UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
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(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 June 30, 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)
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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)
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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 July 31, 2007, there were
86,450,425 common shares of beneficial interest of Weingarten Realty Investors,
$.03 par value, outstanding.
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 (“REIT”) 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 68 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 REIT.
Basis
of Presentation
Our
condensed consolidated financial statements include the accounts of our
subsidiaries and certain partially owned real estate 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.
Real
Estate Joint Ventures and Partnerships
To
determine the method of accounting for partially owned real estate joint
ventures and 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 real estate joint ventures and 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 real estate 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 directly
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. No impairment was recorded
for both the quarter and the six months ending June 30, 2007 and
2006.
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 internal costs directly related to 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 and if it
meets
the sales criteria in accordance with SFAS No. 66.
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 June 30, 2007 and December 31,
2006, we had $69.0 million and $79.4 million held for like-kind exchange
transactions, respectively, and $17.8 million and $15.1 million held in escrow
related to our mortgages, respectively.
Other
Assets
Other
assets in our condensed consolidated financial statements include investments
held in grantor trusts, prepaid expenses, the value of above-market leases
and
assumed mortgages and the related accumulated amortization, deferred tax assets
and other miscellaneous receivables. Investments held in grantor
trusts are adjusted to fair value at each period end with changes included
in
our Condensed Consolidated Statements of Income and Comprehensive
Income. Above-market leases and assumed mortgages are amortized over
terms of the acquired leases and the remaining life of the mortgages,
respectively.
Per
Share Data
Net
income per common share - basic is computed using net income available to common
shareholders and the weighted average shares outstanding. Net income
per common share - diluted includes the effect of potentially dilutive
securities for the periods indicated as follows (in thousands):
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Three
Months Ended
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Six
Months Ended
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|||||||||||||||
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June
30,
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June
30,
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|||||||||||||||
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2007
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2006
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2007
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2006
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Numerator:
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Net
income available to common shareholders – basic
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$ |
70,002
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$ |
87,741
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$ |
116,659
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$ |
139,825
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Income
attributable to operating partnership units
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1,103
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1,368
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2,209
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2,768
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Net
income available to common shareholders – diluted
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$ |
71,105
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$ |
89,109
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$ |
118,868
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$ |
142,593
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Denominator:
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||||||||||||||||
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Weighted
average shares outstanding – basic
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86,274
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89,519
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86,140
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89,446
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Effect
of dilutive securities:
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||||||||||||||||
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Share
options and awards
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1,011
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854
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1,063
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905
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Operating
partnership units
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2,450
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3,160
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2,565
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3,151
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Weighted
average shares outstanding – diluted
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89,735
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93,533
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89,768
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93,502
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Options
to purchase 518,814 and 364,520 common shares for the three months ended June
30, 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. Options to purchase 3,220 and
364,220 common shares for the six months ended June 30, 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.
As
of
August 6, 2007, we have purchased or committed to purchase 1.1 million common
shares of beneficial interest at an average share price of $37.20 from the
net
proceeds of our property disposition program, as well as from general corporate
funds, during 2007. Had all of these purchases occurred on January 1,
2007, earnings per common share – basic and earnings per common share – diluted
for the three months ended June 30, 2007 would have both increased by $.01,
and
earnings per common share – basic and earnings per common share – diluted for
the six months ended June 30, 2007 would have both increased by
$.02.
Income
Taxes
We
have
elected to be treated as a 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 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 such activities 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 $3.3 million during the first six months
of
June 30, 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 $75.1 million
and
$71.4 million were made during the first six months of 2007 and 2006,
respectively. A cash payment of $.3 million for federal income taxes
was made during the first six months of 2006, and no federal income tax payments
were made during the first six months of 2007. In association with
property acquisitions and investments in unconsolidated joint ventures, items
assumed were as follows (in thousands):
|
Six
Months Ended
|
||||||||
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June
30,
|
||||||||
|
2007
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2006
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|||||||
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Debt
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$ |
26,419
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$ |
18,961
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||||
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Obligations
Under Capital Leases
|
12,888
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|||||||
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Minority
Interest
|
23,582
|
11,116
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||||||
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Net
Assets and Liabilities
|
3,600
|
6,989
|
||||||
Net
assets and liabilities were reduced by $59.8 million during the first six months
of 2007 from the reorganization of three joint ventures, two of which were
previously consolidated, to tenancy-in-common arrangements where we have a
50%
interest. This reduction was offset by the assumption of debt
totalling $33.2 million. We also accrued $7.9 million and $4.2 million
during the first six months of 2007 and 2006, respectively, associated with
the
construction of property. In conjunction with the disposition of
properties completed during the first six months of 2007, we defeased two
mortgage loans totaling $21.2 million and transferred marketable securities
totalling $21.5 million in connection with the legal defeasance of these two
loans.
Reclassifications
The
reclassification of prior years’ operating results for certain properties to
discontinued operations was made to conform to the current year
presentation. 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. We adopted FIN 48 as of January 1, 2007, and its
adoption did not have a material effect on our financial
statements.
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 statements.
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 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 statements.
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 statements.
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.
On
July
25, 2007, the FASB authorized a FASB Staff Position (the “proposed FSP”) that,
if issued, would affect the accounting for our convertible and exchangeable
senior debentures. If issued in the form expected, the proposed FSP
would require that the initial debt proceeds from the sale of our convertible
and exchangeable senior debentures be allocated between a liability component
and an equity component. The resulting debt discount would be
amortized over the period the debt is expected to be outstanding as additional
interest expense. The proposed FSP is expected to be effective for
fiscal years beginning after December 15, 2007 and requires retroactive
application. We are currently evaluating the impact that this
proposed FSP will have on our financial statements.
