 2007 and 2006, respectively. Within the
next
12 months, we expect to amortize to interest expense approximately $.9 million
of the balance in Accumulated Other Comprehensive Loss.
During
the first quarter of 2007 and 2006, the interest rate swaps increased interest
expense and decreased net income by $.1 million and $.05 million, respectively,
and increased the average interest rate of our debt by 0.02% and 0.01%,
respectively. We could be exposed to credit losses in the event of
nonperformance by the counter-party; however, management believes the likelihood
of such nonperformance is remote.
Note
4. Debt
Our
debt
consists of the following (in thousands):
|
|
March
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Debt
payable to 2030 at 4.5% to 8.9%
|
|
$
|
2,838,312
|
|
$
|
2,848,805
|
|
Unsecured
notes payable under revolving credit agreements
|
|
|
18,430
|
|
|
18,000
|
|
Obligations
under capital leases
|
|
|
29,725
|
|
|
29,725
|
|
Industrial
revenue bonds payable to 2015 at 3.7% to 6.19%
|
|
|
4,364
|
|
|
4,422
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,890,831
|
|
$
|
2,900,952
|
|
The
grouping of total debt between fixed and variable-rate as well as between
secured and unsecured is summarized below (in thousands):
|
|
|
|
March
31,
|
|
December
31,
|
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
As
to interest rate (including the effects of interest rate
swaps):
|
|
|
|
|
|
|
|
Fixed-rate
debt
|
|
|
|
|
$
|
2,775,091
|
|
$
|
2,785,553
|
|
Variable-rate
debt
|
|
|
|
|
|
115,740
|
|
|
115,399
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
$
|
2,890,831
|
|
$
|
2,900,952
|
|
|
|
|
|
|
|
|
|
|
|
|
As
to collateralization:
|
|
|
|
|
|
|
|
|
|
|
Unsecured
debt
|
|
|
|
|
$
|
1,910,880
|
|
$
|
1,910,216
|
|
Secured
debt
|
|
|
|
|
|
979,951
|
|
|
990,736
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
$
|
2,890,831
|
|
$
|
2,900,952
|
|
In
February 2006 we amended and restated our $400 million unsecured revolving
credit facility. The amended facility has an initial four-year term and provides
a one-year extension option available at our request. Borrowing rates under
this
amended facility float at a margin over LIBOR, plus a facility fee. The
borrowing margin and facility fee, which are currently 37.5 and 12.5 basis
points, respectively, are priced off a grid that is tied to our senior unsecured
credit ratings. This amended facility retains a competitive bid feature that
allows us to request bids for amounts up to $200 million from each of the
syndicate banks, allowing us an opportunity to obtain pricing below what we
would pay using the pricing grid. Additionally, the amended facility contains
an
accordion feature, which allows us the ability to increase the facility up
to
$600 million.
At
March
31, 2007, no amounts were outstanding under the $400 million revolving credit
facility. At December 31, 2006, we had $18 million outstanding at an average
variable interest rate of 5.75%. We also have an agreement for an unsecured
and
uncommitted overnight facility totaling $20 million with a bank that is used
for
cash management purposes, of which $18.4 million was outstanding at a variable
interest rate of 5.69% at March 31, 2007. At December 31, 2006, none was
outstanding under this credit facility. Letters of credit totaling $9.8 million
and $10.1 million were outstanding under the $400 million revolving credit
facility at March 31, 2007 and December 31, 2006, respectively. The available
balance under our revolving credit agreement was $371.7 million and $371.9
million at March 31, 2007 and December 31, 2006, respectively. During the first
quarter of 2007, the maximum balance and weighted average balance outstanding
under both the $400 million and the $20 million revolving credit facilities
combined were $100.0 million and $13.0 million, respectively, at a weighted
average interest rate of 5.6%. During 2006 the maximum balance and weighted
average balance outstanding under both the $400 million and the $20 million
revolving credit facilities combined were $368.2 million and $179.1 million,
respectively, at a weighted average interest rate of 5.5%.
In
conjunction with acquisitions completed during the first quarter of 2007, we
assumed $19.1 million of nonrecourse debt secured by the related properties.
As
of December 31, 2006, the balance of secured debt that was assumed in
conjunction with 2006 acquisitions was $140.7 million.
Scheduled
principal payments on our debt (excluding $18.4 million due under our revolving
credit agreements, $18.6 million of capital leases and $2.4 million market
value
of interest rate swaps) are due during the following years (in thousands):
2007
|
|
$
|
109,396
|
|
2008
|
|
|
252,662
|
|
2009
|
|
|
113,510
|
|
2010
|
|
|
119,188
|
|
2011
|
|
|
890,324
|
|
2012
|
|
|
307,900
|
|
2013
|
|
|
302,205
|
|
2014
|
|
|
338,356
|
|
2015
|
|
|
189,347
|
|
Thereafter
|
|
|
233,283
|
|
Our
various debt agreements contain restrictive covenants, including minimum
interest and fixed charge coverage ratios, minimum unencumbered interest
coverage ratios and minimum net worth requirements and maximum total debt
levels. Management believes that we are in compliance with all restrictive
covenants.
In
December 2006 we issued $75 million of 10-year unsecured fixed rate medium
term
notes at 6.1% including the effect of an interest rate swap that had hedged
the
transaction. Proceeds from this issuance were used to repay balances under
our
revolving credit facilities, to cash settle a forward hedge and for general
business purposes.
In
July
2006 we priced an offering of $575 million of 3.95% convertible senior unsecured
notes due 2026, which closed on August 2, 2006. Interest is payable
semi-annually in arrears on February 1 and August 1 of each year, beginning
February 1, 2007. The net proceeds of $395.9 million from the sale of the
debentures, after repurchasing 4.3 million of our common shares of beneficial
interest, were used for general business purposes and to reduce amounts
outstanding under our revolving credit facility.
The
debentures are convertible under certain circumstances for our common shares
of
beneficial interest at an initial conversion rate of 20.3770 common shares
per
$1,000 of principal amount of debentures (an initial conversion price of
$49.075). In addition, the conversion rate may be adjusted if certain change
in
control transactions or other specified events occur on or prior to August
4,
2011. Upon the conversion of debentures, we will deliver cash for the principal
return, as defined, and cash or common shares, at our option, for the excess
of
the conversion value, as defined, over the principal return. The debentures
are
redeemable for cash at our option beginning in 2011 for the principal amount
plus accrued and unpaid interest. Holders of the debentures have the right
to
require us to repurchase their debentures for cash equal to the principal of
the
debentures plus accrued and unpaid interest in 2011, 2016 and 2021 and in the
event of a change in control.
Holders
may convert their debentures based on the applicable conversion rate prior
to
the close of business on the second business day prior to the stated maturity
date at any time on or after August 1, 2025 and also under any of the following
circumstances:
|
• |
during
any calendar quarter beginning after December 31, 2006 (and only
during
such calendar quarter), if, and only if, the closing sale price of
our
common shares for at least 20 trading days (whether or not consecutive)
in
the period of 30 consecutive trading days ending on the last trading
day
of the preceding calendar quarter is greater than 130% of the conversion
price per common share in effect on the applicable trading
day;
|
|
• |
during
the five consecutive trading-day period following any five consecutive
trading-day period in which the trading price of the debentures was
less
than 98% of the product of the closing sale price of our common shares
multiplied by the applicable conversion
rate;
|
|
• |
if
those debentures have been called for redemption, at any time prior
to the
close of business on the third business day prior to the redemption
date;
|
|
• |
if
our common shares are not listed on a U.S. national or regional securities
exchange or quoted on the Nasdaq National Market for 30 consecutive
trading days.
|
In
connection with the issuance of these debentures, we filed a shelf registration
statement related to the resale of the debentures and the common shares issuable
upon the conversion of the debentures. This registration statement has been
declared effective by the SEC.
Note
5. Preferred
Shares
On
January 30, 2007, we issued $200 million of depositary shares. Each depositary
share represents one-hundredth of a Series F Cumulative Redeemable Preferred
Share. The depositary shares are redeemable, in whole or in part, on or after
January 30, 2012 at our option, at a redemption price of $25 per depositary
share, plus any accrued and unpaid dividends thereon. The depositary shares
are
not convertible or exchangeable for any of our other property or securities.
The
Series F Preferred Shares pay a 6.5% annual dividend and have a liquidation
value of $2,500 per share. Net proceeds of $194.4 million were used to repay
amounts outstanding under our credit facilities and for general business
purposes.
Note
6. Common
Shares
In
July
2006 our board of trust managers authorized the repurchase of our common shares
of beneficial interest to a total of $207 million, and we used $167.6 million
of
the net proceeds from the $575 million debt offering to purchase 4.3 million
common shares of beneficial interest at $39.26 per share. Share
repurchases may be made in the open market or in privately negotiated
transactions.
Note
7. Property
Our
property consisted of the following (in thousands):
|
|
March
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Land
|
|
$
|
885,189
|
|
$
|
847,295
|
|
Land
held for development
|
|
|
20,125
|
|
|
21,405
|
|
Land
under development
|
|
|
182,199
|
|
|
146,990
|
|
Buildings
and improvements
|
|
|
3,350,066
|
|
|
3,339,074
|
|
Construction
in-progress
|
|
|
109,027
|
|
|
91,124
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,546,606
|
|
$
|
4,445,888
|
|
The
following carrying charges were capitalized (in thousands):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Interest
|
|
$
|
5,855
|
|
$
|
809
|
|
Ad
valorem taxes
|
|
|
505
|
|
|
31
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,360
|
|
$
|
840
|
|
Acquisitions
of properties are accounted for utilizing the purchase method and, accordingly,
the results of operations are included in our results of operations from
the
respective dates of acquisition. We have used estimates of future cash flows
and
other valuation techniques to allocate the purchase price of acquired property
among land, buildings on an "as if vacant" basis, and other identifiable
intangibles.
Note
8. Discontinued
Operations
In
the
first quarter of 2007, we sold a shopping center located in Texas, and we
classified three shopping centers, totaling $80.8 million, as held for sale
as
of March 31, 2007. In 2006 we sold 19 shopping centers and four industrial
properties, 10 of which were located in Texas, three in Kansas, two each in
Arkansas, Oklahoma and Tennessee, and one each in Arizona, Missouri, New Mexico
and Colorado. The operating results of these properties have been reclassified
and reported as discontinued operations in the Statements of Condensed
Consolidated Income and Comprehensive Income in accordance with SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," as well as
any
gains on the respective disposition for all periods presented. Revenues recorded
in Operating Income From Discontinued Operations related to our dispositions
for
the quarters ended March 31, 2007 and 2006, totaled $2.7 million and $10.3
million, respectively. Included in the Condensed Consolidated Balance Sheet
at
December 31, 2006 were $6.5 million
of Property and $3.2 million of Accumulated Depreciation related to the property
sold in the first quarter of 2007.
The
discontinued operations reported in 2007 and 2006 had no debt that was required
to be repaid upon their disposition. In addition, we elected not to allocate
other consolidated interest to discontinued operations since the interest
savings to be realized from the proceeds of the sale of these operations was
not
material.
Note
9. Related
Parties
We
have
ownership interests in a number of joint ventures and partnerships. Notes
receivable from these entities bear interest ranging from 5.7% to 10% at March
31, 2007 and December 31, 2006 and are due at various dates through 2028. The
notes are generally secured by real estate assets. Interest income recognized
on
these notes was $.2 million and $.5 million for the three months ended March
31,
2007 and 2006, respectively.