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 June 30, 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 June 30, 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 fair value of fair value hedges, as well as changes in the fair value
of
the hedged item, are recorded in earnings each reporting period. For
the quarter and six months ending June 30, 2007 and 2006, these changes in
fair value offset with minimal impact to earnings. The derivative
instruments at June 30, 2007 and December 31, 2006 were reported at their fair
values in Other Assets, net of accrued interest, of $4.1 million and $.1
million, respectively, and as Other Liabilities, net of accrued interest, of
$3.8 million and $3.2 million, respectively.
As
of
June 30, 2007 and December 31, 2006, the balance in Accumulated Other
Comprehensive Loss relating to derivatives was $2.7 million and $7.6 million,
respectively. Amounts amortized to interest expense were $.2 million
and $.1 million during the second quarter of 2007 and 2006, respectively, and
$.4 million and $.2 million during the first six months 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.
The
interest rate swaps increased interest expense and decreased net income by
$.1
million and $.3 million for the three and six months ended June 30, 2007,
respectively, and increased the average interest rate of our debt by 0.02%
for
both periods. For the three and six months ended June 30, 2006, the
interest rate swaps increased interest expense and decreased net income by
$.1
million and $.2 million, respectively, and increased the average interest rate
of our debt by 0.02% for both periods. 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):
|
June
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
Debt
payable to 2030 at 4.5% to 8.8%
|
$ |
2,809,989
|
$ |
2,848,805
|
||||
|
Unsecured
notes payable under revolving credit agreements
|
37,000
|
18,000
|
||||||
|
Obligations
under capital leases
|
42,613
|
29,725
|
||||||
|
Industrial
revenue bonds payable to 2015 at 3.8% to 6.19%
|
4,305
|
4,422
|
||||||
|
Total
|
$ |
2,893,907
|
$ |
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):
|
June
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
As
to interest rate (including the effects of interest rate
swaps):
|
||||||||
|
Fixed-rate
debt
|
$ |
2,759,686
|
$ |
2,785,553
|
||||
|
Variable-rate
debt
|
134,221
|
115,399
|
||||||
|
Total
|
$ |
2,893,907
|
$ |
2,900,952
|
||||
|
As
to collateralization:
|
||||||||
|
Unsecured
debt
|
$ |
1,928,110
|
$ |
1,910,216
|
||||
|
Secured
debt
|
965,797
|
990,736
|
||||||
|
Total
|
$ |
2,893,907
|
$ |
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
June
30, 2007 and December 31, 2006 the balance outstanding under the $400
million revolving credit facility was $37 million at a variable interest rate
of
5.74% and $18 million at a variable interest rate of 5.75%,
respectively. 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 no amounts were outstanding as of June 30,
2007 and December 31, 2006. Letters of credit totaling
$9.5 million and $10.1 million were outstanding under the $400 million revolving
credit facility at June 30, 2007 and December 31, 2006,
respectively. The available balance under our revolving credit
agreement was $353.5 million and $371.9 million at June 30, 2007 and December
31, 2006, respectively. During the first six months 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 $15.4 million, respectively, at a weighted average interest rate
of
5.7%. 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 six months of 2007,
we
assumed $26.4 million of nonrecourse debt secured by the related properties
and
a capital lease obligation totaling $12.9 million. As of December 31,
2006, the balance of secured debt that was assumed in conjunction with 2006
acquisitions was $140.7 million.
In
conjunction with the disposition of properties completed during the first six
months of 2007, we incurred a net loss of $.4 million on the early
extinguishment of two loans totaling $21.2 million. These defeasance
costs were recognized as Interest Expense and have been reclassified and
reported as discontinued operations in the Condensed Consolidated
Statements of Income and Comprehensive Income in accordance with SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived
Assets."
Scheduled
principal payments on our debt (excluding $37.0 million due under our revolving
credit agreements, $31.5 million of capital leases and $3.8 million fair value
of interest rate swaps) are due during the following years (in
thousands):
|
2007
|
$ |
71,084
|
||
|
2008
|
252,170
|
|||
|
2009
|
113,096
|
|||
|
2010
|
118,754
|
|||
|
2011
|
889,866
|
|||
|
2012
|
307,421
|
|||
|
2013
|
283,393
|
|||
|
2014
|
338,356
|
|||
|
2015
|
196,705
|
|||
|
Thereafter
|
258,284
|
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. For additional
information see Note 4, “Debt.”
Note
7.
Property
Our
property consisted of the following (in thousands):
|
June
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
Land
|
$ |
884,835
|
$ |
847,295
|
||||
|
Land
held for development
|
21,440
|
21,405
|
||||||
|
Land
under development
|
248,278
|
146,990
|
||||||
|
Buildings
and improvements
|
3,345,273
|
3,339,074
|
||||||
|
Construction
in-progress
|
125,313
|
91,124
|
||||||
|
Total
|
$ |
4,625,139
|
$ |
4,445,888
|
||||
The
following carrying charges were capitalized (in thousands):
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Interest
|
$ |
6,636
|
$ |
1,346
|
$ |
12,491
|
$ |
2,155
|
||||||||
|
Ad
valorem taxes
|
435
|
15
|
940
|
46
|
||||||||||||
|
Total
|
$ |
7,071
|
$ |
1,361
|
$ |
13,431
|
$ |
2,201
|
||||||||
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.
During
the first six months of 2007, we completed the acquisition of eight shopping
centers, one office building and four industrial properties that are located
in
Arizona, Florida, Georgia, Oregon, Texas and Virginia.