Note
10. Investment
in Real Estate Joint Ventures
We
own
interests in joint ventures or limited partnerships and have
tenancy-in-common interests in which we exercise significant influence but
do not have financial and operating control. We account for these
investments using the equity method, and our interests range from 20% to
75%. Combined condensed unaudited financial information of these ventures (at
100%) is summarized as follows (in thousands):
|
|
March
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Combined
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
$
|
1,236,490
|
|
$
|
1,123,600
|
|
Accumulated
depreciation
|
|
|
(56,136
|
)
|
|
(41,305
|
)
|
Property
- net
|
|
|
1,180,354
|
|
|
1,082,295
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
109,408
|
|
|
118,642
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,289,762
|
|
$
|
1,200,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
330,342
|
|
$
|
327,695
|
|
Amounts
payable to Weingarten Realty Investors
|
|
|
15,686
|
|
|
22,657
|
|
Other
liabilities
|
|
|
42,426
|
|
|
39,967
|
|
Accumulated
equity
|
|
|
901,308
|
|
|
810,618
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,289,762
|
|
$
|
1,200,937
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
March
31,
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Combined
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
31,219
|
|
$ |
11,948
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
5,090
|
|
|
3,332
|
|
Depreciation
and amortization
|
|
|
|
7,003
|
|
|
2,799
|
|
Operating
|
|
|
|
4,615
|
|
|
1,556
|
|
Ad
valorem taxes
|
|
|
|
4,055
|
|
|
1,207
|
|
General
and administrative
|
|
|
|
165
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
20,928
|
|
|
9,015
|
|
|
|
|
|
|
|
|
|
|
Gain
on land sales
|
|
|
|
|
|
|
555
|
|
Gain
on sale of properties
|
|
|
|
|
|
|
2,550
|
|
Net
income
|
|
|
$
|
10,291
|
|
$ |
6,038
|
|
Our
investment in real estate joint ventures, as reported on the balance sheets,
differs from our proportionate share of the joint ventures' underlying net
assets due to basis differentials, which arose upon the transfer of assets
to
the joint ventures. This basis differential, which totaled $19.2 million and
$20.1 million at March 31, 2007 and December 31, 2006, respectively, is
generally amortized over the useful lives of the related assets.
Fees
earned by us for the management of these joint ventures totaled, in millions,
$1.0 and $.3 for the quarters ended March 31, 2007 and 2006,
respectively.
During
the first quarter of 2007, a 25%-owned unconsolidated joint venture acquired
two
shopping centers. Cole Park Plaza is located in Chapel Hill, North Carolina,
and
Sunrise West is located in Sunrise, Florida. A 50%-owned unconsolidated joint
venture was formed for the purpose of developing a retail shopping
center.
In
March
2007 three joint ventures were reorganized and our 50% interest in each of
these
properties is held in a tenancy-in-common arrangement.
During
the first quarter of 2006, we invested in a 25%-owned unconsolidated joint
venture, which acquired two shopping centers. Fresh Market Shoppes is located
in
Hilton Head, South Carolina and the Shoppes at Paradise Isle is located in
Destin, Florida. A newly formed 50%-owned joint venture commenced construction
on a retail center in Mission, Texas, and a 61%-owned joint venture sold a
shopping center located in Crosby, Texas. Our share of the sales proceeds
totaled $2.8 million and generated a gain of $1.5 million. Associated with
our
land and merchant development activities, a parcel of land in Houston, Texas
was
sold in a 75%-owned joint venture, of which our share of the gain totaled $.4
million.
We
have
not guaranteed the debt of any of our joint ventures in which we own an
interest.
Note
11. Income
Tax Considerations
We
qualify as a REIT under the provisions of the Internal Revenue Code, and
therefore, no tax is imposed on us for our taxable income distributed to
shareholders. In our taxable REIT subsidiaries, we recorded a federal
income tax benefit of $.5 million during the first quarter of 2007 and a federal
income tax provision of $.5 million during the first quarter of 2006.
We
have
reviewed our tax positions under FIN 48, which clarifies the accounting for
uncertainty in income taxes recognized in the financial statements. The
interpretation prescribes a recognition threshold and measurement attribute
for
the financial statement recognition of a tax position taken, or expected to
be
taken, in a tax return. A tax position may only be recognized in the financial
statements if it is more likely than not that the tax position will be sustained
upon
examination. We believe it is more likely than not that our tax positions will
be sustained in any tax examinations.
In
May
2006 the state of Texas enacted a margin tax, replacing the taxable capital
components of the current franchise tax with a new “taxable margin” component.
Most REITs are subject to the margin tax, where as they were previously exempt
from the franchise tax. The tax became effective for us beginning in calendar
year 2007. Since the tax base on the margin tax is derived from an
income-based
measure, we believe the margin tax is an income tax. We also record deferred
taxes for the temporary tax differences that have resulted from those activities
as required under SFAS No. 109, “Accounting for Income Taxes.”
For
the
three months ending March 31, 2007, we recorded a provision for the
Texas
margin tax of $.5 million. No provision was recorded during the first quarter
of
2006.
Note
12. Commitments
and Contingencies
We
participate in nine ventures, structured as DownREIT partnerships that have
properties in Arkansas, California, Florida, Georgia, North Carolina, Texas
and
Utah. As general partner, we have operating and financial control over these
ventures and consolidate their operations in our condensed consolidated
financial statements. These ventures allow the outside limited partners to
put
their interest to the partnership for our common shares of beneficial interest
or an equivalent amount in cash. We may acquire any limited partnership
interests that are put to the partnership, and we have the option to redeem
the
interest in cash or a fixed number of our common shares, at our discretion.
During the first quarter of 2007 and 2006, we issued common shares of beneficial
interest valued at $12.6 million and $2.2 million, respectively, in exchange
for
certain of these limited partnership interests.
We
expect
to invest approximately $192.2 million in 2007, $98.0 million in 2008, $55.0
million in 2009, $58.1 million in 2010, and the remaining balance of $23.0
million in 2011 to complete construction of 32 properties under various stages
of development. We also expect to invest $49.9 million to acquire projects
in
2007.
We
are
subject to numerous federal, state and local environmental laws, ordinances
and
regulations in the areas where we own or operate properties. We are not aware
of
any material contamination, which may have been caused by us or any of our
tenants that would have a material effect on our financial position, results
of
operation or cash flows.
As
part
of our risk management activities we have applied and been accepted into state
sponsored environmental programs which will limit our expenses if contaminants
need to be remediated. We also have an environmental insurance policy that
covers us against third party liabilities and remediation costs.
While
we
believe that we do not have any material exposure to environmental remediation
costs, we cannot give absolute assurance that changes in the law or new
discoveries of contamination will not result in increased liabilities to
us.
We
are
involved in various matters of litigation arising in the normal course of
business. While we are unable to predict with certainty the amounts involved,
our management and counsel are of the opinion that, when such litigation is
resolved, our resulting liability, if any, will not have a material effect
on
our condensed consolidated financial statements.
Note
13. Identified
Intangible Assets and Liabilities
Identified
intangible assets and liabilities associated with our property acquisitions
are
as follows (in thousands):
|
|
March
31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Identified
Intangible Assets:
|
|
|
|
|
|
Above-Market
Leases (included in Other Assets)
|
|
$
|
17,193
|
|
$
|
14,686
|
|
Above-Market
Leases - Accumulated Amortization
|
|
|
(5,794
|
)
|
|
(5,277
|
)
|
Above-Market
Assumed Mortgages (included in Other Assets)
|
|
|
1,657
|
|
|
1,653
|
|
Valuation
of In Place Lease (included in Unamortized Debt and Lease
Cost)
|
|
|
57,901
|
|
|
52,878
|
|
Valuation
of In Place Lease - Accumulated Amortization
|
|
|
(18,106
|
)
|
|
(16,297
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
52,851
|
|
$
|
47,643
|
|
|
|
|
|
|
|
|
|
Identified
Intangible Liabilities (included in Other Liabilities):
|
|
|
|
|
|
|
|
Below-Market
Leases
|
|
$
|
29,149
|
|
$
|
24,602
|
|
Below-Market
Leases - Accumulated Amortization
|
|
|
(7,731
|
)
|
|
(6,569
|
)
|
Below-Market
Assumed Mortgages
|
|
|
59,808
|
|
|
59,863
|
|
Below-Market
Assumed Mortgages - Accumulated Amortization
|
|
|
(19,893
|
)
|
|
(18,123
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
61,333
|
|
$
|
59,773
|
|
These
identified intangible assets and liabilities are amortized over the terms of
the
acquired leases or the remaining lives of the assumed mortgages.
The
net
amortization of above-market and below-market leases increased Revenues-Rentals
by $.8 million and $.2 million for the quarters ended March 31, 2007 and 2006,
respectively. The estimated net amortization of these intangible assets and
liabilities for each of the next five years is as follows (in
thousands):
2008
|
|
$
|
2,001
|
|
2009
|
|
|
1,710
|
|
2010
|
|
|
1,004
|
|
2011
|
|
|
413
|
|
2012
|
|
|
436
|
|
The
amortization of the in place lease intangible, which is recorded in Depreciation
and Amortization, was $2.1 million and $1.8 million for the quarters ended
March
31, 2007 and 2006, respectively. The estimated amortization of this intangible
asset for each of the next five years is as follows (in thousands):
2008
|
|
$
|
6,511
|
|
2009
|
|
|
5,609
|
|
2010
|
|
|
4,662
|
|
2011
|
|
|
3,618
|
|
2012
|
|
|
3,038
|
|
The
amortization of above-market and below-market assumed mortgages decreased
Interest Expense by $1.8 million for both quarters ended March 31, 2007 and
2006, respectively. The estimated amortization of these intangible assets and
liabilities for each of the next five years is as follows (in
thousands):
2008
|
|
$
|
6,007
|
|
2009
|
|
|
4,667
|
|
2010
|
|
|
4,015
|
|
2011
|
|
|
2,718
|
|
2012
|
|
|
1,435
|
|
Note
14. Share
Options and Awards
On
January 1, 2006, we adopted SFAS No. 123(R), “Share-Based Payment,” which
established accounting standards for all transactions in which an entity
exchanges its equity instruments for goods and services. This accounting
standard focuses primarily on equity transactions with employees. We began
recording compensation expense on any unvested awards granted during the
remaining vesting periods.
In
1988
we adopted a Share Option Plan that provided for the issuance of options and
share awards up to a maximum of 1.6 million common shares. This plan expired
in
December 1997, and no awards remain outstanding at March 31, 2007.
In
1992
we adopted the Employee Share Option Plan that grants 100 share options to
every
employee, excluding officers, upon completion of each five-year interval of
service. This plan expires in 2012 and provides options for a maximum of 225,000
common shares, of which .2 million is available for future grant of options
or
awards at March 31, 2007. Options granted under this plan are exercisable
immediately.
In
1993
we adopted the Incentive Share Option Plan that provided for the issuance of
up
to 3.9 million common shares, either in the form of restricted shares or share
options. This plan expired in 2002, but some awards made pursuant to it remain
outstanding as of March 31, 2007. The share options granted to non-officers
vest
over a three-year period beginning after the grant date, and for officers vest
over a seven-year period beginning two years after the grant date. Restricted
shares under this plan have multiple vesting periods. Prior to 2000, restricted
shares generally vested over a 10 year period. Effective in 2000, the vesting
period became five years. In addition, the vesting period for these restricted
shares can be accelerated based on appreciation in the market share price.
All
restricted shares related to this plan vested prior to 2005.
In
2001
we adopted the Long-term Incentive Plan for the issuance of options and share
awards. In 2006 the maximum number of common shares issuable under this plan
was
increased to 4.8 million common shares of beneficial interest, of which 2.6
million is available for the future grant of options or awards at March 31,
2007. This plan expires in 2011. The share options granted to non-officers
vest
over a three-year period beginning after the grant date, and share options
and
restricted shares for officers vest over a five-year period after the grant
date. Restricted shares granted to trust managers and retirement eligible
employees are expensed immediately.
The
grant
price for the Employee Share Option Plan is equal to the quoted fair market
value of our common shares on the date of grant. The grant price of the
Long-term Incentive Plan is calculated as an average of the high and low of
the
quoted fair market value of our common shares on the date of grant. In both
plans, these options expire upon termination of employment or 10 years from
the
date of grant. In the Long-term Incentive Plan, restricted shares for officers
and trust managers are granted at no exercise price. Our policy is to recognize
compensation expense for equity awards ratably over the vesting period, except
for retirement eligible amounts. For the three months ended March 31, 2007
and
2006, compensation expense, net of forfeitures, associated with share options
and restricted shares totaled $1.3 million and $1.0 million, of which $.4
million and $.2 million was capitalized, respectively.
The
fair
value of share options and restricted shares is estimated on the date of grant
using the Black-Scholes option pricing method based on the expected weighted
average assumptions in the following table. The dividend yield is an average
of
the historical yields at each record date over the estimated expected life.
We
estimate volatility using our historical volatility data for a period of 10
years, and the expected life is based on historical data from an option
valuation model of employee exercises and terminations. The risk-free rate
is
based on the U.S. Treasury yield curve in effect at the time of grant. The
fair
value and weighted average assumptions are as follows:
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Fair
value per share
|
|
$
|
4.91
|
|
$
|
3.22
|
|
Dividend
yield
|
|
|
5.7
|
%
|
|
6.3
|
%
|
Expected
volatility
|
|
|
18.2
|
%
|
|
16.8
|
%
|
Expected
life (in years)
|
|
|
5.9
|
|
|
6.7
|
|
Risk-free
interest rate
|
|
|
4.4
|
%
|
|
4.4
|
%
|
Following
is a summary of the option activity for the three months ended March 31,
2007:
|
|
|
|
Weighted
|
|
|
|
Shares
|
|
Average
|
|
|
|
Under
|
|
Exercise
|
|
|
|
Option
|
|
Price
|
|
Outstanding,
January 1, 2007
|
|
|
3,147,153
|
|
$
|
31.99
|
|
Granted
|
|
|
3,121
|
|
|
48.11
|
|
Forfeited
or expired
|
|
|
(10,912
|
)
|
|
37.81
|
|
Exercised
|
|
|
(149,665
|
)
|
|
23.77
|
|
Outstanding,
March 31, 2007
|
|
|
2,989,697
|
|
$
|
32.39
|
|
The
total
intrinsic value of options exercised during the first quarter of 2007 and 2006
was $3.6 million and $6.1 million, respectively. As of March 31, 2007 and
December 31, 2006, there was approximately $4.5 million and $4.9 million,
respectively, of total unrecognized compensation cost related to unvested share
options, which is expected to be amortized over a weighted average of 2.75
years
and three years, respectively.
The
following table summarizes information about share options outstanding and
exercisable at March 31, 2007:
|
|
Outstanding
|
|
Exercisable
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
Aggregate
|
|
|
|
|
Weighted
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
Remaining
|
|
|
Average
|
|
Intrinsic
|
|
|
|
|
Average
|
|
Remaining
|
|
|
Intrinsic
|
Range
of
|
|
|
|
Contractual
|
|
|
Exercise
|
|
Value
|
|
|
|
|
Exercise
|
|
Contractual
|
|
|
Value
|
Exercise
Prices
|
|
Number
|
|
Life
|
|
|
Price
|
|
(000’s)
|
|
Number
|
|
|
Price
|
|
Life
|
|
|
(000’s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$17.89
- $26.83
|
|
1,160,944
|
|
4.70
years
|
|
$
|
21.87
|
|
|
|
751,744
|
|
$ |
21.35
|
|
4.52
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$26.84
- $40.26
|
|
1,291,136
|
|
7.74
years
|
|
$
|
35.58
|
|
|
|
572,101
|
|
$ |
34.28
|
|
7.36
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$40.27
- $49.62
|
|
537,617
|
|
9.67
years
|
|
$
|
47.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
2,989,697
|
|
6.91
years
|
|
$
|
32.39
|
$ |
45,354
|
|
1,323,845
|
|
$ |
26.94
|
|
5.75
years
|
|
$ |
27,298
|
A
summary
of the status of unvested restricted shares for the three months ended March
31,
2007 is as follows:
|
|
Unvested
|
|
Weighted
|
|
|
|
Restricted
|
|
Average
Grant
|
|
|
|
Shares
|
|
Date
Fair Value
|
|
Outstanding,
January 1, 2007
|
|
|
172,255
|
|
$
|
40.80
|
|
Granted
|
|
|
812
|
|
|
49.86
|
|
Vested
|
|
|
(320
|
)
|
|
50.22
|
|
Forfeited
|
|
|
(1,170
|
)
|
|
47.50
|
|
Outstanding,
March 31, 2007
|
|
|
171,577
|
|
$
|
40.78
|
|
As
of
March 31, 2007 and December 31, 2006, there was approximately $5.7 million
and
$6.1 million, respectively, of total unrecognized compensation cost related
to
unvested restricted shares, which is expected to be amortized over a weighted
average of 3.42 years and 3.66 years, respectively.
Note
15. Employee
Benefit Plans
We
sponsor a noncontributory qualified retirement plan and a separate and
independent nonqualified supplemental retirement plan for
our officers. The components of net periodic benefit costs for both plans
are as follows (in thousands):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Service
cost
|
|
$
|
878
|
|
$
|
772
|
|
Interest
cost
|
|
|
563
|
|
|
565
|
|
Expected
return on plan assets
|
|
|
(319
|
)
|
|
(346
|
)
|
Prior
service cost
|
|
|
(25
|
)
|
|
(32
|
)
|
Recognized
loss
|
|
|
55
|
|
|
102
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,152
|
|
$
|
1,061
|
|
During
the three months ended March 31, 2007 and 2006, we contributed $2.0 million
and
$1.5 million, respectively, to the qualified retirement plan and $.9 million
and
$1.5 million, respectively, to the supplemental retirement plan. We currently
do
not expect to make any additional contributions to either plan in
2007.
We
have a
Savings and Investment Plan pursuant to which eligible employees may elect
to
contribute from 1% of their salaries to the maximum amount established annually
by the Internal Revenue Service. We match employee contributions at the rate
of
$.50 per $1.00 for the first 6% of the employee's salary. The employees vest
in
the employer contributions ratably over a six-year period. Compensation expense
related to the plan was $.2 million for both the three months ended March 31,
2007 and 2006.
We
have
an Employee Share Purchase Plan under which .6 million of our common shares
have
been authorized. These shares, as well as common shares purchased by us on
the
open market, are made available for sale to employees at a discount of 15%.
Purchases are limited to 10% of an employee’s regular salary. Shares purchased
by the employee under the plan are restricted from being sold for two years
from
the date of purchase or until termination of employment. A total of 7,177 and
5,825 common shares of beneficial interest were purchased for the employees
at
an average per share price of $40.43 and $34.15 during the quarter ended March
31, 2007 and 2006, respectively.
We
also
have a deferred compensation plan for eligible employees allowing them to defer
portions of their current cash salary or share-based compensation. Deferred
amounts are deposited in a grantor trust, which are included in Other Assets,
and are reported as compensation expense in the year service is rendered. Cash
deferrals are invested based on the employee’s investment selections from a mix
of assets based on a “Broad Market Diversification” model. Deferred share-based
compensation can not be diversified, and distributions from this plan are made
in the same form as the original deferral.
Note
16. Segment
Information
The
operating segments presented are the segments 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. We evaluate the performance of the operating segments based on
net
operating income that is defined as total revenues less operating expenses
and
ad valorem taxes. Management does not consider the effect of gains or losses
from the sale of property in evaluating ongoing operating
performance.
The
shopping center segment is engaged in the acquisition, development and
management of real estate, primarily anchored neighborhood and community
shopping centers located in Arizona, Arkansas, California, Colorado, Florida,
Georgia, Illinois, Kansas, Kentucky, Louisiana, Maine, Missouri, Nevada, New
Mexico, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Texas,
Utah
and Washington. The customer base includes supermarkets, discount retailers,
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 California, Florida, Georgia, Tennessee and Texas, 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.
Information
concerning our reportable segments is as follows (in thousands):
|
|
Shopping
|
|
|
|
|
|
|
|
|
|
Center
|
|
Industrial
|
|
Other
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2007
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
132,177
|
|
$
|
12,848
|
|
$
|
1,573
|
|
$
|
146,598
|
|
Net
operating income
|
|
|
96,504
|
|
|
9,008
|
|
|
759
|
|
|
106,271
|
|
Equity
in earnings of joint ventures, net
|
|
|
2,937
|
|
|
350
|
|
|
60
|
|
|
3,347
|
|
Investment
in real estate joint ventures
|
|
|
225,818
|
|
|
25,082
|
|
|
4,513
|
|
|
255,413
|
|
Total
assets
|
|
|
3,669,649
|
|
|
323,164
|
|
|
525,184
|
|
|
4,517,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
116,817
|
|
$
|
14,102
|
|
$
|
374
|
|
$
|
131,293
|
|
Net
operating income
|
|
|
86,833
|
|
|
10,255
|
|
|
346
|
|
|
97,434
|
|
Equity
in earnings of joint ventures, net
|
|
|
4,023
|
|
|
(4
|
)
|
|
47
|
|
|
4,066
|
|
Investment
in real estate joint ventures
|
|
|
91,917
|
|
|
464
|
|
|
2,219
|
|
|
94,600
|
|
Total
assets
|
|
|
3,017,936
|
|
|
376,692
|
|
|
387,640
|
|
|
3,782,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
operating income reconciles to Income from Continuing Operations as shown on
the
Statements of Condensed Consolidated Income and Comprehensive Income as follows
(in thousands):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Total
segment net operating income
|
|
$
|
106,271
|
|
$
|
97,434
|
|
Depreciation
and amortization
|
|
|
(32,820
|
)
|
|
(30,119
|
)
|
General
and administrative
|
|
|
(6,609
|
)
|
|
(5,355
|
)
|
Interest
expense
|
|
|
(36,473
|
)
|
|
(34,437
|
)
|
Interest
and other income
|
|
|
1,713
|
|
|
1,452
|
|
Income
allocated to minority interests
|
|
|
(1,178
|
)
|
|
(1,657
|
)
|
Equity
in earnings of joint ventures, net
|
|
|
3,347
|
|
|
4,066
|
|
Gain
on land and merchant development sales
|
|
|
666
|
|
|
1,676
|
|
Gain
on sale of properties
|
|
|
2,059
|
|
|
51
|
|
Benefit
(provision) for income taxes
|
|
|
9
|
|
|
(519
|
)
|
Income
from Continuing Operations
|
|
$
|
36,985
|
|
$
|
32,592
|
|
Note
17. Subsequent
Events
Subsequent
to March 31, 2007, we acquired a portfolio of 10 high quality industrial
buildings located in Richmond, Virginia for a purchase price of $136 million.