Note
8.
Discontinued
Operations
During
the first six months of 2007, we sold eight shopping centers, two of which
were
located in Colorado, Texas and Illinois, and one each in Georgia and
Louisiana. Also, we classified a shopping center and an industrial
property, totaling $5.1 million, as held for sale as of June 30,
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 Condensed
Consolidated Statements of 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 (Loss) from
Discontinued Operations related to our dispositions totaled $1.3 million and
$10.9 million for the quarter ended June 30, 2007 and 2006, respectively, and
$5.6 million and $22.7 million for the six months ended June 30, 2007 and 2006,
respectively. Included in the Condensed Consolidated Balance Sheet at
December 31, 2006 was $131.9 million of Property and $14.1 million of
Accumulated Depreciation related to properties sold during the first six months
of 2007.
During
the first half of 2007, we incurred a net loss of $.4 million on the defeasance
of two loans totaling $21.2 million that were required to be settled upon their
disposition. These defeasance costs were recognized as Interest
Expense and have been reclassified and reported as discontinued
operations.
The
discontinued operations reported in 2006 had no debt that was required to be
repaid upon their disposition.
We
elected not to allocate other consolidated interest to discontinued operations
for both reporting periods, 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 real estate joint ventures and
partnerships. Notes receivable from these entities bear interest
ranging from 5.3% to 10% at June 30, 2007 and 6.0% to 10% at December 31,
2006. These notes are due at various dates through 2028 and are
generally secured by real estate assets. Interest income recognized
on these notes was $.6 million and $.3 million for the three months ended June
30, 2007 and 2006, respectively, and $.8 million for both the six months ended
June 30, 2007 and 2006.
Note
10.
Investment in Real
Estate Joint Ventures and Partnerships
We
own
interests in real estate 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):
|
June
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
Combined
Balance Sheets
|
||||||||
|
Property
|
$ |
1,361,848
|
$ |
1,123,600
|
||||
|
Accumulated
depreciation
|
(63,008 | ) | (41,305 | ) | ||||
|
Property,
net
|
1,298,840
|
1,082,295
|
||||||
|
Other
assets
|
116,631
|
118,642
|
||||||
|
Total
|
$ |
1,415,471
|
$ |
1,200,937
|
||||
|
Debt
|
$ |
354,988
|
$ |
327,695
|
||||
|
Amounts
payable to Weingarten Realty Investors
|
23,365
|
22,657
|
||||||
|
Other
liabilities
|
44,042
|
39,967
|
||||||
|
Accumulated
equity
|
993,076
|
810,618
|
||||||
|
Total
|
$ |
1,415,471
|
$ |
1,200,937
|
||||
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Combined
Statements of Income
|
||||||||||||||||
|
Revenues
|
$ |
35,267
|
$ |
13,567
|
$ |
66,486
|
$ |
25,515
|
||||||||
|
Expenses:
|
||||||||||||||||
|
Depreciation
and amortization
|
8,533
|
3,172
|
15,536
|
5,971
|
||||||||||||
|
Interest
|
5,396
|
4,127
|
10,486
|
7,459
|
||||||||||||
|
Operating
|
5,173
|
1,737
|
9,788
|
3,293
|
||||||||||||
|
Ad
valorem taxes
|
4,278
|
1,379
|
8,333
|
2,586
|
||||||||||||
|
General
and administrative
|
180
|
138
|
345
|
259
|
||||||||||||
|
Total
|
23,560
|
10,553
|
44,488
|
19,568
|
||||||||||||
|
Gain
on land and merchant development sales
|
555
|
|||||||||||||||
|
Gain
on sale of properties
|
3,442
|
5,992
|
||||||||||||||
|
Net
Income
|
$ |
11,707
|
$ |
6,456
|
$ |
21,998
|
$ |
12,494
|
||||||||
Our
investment in real estate joint ventures and partnerships, as reported on the
Condensed Consolidated 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 $18.2 million and $20.1 million at June 30, 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 $1.1 million
and
$.4 million for the quarters ended June 30, 2007 and 2006, respectively, and
$2.1 million and $.7 million for the six months ended June 30, 2007 and 2006,
respectively.
During
the first six months 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. A 20%-owned
unconsolidated joint venture acquired seven industrial properties, one each
in
Ashland and Chester, Virginia, two in Colonial Heights, Virginia and three
in
Richmond, Virginia.
In
March
2007 three joint ventures, two of which were previously consolidated, were
reorganized and our 50% interest in each of these properties is now held in
a
tenancy-in-common arrangement.
During
the first six months 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. In June
2006 we invested in a 25%-owned unconsolidated joint venture, which acquired
a
shopping center, Indian Harbor Place, located in Melbourne,
Florida. Additionally, a shopping center in a 72%-owned
unconsolidated joint venture was sold in Dickinson, Texas. Our share
of the sales proceeds totaled $5.3 million and generated a gain of $2.5
million.
We
have
not guaranteed the debt of any of the 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 provision of $.6 million during the second quarter of 2007 and $.1
million for the first six months of 2007. During the second quarter
of 2006, we recorded a federal income tax benefit of $.4 million, and for the
first six months of 2006, a federal income tax provision of $.1 million was
recorded. Our deferred tax assets at June 30, 2007 and December 31,
2006 were $.2 million and $.3 million, respectively, with the deferred tax
liabilities totaling $1.6 million in both periods.
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, whereas 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 for accounting
purposes, 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.”
During
the first six months of 2007 and 2006, we recorded a provision for the Texas
margin tax of $.9 million and $.1 million, respectively, and $.4 million and
$.1
million during the quarter ended June 30, 2007 and 2006,
respectively. Both the deferred tax assets and liabilities associated
with the Texas margin tax were $.1 million as of June 30, 2007 and December
31,
2006. In addition, a current tax obligation of $.9 million has been
recorded at June 30, 2007.
Note
12.
Commitments and
Contingencies
We
participate in six ventures, structured as DownREIT partnerships that have
properties in Arkansas, California, Georgia, North Carolina, Texas and
Utah. As a 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. We also participate in two ventures
that have properties in Florida and Texas that allow its outside partners to
put
an operating partnership unit to us for our common shares of beneficial interest
or an equivalent amount of cash. We have the option to redeem these units
in cash or a fixed number of our common shares, at our
discretion. During the first six months of 2007 and 2006, we issued
common shares of beneficial interest valued at $12.6 million and $3.3 million,
respectively, in exchange for certain of these limited partnership interests
or
operating partnership units.
We
expect
to invest approximately $212.1 million in 2007, $91.4 million in 2008, $69.0
million in 2009, $75.2 million in 2010, $32.2 million in 2011 and the remaining
balance of $4.5 million in 2012 to complete construction of 37 properties under
various stages of development. We also expect to invest $223.5
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 condensed consolidated
financial statements.
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):
|
June
30,
|
December
31,
|
|||||||
|
2007
|
2006
|
|||||||
|
Identified
Intangible Assets:
|
||||||||
|
Above-Market
Leases (included in Other Assets)
|
$ |
16,940
|
$ |
14,686
|
||||
|
Above-Market
Leases – Accumulated Amortization
|
(6,121 | ) | (5,277 | ) | ||||
|
Above-Market
Assumed Mortgages (included in Other Assets)
|
1,653
|
1,653
|
||||||
|
Valuation
of In Place Leases (included in Unamortized Debt and Lease
Cost)
|
55,882
|
52,878
|
||||||
|
Valuation
of In Place Leases – Accumulated Amortization
|
(18,752 | ) | (16,297 | ) | ||||
| $ |
49,602
|
$ |
47,643
|
|||||
|
Identified
Intangible Liabilities (included in Other Liabilities):
|
||||||||
|
Below-Market
Leases
|
$ |
31,281
|
$ |
24,602
|
||||
|
Below-Market
Leases – Accumulated Amortization
|
(8,870 | ) | (6,569 | ) | ||||
|
Below-Market
Assumed Mortgages
|
61,006
|
59,863
|
||||||
|
Below-Market
Assumed Mortgages – Accumulated Amortization
|
(22,249 | ) | (18,123 | ) | ||||
| $ |
61,168
|
$ |
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 $.6 million and $.1 million for the quarters ended June 30, 2007 and 2006,
respectively, and by $1.4 million and $.3 million for the six months ended
June
30, 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
|
$ |
2,413
|
||
|
2009
|
2,108
|
|||
|
2010
|
1,393
|
|||
|
2011
|
779
|
|||
|
2012
|
675
|
The
amortization of the in place lease intangible, which is recorded in Depreciation
and Amortization, was $2.0 million and $1.7 million for the quarters ended
June
30, 2007 and 2006, respectively, and $4.1 million and $3.5 million for the
six
months ended June 30, 2007 and 2006, respectively. The estimated
amortization of this intangible asset for each of the next five years is as
follows (in thousands):
|
2008
|
$ |
6,440
|
||
|
2009
|
5,560
|
|||
|
2010
|
4,607
|
|||
|
2011
|
3,573
|
|||
|
2012
|
2,923
|
The
amortization of above-market and below-market assumed mortgages decreased
Interest Expense $1.7 million and $1.8 million for the quarters ended June
30,
2007 and 2006, respectively, and by $3.5 million and $3.6 million for the six
months ended June 30, 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
|
$ |
6,130
|
||
|
2009
|
4,790
|
|||
|
2010
|
4,138
|
|||
|
2011
|
2,841
|
|||
|
2012
|
1,558
|
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 June 30,
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 June 30, 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 June 30, 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
June
30, 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 options or awards granted to retirement eligible employees are
expensed immediately.
The
grant
price for the Employee Share Option Plan is equal to the quoted fair 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 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 June 30, 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 $.3 million was capitalized in both
periods. For the six months ended June 30, 2007 and 2006,
compensation expense, net of forfeitures, associated with share options and
restricted shares totaled $2.6 million and $2.0 million, of which $.7 million
and $.5 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:
|
Six
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2007
|
2006
|
|||||||
|
Fair
value per share
|
$ |
4.96
|
$ |
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 six months ended June 30,
2007:
|
Weighted
|
||||||||
|
Shares
|
Average
|
|||||||
|
Under
|
Exercise
|
|||||||
|
Option
|
Price
|
|||||||
|
Outstanding,
January 1, 2007
|
3,147,153
|
$ |
31.99
|
|||||
|
Granted
|
4,621
|
48.25
|
||||||
|
Forfeited
or expired
|
(43,925 | ) |
34.37
|
|||||
|
Exercised
|
(163,680 | ) |
23.85
|
|||||
|
Outstanding,
June 30, 2007
|
2,944,169
|
$ |
32.43
|
|||||
The
total
intrinsic value of options exercised during the three months ended June 30,
2007
and 2006 was $.3 million and $.9 million, respectively. For the six
months ended June 30, 2007 and 2006, the total intrinsic value of options
exercised was $3.9 million and $7.0 million, respectively. As of June
30, 2007 and December 31, 2006, there was approximately $4.1 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 2.5 years and 3.0 years, respectively.