Eight of the buildings were acquired through an existing 20%-owned
unconsolidated joint venture with Mercantile Real Estate Advisors on behalf
of
its institutional client the AFL-CIO Building Investment Trust. The remaining
two buildings were acquired directly by us. This portfolio added 2.5 million
square feet under management.
Also,
we
sold three shopping centers, of which two were located in Illinois and one
in
Texas. All of these properties were classified as property held for sale at
March 31, 2007.
ITEM
2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
Forward-Looking
Statements
This
quarterly report on Form 10-Q, together with other statements and information
publicly disseminated by us, contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We intend such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and include this statement for purposes of complying with these
safe
harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by use of the words “believe,” “expect,” “intend,”
“anticipate,” “estimate,” “project,” or similar expressions. You should not rely
on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors, which are, in some cases, beyond our control
and which could materially affect actual results, performances or achievements.
Factors which may cause actual results to differ materially from current
expectations include, but are not limited to, (i) general economic and local
real estate conditions, (ii) the inability of major tenants to continue paying
their rent obligations due to bankruptcy, insolvency or general downturn in
their business, (iii) financing risks, such as the inability to obtain equity,
debt, or other sources of financing on favorable terms, (iv) changes in
governmental laws and regulations, (v) the level and volatility of interest
rates, (vi) the availability of suitable acquisition opportunities, (vii)
changes in expected development activity, (viii) increases in operating costs,
(ix) tax matters, including failure to qualify as a real estate investment
trust, could have adverse consequences and (x) investments through joint
ventures and partnerships involve risks not present in investments in which
we
are the sole investor. Accordingly, there is no assurance that our expectations
will be realized.
The
following discussion should be read in conjunction with the condensed
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. Our results of operations and financial condition, as
reflected in the accompanying financial statements and related footnotes, are
subject to management's evaluation and interpretation of business conditions,
retailer performance, changing capital market conditions and other factors
which
could affect the ongoing viability of our tenants.
Executive
Overview
Weingarten
Realty Investors is a real estate investment trust organized under the Texas
Real Estate Investment Trust Act. 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 rental properties which includes neighborhood and
community shopping centers and industrial properties. We have a diversified
tenant base with our largest tenant comprising only 3% of total rental revenues
during 2007.
We
focus
on increasing Funds from Operations and growing dividend payments to our common
shareholders. We do this through hands-on leasing, management and selected
redevelopment of the existing portfolio of properties, through disciplined
growth from selective acquisitions and new developments, and through the
disposition of assets that no longer meet our ownership criteria. We do this
while remaining committed to maintaining a conservative balance sheet, a
well-staggered debt maturity schedule and strong credit agency ratings.
We
continue to maintain a strong, conservative capital structure, which provides
ready access to a variety of attractive capital sources. We carefully balance
obtaining low cost financing with minimizing exposure to interest rate movements
and matching long-term liabilities with the long-term assets acquired or
developed.
At
March
31, 2007, we owned or operated under long-term leases, either directly or
through our interest in joint ventures or partnerships, a total of 373 developed
income-producing properties and 32 properties under various stages of
construction and development. The total number of centers includes 336
neighborhood and community shopping centers located in 22 states spanning the
country from coast to coast. We also owned 67 industrial projects located in
California, Florida, Georgia, Tennessee and Texas and two office buildings
located in Arizona and Texas.
We
also
owned interests in 15 parcels of unimproved land held for future development
that totaled approximately 5.7 million square feet.
We
had
approximately 7,400 leases with 5,500 different tenants at March 31, 2007.
Leases
for our properties range from less than a year for smaller spaces to over 25
years for larger tenants. Rental revenues generally include minimum lease
payments, which often increase over the lease term, reimbursements of property
operating expenses, including ad valorem taxes, and additional rent payments
based on a percentage of the tenants' sales. The majority of our anchor tenants
are supermarkets, value-oriented apparel/discount stores and other retailers
or
service providers who generally sell basic necessity-type goods and services.
We
believe stability of our anchor tenants, combined with convenient locations,
attractive and well-maintained properties, high quality retailers and a strong
tenant mix, should ensure the long-term success of our merchants and the
viability of our portfolio.
In
assessing the performance of our properties, management carefully tracks the
occupancy of the portfolio. Occupancy for the total portfolio was 94.4%
at
March 31, 2007 compared to 94.4% at March 31, 2006. Same store property NOI
was
up a strong 3.3%. As we continue the strategic shift of our portfolio to
properties with barriers to entry, we are confident that we will continue to
produce strong same store NOI growth going forward. Another important indicator
of performance is the spread in rental rates on a same-space basis as we
complete new leases and renew existing leases. We completed 304 new leases
or
renewals during the first quarter of 2007 totaling 2.1 million square feet,
increasing rental rates an average of 9.0% on a cash basis and 11.1% on a GAAP
basis.
In
the
first quarter of 2006, we articulated a new long-term growth strategy with
a
planned three-year implementation. The key elements of this strategy are as
follows:
· |
A
much greater focus on new development, including merchant development,
with $300 million in annual new development completions beginning
in 2009.
|
· |
Increased
use of joint ventures for acquisitions including the recapitalization
(or
partial sale) of existing assets, which provide the opportunity to
further
increase returns on investment through the generation of fee income
from
leasing and management services we will provide to the
venture.
|
· |
Further
recycling capital through the active disposition of non-core properties
and reinvesting the proceeds into properties with barriers to entry
within
high growth metropolitan markets. This, combined with our continuous
focus
on our assets, produces a higher quality portfolio with higher occupancy
rates and much stronger internal revenue
growth.
|
During
2006 and continuing into 2007, we made excellent progress in the execution
of
this long-term growth strategy as described in the following sections on new
development, acquisitions and joint ventures, and dispositions.
New
Development
At
March
31, 2007, we had 32 properties in various stages of development, up from 13
properties under development at the end of the first quarter of 2006. We have
invested $271 million to-date on these projects and, at completion; we estimate
our total investment to be $698 million. These properties are slated to open
over the next four years with a projected return on investment of approximately
9% when completed.
In
addition to these projects, we have significantly increased our development
pipeline with 17 development sites under contract, which will represent a
projected investment of approximately $543 million. In addition to the 17
development sites under contract, we have another 21 development sites under
preliminary pursuit.
Merchant
development is a new program in which we develop a project with the objective
of
selling all or part of it, instead of retaining it in our portfolio on a
long-term basis. We generated approximately $666,000 from this program in the
first quarter of 2007. We expect this number to grow through out the year.
We
currently have 17 properties identified as merchant development properties.
We
have invested $140 million to date in this program and expect to invest a total
of approximately $415 million.
Acquisitions
and Joint Ventures
In
the
first quarter of 2007, we have acquired nine shopping centers and one industrial
property for a purchase price of approximately $187 million. Included in that
total were two properties purchased as part of a joint venture we have with
AEW
Capital Management. It is possible that, consistent with our strategy, some
of
the other acquired properties will also be contributed to future joint ventures.
Acquisitions
are critical to our growth and a key component of our strategy. However, intense
competition for good quality assets has driven asset prices up and returns
down.
Partnering with institutional investors through joint ventures enables us to
acquire high quality assets in our target markets while also meeting our
financial return objectives. We benefit from access to lower-cost capital as
well as leveraging our expertise to provide fee-based services, such as the
acquisition, leasing, and management of properties, to the joint
ventures.
Joint
venture fee income for the first quarter of 2007 was approximately $1.1 million;
triple the level from one year ago. This is a direct result of our strategy
initiative to develop new joint venture relationships. We expect continued
strong growth in joint venture income during the year.
Dispositions
During
the first quarter of 2007 we sold one shopping center for $17 million. We expect
to continue to dispose non-core properties during the year as opportunities
present themselves. Dispositions are part of an on-going portfolio management
process where we prune our portfolio of properties that do not meet our
geographic or growth targets and provide capital to recycle into properties
that
have barrier-to-entry locations within high growth metropolitan markets. Over
time we expect this to produce a portfolio with higher occupancy rates and
much
stronger internal revenue growth.
Summary
of Critical Accounting Policies
Our
discussion and analysis of financial condition and results of operations is
based on our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities and contingencies as of the date of the financial statements and
the
reported amounts of revenues and expenses during the reporting periods. We
evaluate our assumptions and estimates on an on-going basis. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form
the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ
from
these estimates under different assumptions or conditions. We believe the
following critical accounting policies affect our more significant judgments
and
estimates used in the preparation of our condensed consolidated financial
statements.
Revenue
Recognition
Rental
revenue is generally recognized on a straight-line basis over the life of the
lease, which begins the date the leasehold improvements are substantially
complete, if owned by us, or the date the tenant takes control of the space,
if
the leasehold improvements are owned by the tenant. Revenue from tenant
reimbursements of taxes, maintenance expenses and insurance is recognized in
the
period the related expense is recognized. Revenue based on a percentage of
tenants' sales is recognized only after the tenant exceeds their sales
breakpoint.
Partially
Owned Joint Ventures and Partnerships
To
determine the method of accounting for partially owned joint ventures or
partnerships, we first apply the guidelines set forth in FASB Interpretation
No.
46R, "Consolidation of Variable Interest Entities." Based upon our analysis,
we
have determined that we have no variable interest entities.
Partially
owned joint ventures or partnerships over which we exercise financial and
operating control are consolidated in our financial statements. In determining
if we exercise financial and operating control, we consider factors such as
ownership interest, authority to make decisions, kick-out rights and substantive
participating rights. Partially owned joint ventures and partnerships where
we
have the ability to exercise significant influence, but do not exercise
financial and operating control, are accounted for using the equity
method.
Property
Real
estate assets are stated at cost less accumulated depreciation, which, in the
opinion of management, is not in excess of the individual property's estimated
undiscounted future cash flows, including estimated proceeds from disposition.
Depreciation is computed using the straight-line method, generally over
estimated useful lives of 18-40 years for buildings and 10-20 years for parking
lot surfacing and equipment. Major replacements where the betterment extends
the
useful life of the asset are capitalized and the replaced asset and
corresponding accumulated depreciation are removed from the accounts. All other
maintenance and repair items are charged to expense as incurred.
Acquisitions
of properties are accounted for utilizing the purchase method and, accordingly,
the results of operations of an acquired property are included in our results
of
operations from the respective dates of acquisition. We have used estimates
of
future cash flows and other valuation techniques to allocate the purchase price
of acquired property among land, buildings on an "as if vacant" basis, and
other
identifiable intangibles. Other identifiable intangible assets and liabilities
include the effect of out-of-market leases, the value of having leases in place
(lease origination and absorption costs), out-of-market assumed mortgages and
tenant relationships.
Property
also includes costs incurred in the development of new operating properties
and
properties in our merchant development program. These properties are carried
at
cost and no depreciation is recorded on these assets. These costs include
preacquisition costs directly identifiable with the specific project,
development and construction costs, interest and real estate taxes. Indirect
development costs, including salaries and benefits, travel and other related
costs that are clearly attributable to the development of the property, are
also
capitalized. The capitalization of such costs ceases at the earlier of one
year
from the completion of major construction or when the property, or any completed
portion, becomes available for occupancy.
Property
also includes costs for tenant improvements paid by us, including reimbursements
to tenants for improvements that are owned by us and will remain our property
after the lease expires.