The
following table summarizes information about share options outstanding and
exercisable at June 30, 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
|
1,135,928
|
4.45
years
|
$ 21.87
|
746,351
|
$ 21.31
|
4.25
years
|
||||||||||
|
$26.84
- $40.26
|
1,280,249
|
7.49
years
|
$ 35.59
|
568,458
|
$ 34.32
|
7.11
years
|
||||||||||
|
$40.27
- $49.62
|
527,992
|
9.42
years
|
$
47.47
|
|||||||||||||
|
Total
|
2,944,169
|
6.66
years
|
$ 32.43
|
$ 25,526
|
1,314,809
|
$ 26.94
|
5.49
years
|
$ 18,618
|
||||||||
A
summary
of the status of unvested restricted shares for the six months ended June 30,
2007 is as follows:
|
Unvested
|
Weighted
|
|||||||
|
Restricted
|
Average
Grant
|
|||||||
|
Shares
|
Date
Fair Value
|
|||||||
|
Outstanding,
January 1, 2007
|
172,255
|
$ |
40.80
|
|||||
|
Granted
|
10,412
|
48.43
|
||||||
|
Vested
|
(9,920 | ) |
48.37
|
|||||
|
Forfeited
|
(4,823 | ) |
42.23
|
|||||
|
Outstanding,
June 30, 2007
|
167,924
|
$ |
40.78
|
|||||
As
of
June 30, 2007 and December 31, 2006, there was approximately $5.3 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 3.17 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
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Service
cost
|
$ |
962
|
$ |
772
|
$ |
1,840
|
$ |
1,544
|
||||||||
|
Interest
cost
|
631
|
565
|
1,194
|
1,130
|
||||||||||||
|
Expected
return on plan assets
|
(375 | ) | (346 | ) | (694 | ) | (692 | ) | ||||||||
|
Prior
service cost
|
(29 | ) | (32 | ) | (54 | ) | (64 | ) | ||||||||
|
Recognized
loss
|
67
|
102
|
122
|
204
|
||||||||||||
|
Total
|
$ |
1,256
|
$ |
1,061
|
$ |
2,408
|
$ |
2,122
|
||||||||
During
the first six months ended June 30, 2007 and 2006, we contributed $2.0 million
and $1.5 million, respectively, to the qualified retirement plan and $2.8
million and $2.0 million, respectively, to the supplemental retirement
plan. We 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 June 30, 2007 and 2006 and $.4 million
for both the six months ended June 30, 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. During the first six months of 2007 and
2006, a total of 13,868 and 11,374 common shares of beneficial interest were
purchased for the employees at an average per share price of $37.77 and $33.55,
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
cannot 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 for which 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, 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, Texas and Virginia, 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 June 30, 2007:
|
||||||||||||||||
|
Revenues
|
$ |
130,649
|
$ |
13,266
|
$ |
2,547
|
$ |
146,462
|
||||||||
|
Net
Operating Income
|
94,308
|
9,072
|
912
|
104,292
|
||||||||||||
|
Equity
in Earnings of Real Estate Joint Ventures and Partnerships,
net
|
3,785
|
443
|
45
|
4,273
|
||||||||||||
|
Investment
in Real Estate Joint Ventures and Partnerships
|
236,913
|
35,760
|
4,597
|
277,270
|
||||||||||||
|
Total
Assets
|
3,636,327
|
347,982
|
639,843
|
4,624,152
|
||||||||||||
|
Three
Months Ended June 30, 2006:
|
||||||||||||||||
|
Revenues
|
$ |
116,195
|
$ |
14,245
|
$ |
1,513
|
$ |
131,953
|
||||||||
|
Net
Operating Income
|
84,628
|
9,981
|
1,168
|
95,777
|
||||||||||||
|
Equity
in Earnings of Real Estate Joint Ventures and Partnerships,
net
|
4,409
|
49
|
89
|
4,547
|
||||||||||||
|
Investment
in Real Estate Joint Ventures and Partnerships
|
91,684
|
446
|
2,770
|
94,900
|
||||||||||||
|
Total
Assets
|
3,073,367
|
400,334
|
424,287
|
3,897,988
|
||||||||||||
|
Six
Months Ended June 30, 2007:
|
||||||||||||||||
|
Revenues
|
$ |
261,434
|
$ |
25,894
|
$ |
4,122
|
$ |
291,450
|
||||||||
|
Net
Operating Income
|
189,821
|
17,935
|
1,671
|
209,427
|
||||||||||||
|
Equity
in Earnings of Real Estate Joint Ventures and Partnerships,
net
|
6,722
|
793
|
105
|
7,620
|
||||||||||||
|
Six
Months Ended June 30, 2006:
|
||||||||||||||||
|
Revenues
|
$ |
231,714
|
$ |
28,120
|
$ |
1,887
|
$ |
261,721
|
||||||||
|
Net
Operating Income
|
170,482
|
20,074
|
1,522
|
192,078
|
||||||||||||
|
Equity
in Earnings of Real Estate Joint Ventures and Partnerships,
net
|
8,432
|
45
|
136
|
8,613
|
||||||||||||
Net
operating income reconciles to Income from Continuing Operations as shown on
the
Condensed Consolidated Statements of Income and Comprehensive Income as follows
(in thousands):
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Total
Segment Net Operating Income
|
$ |
104,292
|
$ |
95,777
|
$ |
209,427
|
$ |
192,078
|
||||||||
|
Depreciation
and Amortization
|
(32,541 | ) | (30,039 | ) | (64,807 | ) | (59,618 | ) | ||||||||
|
General
and Administrative
|
(6,504 | ) | (5,648 | ) | (13,113 | ) | (11,003 | ) | ||||||||
|
Interest
Expense
|
(35,653 | ) | (34,331 | ) | (71,719 | ) | (68,361 | ) | ||||||||
|
Interest
and Other Income
|
3,044
|
579
|
4,756
|
2,031
|
||||||||||||
|
Equity
in Earnings of Real Estate Joint Ventures and Partnerships,
net
|
4,273
|
4,547
|
7,620
|
8,613
|
||||||||||||
|
Income
Allocated to Minority Interests
|
(3,497 | ) | (1,644 | ) | (4,675 | ) | (3,301 | ) | ||||||||
|
Gain
(Loss) on Sale of Properties
|
(65 | ) |
52
|
1,994
|
103
|
|||||||||||
|
Gain
on Land and Merchant Development Sales
|
3,285
|
3,951
|
1,676
|
|||||||||||||
|
Benefit
(Provision) for Income Taxes
|
(1,012 | ) |
371
|
(1,003 | ) | (148 | ) | |||||||||
|
Income
from Continuing Operations
|
$ |
35,622
|
$ |
29,664
|
$ |
72,431
|
$ |
62,070
|
||||||||
Note
17.