Our
properties are reviewed for impairment if events or changes in circumstances
indicate that the carrying amount of the property may not be recoverable. In
such an event, a comparison is made of either the current and projected
operating cash flows of each such property into the foreseeable future on an
undiscounted basis or the estimated net sales price to the carrying amount
of
such property. Such carrying amount is adjusted, if necessary, to the estimated
fair value less cost to sell to reflect an impairment in the value of the
asset.
Some
of
our properties are held in single purpose entities. A single purpose entity
is a
legal entity typically established at the request of a lender solely for the
purpose of owning a property or group of properties subject to a mortgage.
There
may be restrictions limiting the entity’s ability to engage in an activity other
than owning or operating the property, assume or guarantee the debt of any
other
entity, or dissolve itself or declare bankruptcy before the debt has been
repaid. Most of our single purpose entities are 100% owned by us and are
consolidated in our financial statements.
Interest
Capitalization
Interest
is capitalized on land under development and buildings under construction based
on rates applicable to borrowings outstanding during the period and the weighted
average balance of qualified assets under development/construction during the
period.
Deferred
Charges
Debt
and
lease costs are amortized primarily on a straight-line basis, which approximates
the effective interest method, over the terms of the debt and over the lives
of
leases, respectively. Lease costs represent the initial direct costs incurred
in
origination, negotiation and processing of a lease agreement. Such costs include
outside broker commissions and other independent third party costs as well
as
salaries and benefits, travel and other related internal costs incurred in
completing the leases. Costs related to supervision, administration,
unsuccessful origination efforts and other activities not directly related
to
completed lease agreements are charged to expense as incurred.
Sales
of Real Estate
Sales
of
real estate include the sale of shopping center pads, property adjacent to
shopping centers, shopping center properties, merchant development properties,
investments in real estate ventures and partial sales to joint ventures in
which
we participate.
We
recognize profit on sales of real estate, including merchant development sales,
in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” Profits
are not recognized until (a) a sale is consummated; (b) the buyer’s initial and
continuing investments are adequate to demonstrate a commitment to pay; (c)
the
seller’s receivable is not subject to future subordination; and (d) we have
transferred to the buyer the usual risks and rewards of ownership in the
transaction, and we do not have a substantial continuing involvement with the
property.
We
recognize gains on the sale of real estate to joint ventures in which we
participate to the extent we receive cash from the joint venture.
Accrued
Rent and Accounts Receivable
Receivable
balances outstanding include base rents, tenant reimbursements and receivables
attributable to the straight-lining of rental commitments. An allowance for
the
uncollectible portion of accrued rents and accounts receivable is determined
based upon an analysis of balances outstanding, historical bad debt levels,
tenant credit worthiness and current economic trends.
Income
Taxes
We
have
elected to be treated as a Real Estate Investment Trust (“REIT”) under the
Internal Revenue Code of 1986, as amended. As a REIT, we generally will not
be
subject to corporate level federal income tax on taxable income we distribute
to
our shareholders. To be taxed as a REIT we must meet a number of requirements
including meeting defined percentage tests concerning the amount of our assets
and revenues that come from, or are attributable to, real estate operations.
As
long as we distribute at least 90% of the taxable income of the REIT to our
shareholders as dividends, we will not be taxed on the portion of our income
we
distribute as dividends unless we have ineligible transactions.
The
Tax
Relief Extension Act of 1999 gave REITs the ability to conduct activities which
a REIT was previously precluded from doing as long as they are performed in
entities which have elected to be treated as taxable REIT subsidiaries under
the
IRS code. These activities include buying or developing properties with the
express purpose of selling them. We conduct certain of these activities in
taxable REIT subsidiaries that we have created. We calculate and record income
taxes in our financial statements based on the activities in those entities.
We
also record deferred taxes for the temporary tax differences that have resulted
from those activities as required under SFAS No. 109, “Accounting for Income
Taxes.”
Results
of Operations
Comparison
of the Three Months Ended March 31, 2007 to the Three Months Ended March 31,
2006
Revenues
Total
revenues were $146.6 million in the first quarter ended 2007 versus $131.3
million in the first quarter ended 2006, an increase of $15.3 million or 11.7%.
This increase resulted primarily from an increase in rental revenues of $15.4
million.
Property
acquisitions and new development activity contributed $13.1 million of the
rental income increase. The remaining increase of $4.9 million resulted from
304
renewals and new leases, comprising 2.1 million square feet at an average rental
rate increase of 9%. Offsetting these rental income increases was a decrease
of
$2.6 million, which resulted from the sale of an 80% interest in five industrial
centers in the third quarter of 2006.
Occupancy
(leased space) of the portfolio as compared to the prior year was as
follows:
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Shopping
Centers
|
|
|
95.4
|
%
|
|
94.9
|
%
|
Industrial
|
|
|
90.8
|
%
|
|
92.9
|
%
|
Total
|
|
|
94.4
|
%
|
|
94.4
|
%
|
Expenses
Total
expenses for the first quarter of 2007 were $79.8 million versus $69.3 million
in 2006, an increase of $10.5 million or 15.2%.
The
increases in 2007 for depreciation and amortization expense ($2.7 million),
operating expenses ($5.3 million), ad valorem taxes ($1.2 million) and general
and administrative expenses ($1.3 million) were primarily a result of the
properties acquired and developed during the year, and increases in headcount
associated with growth of the portfolio. Overall, direct operating costs and
expenses (operating and ad valorem tax expense) of operating our properties
as a
percentage of rental revenues were 28% in 2007 and 26% in 2006.
Interest
Expense
Interest
expense totaled $36.5 million for 2007, up $2.0 million or 5.9% from 2006.
The
components of interest expense were as follows (in thousands):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Gross
interest expense
|
|
$
|
44,098
|
|
$
|
37,072
|
|
Over-market
mortgage adjustment of acquired properties
|
|
|
(1,770
|
)
|
|
(1,826
|
)
|
Capitalized
interest
|
|
|
(5,855
|
)
|
|
(809
|
)
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
36,473
|
|
$
|
34,437
|
|
Gross
interest expense totaled $44.1 million in the first quarter of 2007, up $7
million or 19% from 2006. The increase in gross interest expense was due to
an
increase in the average debt outstanding from $2.3 billion in 2006 to $2.9
billion in 2007 at a weighted average interest rate of 5.8% in 2007 and 6.1%
for
2006. Capitalized interest increased $5.0 million due to an increase in new
development activity.
Interest
and Other Income
Interest
and other income was $1.7 million in the first quarter of 2007 versus $1.5
million in the first quarter of 2006, an increase of $ .2 million or 13.3%.
This
increase was attributable to interest earned from a qualified escrow account
for
the purposes of completing like-kind exchanges, construction loans associated
with our new development activities and excess proceeds from the Series F
Preferred Shares Offering.
Equity
in Earnings of Joint Ventures
Our
equity in earnings of joint ventures was $3.3 million in the first quarter
of
2007 versus $4.1 million in the first quarter of 2006, a decrease of $.8 million
or 19.5%. This decrease was attributable primarily to a reduction in property
sale gains of $1.9 million offset by our incremental income from our investments
in newly formed joint ventures in 2006 and 2007 for the acquisition and
development of retail and industrial properties.
Income
from Discontinued Operations
Income
from discontinued operations was $14.4 million in 2007 versus $22.0 million
in
2006, a decrease of $7.6 million or 34.5%. The decrease resulted primarily
from
the decrease in gain on sale of one shopping center during the first quarter
of
2007 as compared to the gain on sale for three retail properties during the
same
period of 2006. Also, the decrease in operating income from discontinued
operations results primarily from the disposition of 19 retail and four
industrial properties during the fiscal year of 2006.
Effects
of Inflation
We
have
structured our leases in such a way as to remain largely unaffected should
significant inflation occur. Most of the leases contain percentage rent
provisions whereby we receive increased rentals based on the tenants' gross
sales. Many leases provide for increasing minimum rentals during the terms
of
the leases through escalation provisions. In addition, many of our leases are
for terms of less than 10 years, which allow us to adjust rental rates to
changing market conditions when the leases expire. Most of our leases also
require the tenants to pay their proportionate share of operating expenses
and
ad valorem taxes. As a result of these lease provisions, increases due to
inflation, as well as ad valorem tax rate increases, generally do not have
a
significant adverse effect upon our operating results as they are absorbed
by
our tenants.
Capital
Resources and Liquidity
Our
primary liquidity needs are payment of our common and preferred dividends,
maintaining and operating our existing properties, payment of our debt service
costs, and funding planned growth. We anticipate that cash flows from operating
activities will continue to provide adequate capital for all common and
preferred dividend payments and debt service costs, as well as the capital
necessary to maintain and operate our existing properties.
Primary
sources of capital for funding our acquisitions and new development programs
are
our $400 million revolving credit facility, cash generated from sales of
properties that no longer meet our investment criteria, cash flow generated
by
our operating properties and proceeds from capital issuances as needed. Amounts
outstanding under the revolving credit agreement are retired as needed with
proceeds from the issuance of long-term unsecured debt, common and preferred
equity, cash generated from dispositions of properties, and cash flow generated
by our operating properties. As of March 31, 2007, there were no borrowings
outstanding under our $400 million revolving credit facility, and $18.4 million
was outstanding under our $20 million credit facility, which we use for cash
management purposes.
Our
capital structure also includes nonrecourse secured debt that we assume in
conjunction with our acquisitions program. We also have nonrecourse debt secured
by acquired or developed properties held in several of our joint ventures.
We
hedge the future cash flows of certain debt transactions, as well as changes
in
the fair value of our debt instruments, principally through interest rate swaps
with major financial institutions. We generally have the right to sell or
otherwise dispose of our assets except in certain cases where we are required
to
obtain a third party consent, such as assets held in entities in which we have
less than 100% ownership.
Investing
Activities:
Acquisitions
Retail
Properties.
A
portfolio of six retail properties was purchased in January and March 2007,
including five properties in Tucson, Arizona and one in Scottsdale, Arizona.
The
centers are leased to a diverse mix of strong national retailers including
Wal-Mart, Safeway, Walgreens, Kohl’s, Home Depot, PetSmart and Circuit City.
This acquisition added 780,000 square feet to our portfolio and represented
a
total investment of $165 million, including $22 million that is contingent
upon
the subsequent development of space by the property seller. This contingency
agreement expires in the first quarter of 2009.
Cherokee
Plaza, acquired in January 2007, is a 99,000 square foot grocery-anchored
neighborhood center located in the prestigious Buckhead area in Atlanta,
Georgia. The 100% occupied property is anchored by a 57,000 square foot Kroger.
Sunrise
West Shopping Center, acquired in January 2007, is a 76,000 square foot
grocery-anchored neighborhood center located in Sunrise (Miami), Florida. This
98% occupied property is anchored by a 44,000 square foot Publix. Cole Park
Plaza, acquired in February 2007, is an 82,000 square foot retail development
located in Chapel Hill (Durham), North Carolina next to our existing Chatham
Crossing shopping center. Both of these properties were acquired through an
existing unconsolidated joint venture with AEW Capital Management.
Subsequent
to March 31, 2007, we acquired a portfolio of 10 high quality industrial
buildings located in Richmond, Virginia for a purchase price of $136 million.
Eight of the buildings were acquired through an existing 20%-owned
unconsolidated joint venture with Mercantile Real Estate Advisors on behalf
of
its institutional client the AFL-CIO Building Investment Trust. The remaining
two buildings were acquired directly by us. This portfolio added 2.5 million
square feet under management.
Industrial
Properties.
Lakeland
Business Park, acquired in January 2007, is a 100% leased 168,000 square foot
industrial business center located in Lakeland (Tampa), Florida.
The
cash
requirements for these acquisitions were initially financed under our revolving
credit facilities, using available cash generated from dispositions of
properties or using cash flow generated by our operating properties.
Dispositions
Retail
Properties.
In
March
2007 we sold a 146,000 square foot shopping center located in Austin, Texas.
Industrial
Properties.
There
were no sales of industrial properties in the first quarter of
2007.
Subsequent
to March 31, 2007, we sold three shopping centers, of which two were located
in
Illinois and one in Texas. All of these properties were classified as property
held for sale at March 31, 2007.
New
Development and Capital Expenditures
At
March
31,
2007, we had 32 projects under construction or in preconstruction stages. The
total square footage is approximately 8.7 million. These properties are slated
to open over the next four years.
Our
new
development projects are financed initially under our revolving credit
facilities, using available cash generated from dispositions of properties
or
using cash flow generated by our operating properties.
Capital
expenditures for additions to the existing portfolio, acquisitions, new
development and our share of investments in unconsolidated joint ventures
totaled $267.3 million and $74.2 million for
the
first quarter of 2007 and 2006, respectively.
Financing
Activities:
Debt
Total
debt outstanding was unchanged at $2.9 billion at March 31, 2007 and December
31, 2006. Total debt at March 31, 2007 includes $2.8 billion of which interest
rates are fixed and $115.7 million, which bears interest at variable rates,
including the effect of $75 million of interest rate swaps. Additionally, debt
totaling $1 billion was secured by operating properties while the remaining
$1.9
billion was unsecured.
In
February 2006 we amended and restated our $400 million unsecured revolving
credit facility held by a syndicate of banks. This amended facility has an
initial four-year term and provides a one-year extension option available at
our
request. Borrowing rates under this facility float at a margin over LIBOR,
plus
a facility fee. The borrowing margin and facility fee, which are currently
37.5
and 12.5 basis points, respectively, are priced off a grid that is tied to
our
senior unsecured credit rating. This facility includes a competitive bid feature
where we are allowed to request bids for borrowings up to $200 million from
the
syndicate banks. Additionally, the facility contains an accordion feature,
which
allows us to increase the facility amount up to $600 million. As of April 30,
2007, there was $33 million outstanding under this facility. We also maintain
a
$20 million unsecured and uncommitted overnight facility that is used for cash
management purposes, and as of April 30, 2007, no amounts were outstanding under
this facility. The available balance under our revolving credit agreement was
$356.9 million at April 30, 2007, which is reduced by amounts outstanding for
letters of credit and our overnight facility. We are in full compliance with
the
covenants of our $400 million unsecured revolving credit facility.
In
August
2006 we issued $575 million of 3.95% convertible senior unsecured notes due
2026. The net proceeds from the sale of the debentures were used for general
business purposes including the repurchase of 4.3 million of our common shares
of beneficial interest and to reduce amounts outstanding under our revolving
credit facilities. The debentures are convertible under certain circumstances
for our common shares of beneficial interest at an initial conversion rate
of
20.3770 common shares per $1,000 of principal amount of debentures (an initial
conversion price of $49.075). Upon the conversion of debentures, we will deliver
cash for the principal return, as defined, and cash or common shares, at our
option, for the excess of the conversion value, as defined, over the principal
return. The debentures are redeemable for cash at our option beginning in 2011
for the principal amount plus accrued and unpaid interest. Holders of the
debentures have the right to require us to repurchase their debentures for
cash
equal to the principal of the debentures plus accrued and unpaid interest in
2011, 2016 and 2021 and in the event of a change in control.
In
December 2006 we issued $75 million of 10-year unsecured fixed rate medium
term
notes at 6.1% including the effect of an interest rate swap that had hedged
the
transaction. Proceeds from this issuance were used to repay balances under
our
revolving credit facilities, to cash settle a forward hedge and for general
business purposes. In May 2006 we entered into a forward-starting interest
rate
swap with a notional amount of $74.0 million. In December 2006 we terminated
this rate swap in conjunction with the issuance of the $75.0 million of medium
term notes. The termination fee of $4.1 million is being amortized over the
life
of the medium term note.
At
March
31, 2007, we had five interest rate swap contracts designated as fair value
hedges with an aggregate notional amount of $75 million that convert fixed
rate
interest payments at rates ranging from 4.2% to 6.8% to variable interest
payments. Also, at March 31, 2007, we had two forward-starting interest rate
swap contracts with an aggregate notional amount of $118.6 million. These
contracts have been designated as cash flow hedges and mitigate the risk of
increasing interest rates on forecasted long-term debt issuances over a maximum
period of two years. We could be exposed to credit losses in the event of
nonperformance by the counter-party; however, management believes the likelihood
of such nonperformance is remote.
In
conjunction with acquisitions completed during the first quarter of 2007, we
assumed $19.1 million of non-recourse debt secured by the related properties.
During the first quarter of 2006, we did not assume any non-recourse
debt.
Equity
Common
and preferred dividends increased to $47.5 million in 2007, compared to $44.2
million for 2006. The dividend rate for our common shares of beneficial interest
increased to $.495 in the first quarter of 2007 compared to $.465 in the first
quarter of 2006. Our dividend payout ratio on common equity for 2007 and 2006
approximated 65.1% and 63.4%, respectively, based on basic funds from operations
for the respective periods.
In
July
2006 our board of trust managers authorized the repurchase of our common shares
of beneficial interest to a total of $207 million, and we used $167.6 million
of
the net proceeds from the $575 million debt offering to purchase 4.3 million
common shares of beneficial interest at $39.26 per share. Share
repurchases may be made in the open market or in privately negotiated
transactions.
On
January 30, 2007, we issued $200 million of depositary shares. Each depositary
share represents one-hundredth of a 6.5% Series F Cumulative Redeemable
Preferred Share. The depositary shares are redeemable, in whole or in part,
on
or after January 30, 2012 at our option, at a redemption price of $25 per
depositary share, plus any accrued and unpaid dividends thereon. The depositary
shares are not convertible or exchangeable for any of our other property or
securities. The Series F Preferred Shares pay a 6.5% annual dividend and have
a
liquidation value of $2,500 per share. Net proceeds of $194.4 million were
used
to repay amounts outstanding under our credit facilities and for general
business purposes.
In
September 2004 the SEC declared effective two additional shelf registration
statements totaling $1.55 billion, of which $1.35 billion was available as
of
April 30, 2007. In addition, we have $85.4 million available as of April 30,
2007 under our $1 billion shelf registration statement, which became effective
in April 2003. We will continue to closely monitor both the debt and equity
markets and carefully consider our available financing alternatives, including
both public and private placements.
Contractual
Obligations
The
following table summarizes our principal contractual obligations as of March
31,
2007 (in thousands):
|
|
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
Thereafter
|
|
Total
|
|
Mortgages
and Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
Debt
|
|
|
|
|
$
|
179,869
|
|
$
|
154,680
|
|
$
|
121,802
|
|
$
|
138,090
|
|
$
|
665,301
|
|
$
|
1,207,200
|
|
$
|
2,466,942
|
|
Secured
Debt
|
|
|
|
|
|
75,154
|
|
|
248,004
|
|
|
131,254
|
|
|
113,479
|
|
|
138,685
|
|
|
606,951
|
|
|
1,313,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ground
Lease Payments
|
|
1,398
|
|
|
1,782
|
|
|
1,737
|
|
|
1,691
|
|
|
1,626
|
|
|
39,459
|
|
|
47,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
to Acquire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projects
|
|
|
|
|
|
49,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
to Develop
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projects
|
|
|
|
|
|
192,177
|
|
|
97,977
|
|
|
55,012
|
|
|
58,086
|
|
|
22,960
|
|
|
|
|
|
426,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Contractual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
|
|
|
|
|
$
|
498,510
|
|
$
|
502,443
|
|
$
|
309,805
|
|
$
|
311,346
|
|
$
|
828,572
|
|
$
|
1,853,610
|
|
$
|
4,304,286
|
|
_________________________
(1) Includes
principal and interest with interest on variable-rate debt calculated using
rates at March 31, 2007 excluding the effect of interest rate swaps.
As
of
March 31, 2007 and December 31, 2006, we did not have any off-balance sheet
arrangements that would materially affect our liquidity or availability of,
or
requirement for, our capital resources. We have not guaranteed the debt of
any
of our joint ventures in which we own an interest.
Funds
from Operations
The
National Association of Real Estate Investment Trusts defines funds from
operations as net income (loss) available to common shareholders computed in
accordance with generally accepted accounting principles, excluding gains or
losses from sales of real estate assets and extraordinary items, plus
depreciation and amortization of operating properties, including our share
of
unconsolidated partnerships and joint ventures. We calculate FFO in a manner
consistent with the NAREIT definition.
We
believe FFO is an appropriate supplemental measure of operating performance
because it helps investors compare our operating performance relative to other
REITs. Management also uses FFO as a supplemental measure to conduct and
evaluate our business because there are certain limitations associated with
using GAAP net income by itself as the primary measure of our operating
performance. Historical cost accounting for real estate assets in accordance
with GAAP implicitly assumes that the value of real estate assets diminishes
predictably over time. Since real estate values instead have historically risen
or fallen with market conditions, management believes that the presentation
of
operating results for real estate companies that uses historical cost accounting
is insufficient by itself. There can be no assurance that FFO presented by
us is
comparable to similarly titled measures of other REITs.
FFO
should not be considered as an alternative to net income or other measurements
under GAAP as an indicator of our operating performance or to cash flows from
operating, investing or financing activities as a measure of liquidity. FFO
does
not reflect working capital changes, cash expenditures for capital improvements
or principal payments on indebtedness.
Funds
from operations is calculated as follows (in thousands):
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
$
|
46,657
|
|
$
|
52,084
|
|
Depreciation
and amortization
|
|
|
31,979
|
|
|
31,431
|
|
Depreciation
and amortization of unconsolidated joint ventures
|
|
|
2,057
|
|
|
1,018
|
|
Gain
on sale of properties
|
|
|
(14,945
|
)
|
|
(17,142
|
)
|
Gain
on sale of properties of unconsolidated joint ventures
|
|
|
|
|
|
(1,557
|
)
|
Funds
from operations
|
|
|
65,748
|
|
|
65,834
|
|
Funds
from operations attributable to operating partnership
units
|
|
|
1,106
|
|
|
1,399
|
|
|
|
|
|
|
|
|
|
Funds
from operations assuming conversion of OP units
|
|
$
|
66,854
|
|
$
|
67,233
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
86,005
|
|
|
89,515
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
Share
options and awards
|
|
|
1,123
|
|
|
850
|
|
Operating
partnership units
|
|
|
2,681
|
|
|
3,151
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - diluted
|
|
|
89,809
|
|
|
93,516
|
|
Newly
Adopted Accounting Pronouncements
In
June
2006 the FASB issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.” FIN 48
clarifies the accounting for uncertainty in income taxes recognized in the
financial statements. The interpretation prescribes a recognition threshold
and
measurement attribute for the financial statement recognition of a tax position
taken, or expected to be taken, in a tax return. A tax position may only be
recognized in the financial statements if it is more likely than not that the
tax position will be sustained upon examination. There are also several
disclosure requirements. The interpretation is effective for fiscal years
beginning after December 15, 2006. We adopted FIN 48 as of January 1, 2007,
and
its adoption did not have a material effect on our financial position, results
of operations or cash flows.