Subsequent
Events
Subsequent
to June 30, 2007, we acquired a portfolio of five retail power centers and
one
additional shopping center, adding 1.7 million square feet to our portfolio
under management and representing a gross investment of $315
million. Three of the retail power centers in Florida, Georgia and
Texas were acquired through a new retail joint venture with PNC Realty Investors
on behalf of its institutional client the AFL-CIO Building Investment Trust
(“BIT”). We own 20% of this joint venture with the BIT owning
80%. The remaining two centers in Atlanta, Georgia and Chicago,
Illinois were acquired by us.
Countryside
Centre, a 243,000 square foot community center located in the St.
Petersburg/Clearwater Area of Florida, was also acquired subsequent to June
30,
2007.
Also,
we
sold two properties located in Texas that were classified as property held
for
sale at June 30, 2007, and one shopping center in our merchant development
program located in Arizona.
In
July
2007 our board of trust managers authorized a common share repurchase
program as part of our ongoing investment strategy. Under the terms
of the program we may purchase up to a maximum value of $300 million of our
common shares of beneficial interest during the next two years. Share
repurchases may be made in the open market or in privately negotiated
transactions at the discretion of management and as market conditions
warrant. We anticipate funding the repurchase of shares primarily
through the proceeds received from our property disposition program, as well
as
from general corporate funds.
As
of
August 6, 2007, we have purchased or committed to purchase 1.1 million common
shares of beneficial interest at an average share price of $37.20 from the
net
proceeds of our property disposition program, as well as from general corporate
funds, during 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 real estate 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 (“REIT”) 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
June
30, 2007, we owned or operated under long-term leases, either directly or
through our interest in real estate joint ventures or partnerships, a total
of
377 developed income-producing properties and 37 properties under various stages
of construction and development. The total number of centers includes
336 neighborhood and community shopping centers located in 21 states spanning
the country from coast to coast. We also owned 75 industrial projects
located in California, Florida, Georgia, Tennessee, Texas and Virginia and
three office buildings located in Arizona and Texas.
We
also
owned interests in 15 parcels of unimproved land held for future development
that totaled approximately 5.8 million square feet.
We
had
approximately 7,600 leases with 5,600 different tenants at June 30,
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
95.3% at June 30, 2007 compared to 93.7% at June 30, 2006. Same store
property NOI was up a strong 3.4% for the first six months of June 30,
2007. 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 619
new leases or renewals during the first six months of 2007 totaling 3.4 million
square feet, increasing rental rates an average of 10.5% on a cash basis and
13.0% 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
June
30, 2007, we had 37 properties in various stages of development, up from 16
properties under development at the end of the first half of 2006. We have
invested $346 million to-date on these projects and, at completion; we estimate
our total investment to be $830 million. These properties are slated to
open over the next three to 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 $540 million. In addition to
the 17 development sites under contract, we have another 26 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. As part of the program, land parcels and vacant
structures may also be disposed. Merchant development sales generated
gains of approximately $4.0 million during the first half of 2007, and we expect
this number to grow through out the year. We currently have 20
properties identified as merchant development properties. We have
invested $183 million to date and expect to invest a total of approximately
$509
million.
Acquisitions
and Joint Ventures
In
the
first half of 2007, we have acquired ten shopping centers and 11 industrial
properties for a purchase price of approximately $263
million. Included in that total were two retail properties purchased
as part of an unconsolidated joint venture we have with AEW Capital Management
and seven industrial properties as part of an unconsolidated joint venture
with
Mercantile Real Estate Advisors on behalf of its institutional client, AFL-CIO
Building Investment Trust (“BIT”). 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 half of 2007 was approximately $3.2 million
or
an increase of $2.3 million over the prior year. 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 half of 2007 we sold eight shopping centers for $178
million. We expect to continue to dispose non-core properties during
the year as opportunities present themselves. Dispositions are part
of an ongoing 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 ongoing 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.
Real
Estate Joint Ventures and Partnerships
To
determine the method of accounting for partially owned real estate joint
ventures and 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 real estate joint ventures and 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 real estate 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 pre-acquisition 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 directly
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 internal costs directly related to 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 and if it
meets
the sales criteria in accordance with SFAS No. 66.
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. 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.
Income
Taxes
We
have
elected to be treated as a 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 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 such activities 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 June 30, 2007 to the Three Months Ended June 30,
2006
Revenues
Total
revenues were $146.5 million in the second quarter of 2007 versus $132.0 million
in the second quarter 2006, an increase of $14.5 million or
11.0%. This increase resulted from an increase in rental revenues of
$12.6 million and other income of $1.9 million.
Property
acquisitions and new development activity contributed $15.0 million of the
rental income increase with $.2 million resulting from 315 renewals and new
leases, comprising 1.3 million square feet at an average rental rate increase
of
12.6%. 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:
Other
income increased by $1.9 million from the second quarter of
2006. This increase resulted primarily from the increase in joint
venture fee income.
Expenses
Total
expenses for the second quarter 2007 were $81.2 million versus $71.9 million
in
the second quarter of 2006, an increase of $9.3 million or 12.9%.
The
increases in 2007 for depreciation and amortization expense ($2.5 million),
operating expenses ($4.6 million), ad valorem taxes ($1.4 million) and general
and administrative expenses ($.8 million) were primarily a result of the
properties acquired and developed during the year and increases in headcount
associated with planned growth of the portfolio. Overall, direct
operating costs and expenses (operating and ad valorem taxes) of operating
our
properties as a percentage of rental revenues were 29% in 2007 and 28% in
2006.
Interest
Expense
Interest
expense totaled $35.7 million for the second quarter 2007, up $1.3 million
or
3.9% from the second quarter 2006. The components of interest expense
were as follows (in thousands):
|
Three
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2007
|
2006
|
|||||||
|
Gross
interest expense
|
$ |
44,106
|
$ |
37,550
|
||||
|
Out-of-market
mortgage adjustment of acquired mortgages
|
(1,817 | ) | (1,873 | ) | ||||
|
Capitalized
interest
|
(6,636 | ) | (1,346 | ) | ||||
|
Total
|
$ |
35,653
|
$ |
34,331
|
||||
Gross
interest expense totaled $44.1 million in the second quarter of 2007, up $6.6
million or 17.5% from the second quarter 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 5.9% for the second quarter 2007 and 6.2% for the second quarter
2006. Capitalized interest increased $5.3 million due to an increase
in new development activity.
Interest
and Other Income
Interest
and other income was $3.0 million in the second quarter of 2007 versus $.6
million in the second quarter of 2006, an increase of $2.4 million or
400%. 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 assets
held in a grantor trust related to our deferred compensation plan.
Income
Allocated to Minority Interests
Income
allocated to minority interests were $3.5 million in the second quarter of
2007
versus $1.6 million in the second quarter 2006, an increase of $1.9 million
or
119%. This increase resulted primarily from the gain on sale of two
shopping centers in Colorado that were each held in a 50% consolidated joint
venture. These joint ventures are included in our condensed
consolidated financial statements because we exercise financial and operating
control.
Gain
on Land and Merchant Development Sales
Gain
on
land and merchant development sales of $3.3 million for the second quarter
of
2007 represents the gain on sale from two vacant industrial buildings in San
Diego, California.
Benefit
(Provision) for Income Taxes
The
increase in the benefit (provision) for income taxes of $1.4 million from the
prior year is primarily attributable to the quarterly determination of the
tax
liability of our taxable REIT subsidiary at the respective periods.
Income
from Discontinued Operations
Income
from discontinued operations was $40.2 million in the second quarter of 2007
versus $60.6 million in the second quarter of 2006, a decrease of $20.4 million
or 33.7%. This decrease was due primarily to the gain on sale of
seven shopping centers in 2007 as compared to the gain on sale for six retail
properties and two industrial properties during the same period of
2006. Also, the decrease in operating income (loss) from discontinued
operations results primarily from the disposition of 19 retail and four
industrial properties during fiscal year 2006.
Results
of Operations
Comparison
of the Six Months Ended June 30, 2007 to the Six Months Ended June 30,
2006
Revenues
Total
revenues were $291.4 million in the first six months of 2007 versus $261.7
million in the first six months of 2006, an increase of $29.7 million or
11.4%. This increase resulted from an increase in rental revenues of
$27.9 million and other income of $1.8 million.
Property
acquisitions and new development activity contributed $28.6 million of the
rental income increase with $4.5 million resulting from 619 renewals and new
leases, comprising 3.4 million square feet at an average rental rate increase
of
10.5%. Offsetting these rental income increases was a decrease of
$5.2 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:
Other
income increased by $1.8 million from the first six months of
2006. This increase resulted primarily from the increase in joint
venture fee income.
Expenses
Total
expenses for the first six months of 2007 were $159.9 million versus $140.3
million in the first six months of 2006, an increase of $19.6 million or
14.0%.
The
increases in 2007 for depreciation and amortization expense ($5.2 million),
operating expenses ($9.8 million), ad valorem taxes ($2.6 million) and general
and administrative expenses ($2.1 million) were primarily a result of the
properties acquired and developed during the year, an increase in insurance
expenses as a result of the hurricanes experienced in 2005 and increases
associated with planned growth of the portfolio. Overall, direct
operating costs and expenses (operating and ad valorem taxes) of operating
our
properties as a percentage of rental revenues were 29% in 2007 and 27% in
2006.
Interest
Expense
Interest
expense totaled $71.7 million for the first six months of 2007, up $3.4 million
or 4.9% from the first six months of 2006. The components of interest
expense were as follows (in thousands):
|
Six
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2007
|
2006
|
|||||||
|
Gross
interest expense
|
$ |
87,845
|
$ |
74,263
|
||||
|
Out-of-market
mortgage adjustment of acquired mortgages
|
(3,635 | ) | (3,747 | ) | ||||
|
Capitalized
interest
|
(12,491 | ) | (2,155 | ) | ||||
|
Total
|
$ |
71,719
|
$ |
68,361
|
||||
Gross
interest expense totaled $87.8 million in the first six months of 2007, up
$13.6
million or 18.3% from the first six months of 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% for the six months ended June 30, 2007 and 6.2% for the six months
ended June 30, 2006. Capitalized interest increased $10.3 million due
to an increase in new development activity, and the out-of-market mortgage
adjustment decreased by $.1 million.