In
September 2006 the FASB issued SFAS No. 157, “Fair Value Measurements.” This
Statement defines fair value and establishes a framework for measuring fair
value in generally accepted accounting principles. The key changes to current
practice are (1) the definition of fair value, which focuses on an exit price
rather than an entry price; (2) the methods used to measure fair value, such
as
emphasis that fair value is a market-based measurement, not an entity-specific
measurement, as well as the inclusion of an adjustment for risk, restrictions
and credit standing and (3) the expanded disclosures about fair value
measurements. This Statement does not require any new fair value measurements.
This
Statement is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. We are required to adopt SFAS No. 157 in the first quarter of 2008, and
we are currently evaluating the impact that this Statement will have on our
financial position, results of operations or cash flows.
In
September 2006 the FASB issued FASB Statement No. 158, “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans - An Amendment of
FASB Statements No. 87, 88, 106, and 132R.” This new standard requires an
employer to: (a) recognize in its statement of financial position an asset
for a
plan’s over-funded status or a liability for a plan’s under-funded status; (b)
measure a plan’s assets and its obligations that determine its funded status as
of the end of the employer’s fiscal year (with limited exceptions); and (c)
recognize changes in the funded status of a defined benefit postretirement
plan
in the year in which the changes occur. These changes will be reported in
comprehensive income of a business entity. The requirement to recognize the
funded status of a benefit plan and the disclosure requirements (the
“Recognition Provision”) were effective for us as of December 31, 2006, and as a
result we recognized an additional liability of $803,000. The requirement to
measure plan assets and benefit obligations as of the date of the employer’s
fiscal year-end statement of financial position (the “Measurement Provision”) is
effective for fiscal years ending after December 15, 2008. We have assessed
the
potential impact of the Measurement Provision of SFAS No. 158 and concluded
that
its adoption will not have a material effect on our financial position, results
of operations or cash flows.
In
September 2006 the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”),
which became effective for us as of December 31, 2006. SAB 108 provides guidance
on the consideration of the effects of prior period misstatements in quantifying
current year misstatements for the purpose of a materiality assessment. SAB
108
provides for the quantification of the impact of correcting all misstatements,
including both the carryover and reversing effects of prior year misstatements,
on the current year financial statements. The adoption of SAB 108 on December
31, 2006 did not have a material effect on our financial position, results
of
operations or cash flows.
In
February 2007 the FASB issued Statement No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” SFAS No. 159 expands opportunities
to use fair value measurement in financial reporting and permits entities to
choose to measure many financial instruments and certain other items at fair
value. This Statement is effective for fiscal years beginning after November
15,
2007. We have not decided if we will choose to measure any eligible financial
assets and liabilities at fair value under the provisions of SFAS No. 159.
ITEM
3. Quantitative
and Qualitative Disclosures About Market Risk
We
use
fixed and floating-rate debt to finance our capital requirements. These
transactions expose us to market risk related to changes in interest rates.
Derivative financial instruments are used to manage a portion of this risk,
primarily interest rate swap agreements with major financial institutions.
These
swap agreements expose us to credit risk in the event of non-performance by
the
counter-parties to the swaps. We do not engage in the trading of derivative
financial instruments in the normal course of business. At March 31, 2007,
we
had fixed-rate debt of $2.8 billion and variable-rate debt of $115.7 million,
after adjusting for the net effect of $75 million notional amount of interest
rate swaps. At December 31, 2006, we had fixed-rate debt of $2.8 billion and
variable-rate debt of $115.4 million, after adjusting for the net effect of
$75
million notional amount of interest rate swaps.
ITEM
4. Controls
and Procedures
Under
the
supervision and with the participation of our principal executive officer and
principal financial officer, management has evaluated the effectiveness of
the
design and operation of our disclosure controls and procedures (as defined
in
Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of
March
31, 2007. Based on that evaluation, our principal executive officer and our
principal financial officer have concluded that our disclosure controls and
procedures were effective as of March 31, 2007.
There
has
been no change to our internal control over financial reporting during the
quarter ended March 31, 2007 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II-OTHER INFORMATION
ITEM
1. Legal
Proceedings
We
are
involved in various matters of litigation arising in the normal course of
business. While we are unable to predict with certainty the amounts involved,
our management and counsel believe that when such litigation is resolved, our
resulting liability, if any, will not have a material adverse effect on our
condensed consolidated financial statements.
ITEM
1A. Risk
Factors
There
were no material changes to the risk factors discussed in our Annual Report
on
Form 10-K for the year ended December 31, 2006.
ITEM
2. Unregistered
Sales of Equity Securities and Use of Proceeds
None.
ITEM
3. Defaults
Upon Senior Securities
None.
ITEM
4. Submission
of Matters to a Vote of Shareholders
None.
ITEM
5. Other
Information
Not
applicable.
ITEM
6. Exhibits
The
exhibits required by this item are set forth on the Exhibit Index attached
hereto.
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/
Andrew M. Alexander
|
|
|
Andrew
M. Alexander
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
By:
|
/s/
Joe D. Shafer
|
|
|
Joe
D. Shafer
|
|
|
Vice
President/Chief Accounting Officer
|
|
|
(Principal
Accounting Officer)
|
DATE: May
9,
2007
EXHIBIT
INDEX
|
|
|
|
(a)
|
|
Exhibits:
|
|
|
|
|
|
3.1
|
—
|
Restated
Declaration of Trust (filed as Exhibit 3.1 to WRI's Registration
Statement
on Form 8-A dated January 19, 1999 and incorporated herein by
reference).
|
3.2
|
—
|
Amendment
of the Restated Declaration of Trust (filed as Exhibit 3.2 to WRI's
Registration Statement on Form 8-A dated January 19, 1999 and incorporated
herein by reference).
|
3.3
|
—
|
Second
Amendment of the Restated Declaration of Trust (filed as Exhibit
3.3 to
WRI's Registration Statement on Form 8-A dated January 19, 1999 and
incorporated herein by reference).
|
3.4
|
—
|
Third
Amendment of the Restated Declaration of Trust (filed as Exhibit
3.4 to
WRI's Registration Statement on Form 8-A dated January 19, 1999 and
incorporated herein by reference).
|
3.5
|
—
|
Fourth
Amendment of the Restated Declaration of Trust dated April 28, 1999
(filed
as Exhibit 3.5 to WRI's Annual Report on Form 10-K for the year ended
December 31, 2001 and incorporated herein by
reference).
|
3.6
|
—
|
Fifth
Amendment of the Restated Declaration of Trust dated April 20, 2001
(filed
as Exhibit 3.6 to WRI's Annual Report on Form 10-K for the year ended
December 31, 2001 and incorporated herein by
reference).
|
3.7
|
—
|
Amended
and Restated Bylaws of WRI (filed as Exhibit 99.2 to WRI's Registration
Statement on Form 8-A dated February 23, 1998 and incorporated herein
by
reference).
|
4.1
|
—
|
Subordinated
Indenture dated as of May 1, 1995 between WRI and Chase Bank of Texas,
National Association (formerly, Texas Commerce Bank National Association)
(filed as Exhibit 4(a) to WRI's Registration Statement on Form S-3
(No.
33-57659) and incorporated herein by reference).
|
4.2
|
—
|
Subordinated
Indenture dated as of May 1, 1995 between WRI and Chase Bank of Texas,
National Association (formerly, Texas Commerce Bank National Association)
(filed as Exhibit 4(b) to WRI's Registration Statement on Form S-3
(No.
33-57659) and incorporated herein by reference).
|
4.3
|
—
|
Form
of Fixed Rate Senior Medium Term Note (filed as Exhibit 4.19 to WRI’s
Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
|
4.4
|
—
|
Form
of Floating Rate Senior Medium Term Note (filed as Exhibit 4.20 to
WRI’s
Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
|
4.5
|
—
|
Form
of Fixed Rate Subordinated Medium Term Note (filed as Exhibit 4.21
to
WRI’s Annual Report on Form 10-K for the year ended December 31, 1998
and
incorporated herein by reference).
|
4.6
|
—
|
Form
of Floating Rate Subordinated Medium Term Note (filed as Exhibit
4.22 to
WRI’s Annual Report on Form 10-K for the year ended December 31, 1998
and
incorporated herein by reference).
|
4.7
|
—
|
Statement
of Designation of 6.75% Series D Cumulative Redeemable Preferred
Shares
(filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated
April 17, 2003 and incorporated herein by reference).
|
4.8
|
—
|
Statement
of Designation of 6.95% Series E Cumulative Redeemable Preferred
Shares
(filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated
July 8, 2004 and incorporated herein by reference).
|
4.9
|
—
|
Statement
of Designation of 6.50% Series F Cumulative Redeemable Preferred
Shares
(filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated
January 29, 2007 and incorporated herein by reference).
|
4.10
|
—
|
6.75%
Series D Cumulative Redeemable Preferred Share Certificate (filed
as
Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated April 17,
2003 and incorporated herein by reference).
|
4.11
|
—
|
6.95%
Series E Cumulative Redeemable Preferred Share Certificate (filed
as
Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated July 8, 2004
and incorporated herein by
reference).
|
4.12
|
—
|
6.50%
Series F Cumulative Redeemable Preferred Share Certificate (filed
as
Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated January 29,
2007 and incorporated herein by reference).
|
4.13
|
—
|
Form
of Receipt for Depositary Shares, each representing 1/30 of a share
of
6.75% Series D Cumulative Redeemable Preferred Shares, par value
$.03 per
share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A
dated April 17, 2003 and incorporated herein by
reference).
|
4.14
|
—
|
Form
of Receipt for Depositary Shares, each representing 1/100 of a share
of
6.95% Series E Cumulative Redeemable Preferred Shares, par value
$.03 per
share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A
dated July 8, 2004 and incorporated herein by
reference).
|
4.15
|
—
|
Form
of Receipt for Depositary Shares, each representing 1/100 of a share
of
6.50% Series F Cumulative Redeemable Preferred Shares, par value
$.03 per
share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A
dated January 29, 2007 and incorporated herein by
reference).
|
4.16
|
—
|
Form
of 7% Notes due 2011 (filed as Exhibit 4.17 to WRI’s Annual Report on Form
10-K for the year ended December 31, 2001 and incorporated herein
by
reference).
|
4.17
|
—
|
Form
of 3.95% Convertible Senior Notes due 2026 (filed as Exhibit 4.2
to WRI’s
Form 8-K on August 2, 2006 and incorporated herein by
reference).
|
10.1†
|
—
|
1988
Share Option Plan of WRI, as amended (filed as Exhibit 10.1 to WRI’s
Annual Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference).
|
10.2†
|
—
|
The
Savings and Investment Plan for Employees of Weingarten Realty Investors
dated December 17, 2003 (filed as Exhibit 10.34 on WRI’s Annual Report on
Form 10-K for the year ended December 31, 2005 and incorporated herein
by
reference).
|
10.3†
|
—
|
The
Savings and Investment Plan for Employees of WRI, as amended (filed
as
Exhibit 4.1 to WRI’s Registration Statement on Form S-8 (No. 33-25581) and
incorporated herein by reference).
|
10.4†
|
—
|
First
Amendment to the Savings and Investment Plan for Employees of Weingarten
Realty Investors dated August 1, 2005 (filed as Exhibit 10.25 on
WRI’s
Form 10-Q for the quarter ended September 30, 2005 and incorporated
herein
by reference).
|
10.5†
|
—
|
The
Fifth Amendment to Savings and Investment Plan for Employees of WRI
(filed
as Exhibit 4.1.1 to WRI’s Post-Effective Amendment No. 1 to Registration
Statement on Form S-8 (No. 33-25581) and incorporated herein by
reference).
|
10.6†
|
—
|
Mandatory
Distribution Amendment for the Savings and Investment Plan for Employees
of Weingarten Realty Investors dated August 1, 2005 (filed as Exhibit
10.26 on WRI’s Form 10-Q for the quarter ended September 30, 2005 and
incorporated herein by reference).
|
10.7†
|
—
|
The
1993 Incentive Share Plan of WRI (filed as Exhibit 4.1 to WRI’s
Registration Statement on Form S-8 (No. 33-52473) and incorporated
herein
by reference).
|
10.8†
|
—
|
1999
WRI Employee Share Purchase Plan (filed as Exhibit 10.6 to WRI’s Annual
Report on Form 10-K for the year ended December 31, 1999 and incorporated
herein by reference).
|
10.9†
|
—
|
2001
Long Term Incentive Plan (filed as Exhibit 10.7 to WRI’s Annual Report on
Form 10-K for the year ended December 31, 2001 and incorporated herein
by
reference).
|
10.10
|
—
|
Master
Promissory Note in the amount of $20,000,000 between WRI, as payee,
and
Chase Bank of Texas, National Association (formerly, Texas Commerce
Bank
National Association), as maker, effective December 30, 1998 (filed
as
Exhibit 4.15 to WRI’s
Annual Report on Form 10-K for the year ended December 31, 1999 and
incorporated herein by reference).
|
10.11†
|
—
|
Weingarten
Realty Retirement Plan restated effective April 1, 2002 (filed as
Exhibit
10.29 on WRI’s Annual Report on Form 10-K for the year ended December 31,
2005 and incorporated herein by reference).
|
10.12†
|
—
|
First
Amendment to the Weingarten Realty Retirement Plan, dated December
31,
2003 (filed as Exhibit 10.33 on WRI’s Annual Report on Form 10-K for the
year ended December 31, 2005 and incorporated herein by reference).
|
10.13†
|
—
|
First
Amendment to the Weingarten Realty Pension Plan, dated August 1,
2005
(filed as Exhibit 10.27 on WRI’s Form 10-Q for the quarter ended September
30, 2005 and incorporated herein by
reference).
|
10.14†
|
—
|
Mandatory
Distribution Amendment for the Weingarten Realty Retirement Plan
dated
August 1, 2005 (filed as Exhibit 10.28 on WRI’s Form 10-Q for the quarter
ended September 30, 2005 and incorporated herein by
reference).
|
10.15†
|
—
|
Weingarten
Realty Investors Supplemental Executive Retirement Plan amended and
restated effective September 1, 2002 (filed as Exhibit 10.10 on WRI’s Form
10-Q for the quarter ended June 30, 2005 and incorporated herein
by
reference).
|
10.16†
|
—
|
First
Amendment to the Weingarten Realty Investors Supplemental Executive
Retirement Plan amended on November 3, 2003 (filed as Exhibit 10.11
on
WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference).
|
10.17†
|
—
|
Second
Amendment to the Weingarten Realty Investors Supplemental Executive
Retirement Plan amended October 22, 2004 (filed as Exhibit 10.12
on WRI’s
Form 10-Q for the quarter ended June 30, 2005 and incorporated herein
by
reference).
|
10.18†
|
—
|
Third
Amendment to the Weingarten Realty Investors Supplemental Executive
Retirement Plan amended October 22, 2004 (filed as Exhibit 10.13
on WRI’s
Form 10-Q for the quarter ended June 30, 2005 and incorporated herein
by
reference).
|
10.19†
|
—
|
Weingarten
Realty Investors Retirement Benefit Restoration Plan adopted effective
September 1, 2002 (filed as Exhibit 10.14 on WRI’s Form 10-Q for the
quarter ended June 30, 2005 and incorporated herein by
reference).
|
10.20†
|
—
|
First
Amendment to the Weingarten Realty Investors Retirement Benefit
Restoration Plan amended on November 3, 2003 (filed as Exhibit 10.15
on
WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference).
|
10.21†
|
—
|
Second
Amendment to the Weingarten Realty Investors Retirement Benefit
Restoration Plan amended October 22, 2004 (filed as Exhibit 10.16
on WRI’s
Form 10-Q for the quarter ended June 30, 2005 and incorporated herein
by
reference).
|
10.22†
|
—
|
Third
Amendment to the Weingarten Realty Pension Plan dated December 23,
2005
(filed as Exhibit 10.30 on WRI’s Annual Report on Form 10-K for the year
ended December 31, 2005 and incorporated herein by
reference).
|
10.23†
|
—
|
Weingarten
Realty Investors Deferred Compensation Plan amended and restated
as a
separate and independent plan effective September 1, 2002 (filed
as
Exhibit 10.17 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and
incorporated herein by reference).
|
10.24†
|
—
|
Supplement
to the Weingarten Realty Investors Deferred Compensation Plan amended
on
April 25, 2003 (filed as Exhibit 10.18 on WRI’s Form 10-Q for the quarter
ended June 30, 2005 and incorporated herein by
reference).
|
10.25†
|
—
|
First
Amendment to the Weingarten Realty Investors Deferred Compensation
Plan
amended on November 3, 2003 (filed as Exhibit 10.19 on WRI’s Form 10-Q for
the quarter ended June 30, 2005 and incorporated herein by
reference).
|
10.26†
|
—
|
Second
Amendment to the Weingarten Realty Investors Deferred Compensation
Plan,
as amended, dated October 13, 2005 (filed as Exhibit 10.29 on WRI’s Form
10-Q for the quarter ended September 30, 2005 and incorporated herein
by
reference).
|
10.27†
|
—
|
Trust
Under the Weingarten Realty Investors Deferred Compensation Plan
amended
and restated effective October 21, 2003 (filed as Exhibit 10.21 on
WRI’s
Form 10-Q for the quarter ended June 30, 2005 and incorporated herein
by
reference).
|
10.28†
|
—
|
Fourth
Amendment to the Weingarten Realty Investors Deferred Compensation
Plan,
dated December 23, 2005 (filed as Exhibit 10.31 on WRI’s Annual Report on
Form 10-K for the year ended December 31, 2005 and incorporated herein
by
reference).
|
10.29†
|
—
|
Trust
Under the Weingarten Realty Investors Retirement Benefit Restoration
Plan
amended and restated effective October 21, 2003 (filed as Exhibit
10.22 on
WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference).
|
10.30†
|
—
|
Trust
Under the Weingarten Realty Investors Supplemental Executive Retirement
Plan amended and restated effective October 21, 2003 (filed as Exhibit
10.23 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and
incorporated herein by reference).
|
10.31†
|
—
|
First
Amendment to the Trust Under the Weingarten Realty Investors Deferred
Compensation Plan, Supplemental Executive Retirement Plan, and Retirement
Benefit Restoration Plan amended on March 16, 2004 (filed as Exhibit
10.24
on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference).
|
10.32†
|
—
|
Third
Amendment to the Weingarten Realty Investors Deferred Compensation
Plan
dated August 1, 2005 (filed as Exhibit 10.30 on WRI’s Form 10-Q for the
quarter ended September 30, 2005 and incorporated herein by
reference).
|
10.33
|
—
|
Amended
and Restated Credit Agreement dated February 22, 2006 among Weingarten
Realty Investors, the Lenders Party Hereto and JPMorgan Chase Bank,
N.A.,
as Administrative Agent (filed as Exhibit 10.32 on WRI’s Form 10-K for the
year ended December 31, 2005 and incorporated by
reference).
|
10.34†
|
—
|
Fifth
Amendment to the Weingarten Realty Investors Deferred Compensation
Plan
(filed as Exhibit 10.34 to WRI’s Form 10-Q for quarter ended June 30, 2006
and incorporated herein by reference).
|
10.35†
|
—
|
Restatement
of the Weingarten Realty Investors Supplemental Executive Retirement
Plan
dated August 4, 2006
(filed as Exhibit 10.35 to WRI’s Form 10-Q for the quarter ended September
30, 2006 and incorporated herein by reference).
|
10.36†
|
—
|
Restatement
of the Weingarten Realty Investors Deferred Compensation Plan dated
August
4, 2006
(filed as Exhibit 10.36 to WRI’s Form 10-Q for the quarter ended September
30, 2006 and incorporated herein by reference).
|
10.37†
|
—
|
Restatement
of the Weingarten Realty Investors Retirement Benefit Restoration
Plan
dated August 4, 2006
(filed as Exhibit 10.37 to WRI’s Form 10-Q for the quarter ended September
30, 2006 and incorporated herein by reference).
|
10.38†
|
—
|
Amendment
No. 1 to the Weingarten Realty Investors Supplemental Executive Retirement
Plan dated December 15, 2006 (filed as Exhibit 10.38 on WRI’s Form 10-K
for the year ended December 31, 2006 and incorporated by
reference).
|
10.39†
|
—
|
Amendment
No. 1 to the Weingarten Realty Investors Retirement Benefit Restoration
Plan dated December 15, 2006 (filed as Exhibit 10.39 on WRI’s Form 10-K
for the year ended December 31, 2006 and incorporated by
reference).
|
10.40†
|
—
|
Amendment
No. 1 to the Weingarten Realty Investors Deferred Compensation Plan
dated
December 15, 2006 (filed as Exhibit 10.40 on WRI’s Form 10-K for the year
ended December 31, 2006 and incorporated by reference).
|
10.41†
|
—
|
Final
401(k)/401(m) Regulations Amendment dated December 15, 2006 (filed
as
Exhibit 10.41 on WRI’s Form 10-K for the year ended December 31, 2006 and
incorporated by reference).
|
12.1*
|
—
|
Computation
of Fixed Charges Ratios.
|
14.1
|
—
|
Code
of Ethical Conduct for Senior Financial Officers - Andrew M. Alexander
(filed as Exhibit 14.1 to WRI’s Annual Report on Form 10-K for the year
ended December 31, 2003 and incorporated herein by
reference).
|
14.2
|
—
|
Code
of Ethical Conduct for Senior Financial Officers - Stephen C. Richter
(filed as Exhibit 14.2 to WRI’s Annual Report on Form 10-K for the year
ended December 31, 2003 and incorporated herein by
reference).
|
14.3
|
—
|
Code
of Ethical Conduct for Senior Financial Officers - Joe D. Shafer
(filed as
Exhibit 14.3 to WRI’s Annual Report on Form 10-K for the year ended
December 31, 2003 and incorporated herein by
reference).
|
31.1*
|
—
|
Certification
pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Chief
Executive Officer).
|
31.2*
|
—
|
Certification
pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Chief
Financial Officer).
|
32.1**
|
—
|
Certification
pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906
of the
Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
|
32.2**
|
—
|
Certification
pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906
of the
Sarbanes-Oxley Act of 2002 (Chief Financial
Officer).
|
_______________
*
|
Filed
with this report.
|
**
|
Furnished
with this report.
|
†
|
Management
contract or compensation plan or
arrangement.
|