Interest
and Other Income
Interest
and other income was $4.8 million in the first six months of 2007 versus $2.0
million in the first six months of 2006, an increase of $2.8 million or
140%. 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, excess
proceeds from the Series F Preferred Share offering and assets held in a grantor
trust related to our deferred compensation plan.
Equity
in Earnings of Real Estate Joint Ventures and Partnerships
Our
equity in earnings of real estate joint ventures and partnerships was $7.6
million in the first six months of 2007 versus $8.6 million in the first six
months of 2006, a decrease of $1.0 million or 11.6%. This decrease
was attributable primarily to a reduction in property sale gains of $4.5
million offset by our incremental income from our investments in newly formed
joint ventures for the acquisition and development of retail and industrial
properties.
Income
Allocated to Minority Interests
Income
allocated to minority interests were $4.7 million in the first six months of
2007 versus $3.3 million in the first six months of 2006, an increase of $1.4
million or 42.4%. This increase resulted primarily from the gain on
sale of two shopping centers in Colorado that were each held in a 50%
consolidated joint venture. These joint ventures are included in our
condensed consolidated financial statements because we exercise financial and
operating control.
Gain
on Land and Merchant Development Sales
Gain
on
land and merchant development sales of $4.0 million for the first six months
of
2007 resulted from the sale of two parcels of land in Texas and two vacant
industrial buildings in San Diego, California. The activity during
the first half of 2006 represents the gain from the sale of an unimproved land
tract in Phoenix, Arizona.
Benefit
(Provision) for Income Taxes
The
increase in the benefit (provision) for income taxes of $.9 million from the
prior year is primarily attributable to the year-to-date determination of the
tax liability attributable to the Texas margin tax, which was enacted in the
second quarter of 2006.
Income
from Discontinued Operations
Income
from discontinued operations was $54.7 million in the first six months of 2007
versus $82.8 million in the first six months of 2006, a decrease of $28.1
million or 33.9%. This decrease was due primarily to the gain on sale
of eight shopping centers in 2007 as compared to the gain on sale for nine
retail properties and two industrial properties during the same period of
2006. Also, the decrease in operating income (loss) from discontinued
operations results primarily from the disposition of 19 retail and four
industrial properties during fiscal year 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 June 30,
2007, the balance outstanding under our $400 million revolving credit
facility was $37 million, and no amounts were outstanding under our $20
million credit facility, which we use for cash management purposes.
Our
capital structure also includes non-recourse secured debt that we assume in
conjunction with our acquisitions program. We also have non-recourse
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
2010.
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.
In
April
and May 2007, we acquired a portfolio of 10 high quality industrial buildings
located in Richmond, Virginia for a purchase price of $136 million, including
$6
million that is contingent upon the lease up of vacant space by the property
seller. This contingency agreement expires in 2009. 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 BIT. The remaining two buildings were
acquired directly by us. This portfolio added 2.5 million square feet
under management.
Oak Grove Market Center,
acquired in June 2007, is a 97,000 square foot grocery anchored shopping center
located in Portland, Oregon. The 100% occupied center is anchored by
a 53,000 square foot Safeway.
Subsequent
to June 30, 2007, we acquired a portfolio of five retail power centers and
one
additional shopping center, adding 1.7 million square feet to our portfolio
under management and representing a gross investment of $315
million. Three of the retail power centers in Florida, Georgia and
Texas were acquired through a new retail joint venture with PNC Realty Investors
on behalf of its institutional client, the BIT. We own 20% of this
joint venture with the BIT owning 80%. The remaining two centers, one
in Atlanta, Georgia and the other in Chicago, Illinois, were acquired by
us.
Countryside
Centre, a 243,000 square foot community center located in the St.
Petersburg/Clearwater Area of Florida, was also acquired subsequent to June
30,
2007. This center is anchored by Albertson’s, TJ Maxx, Home Goods and
Shoe Carnival.
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.
Town
& Country Commerce Center, acquired in June 2007, is a 206,000
square foot industrial distribution center located in Houston,
Texas. The property is 100% leased to Arizona Tile and
Seitel Solution Tech Center.
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.
During
2007 we sold eight shopping centers totaling 1.2 million square feet of building
area, of which two each are located in Colorado, Illinois and Texas and one
each
in Louisiana and Georgia. Sales proceeds from these dispositions
totaled $178.4 million and generated gains of $53.4 million. Two of
these shopping centers were each held in a 50% consolidated joint
venture. These joint ventures are included in our condensed
consolidated financial statements because we exercise financial and operating
control.
Subsequent
to June 30, 2007, a 50% consolidated joint venture sold an 81,000 square foot
shopping center located in Rosenberg, Texas. This shopping center was
classified as held for sale at June 30, 2007.
Industrial
Properties.
There
were no sales of industrial properties in the first half of 2007.
Subsequent
to June 30, 2007, we sold a 152,000 square foot business center located in
Dallas, Texas, which was classified as held for sale at June 30,
2007.
Merchant
Development Properties.
During
2007, we sold two vacant industrial buildings in San Diego, California and
two
parcels of land in Texas, which generated gains of $4.0 million from sale
proceeds totaling $29.9 million.
Subsequent
to June 30, 2007, a shopping center located in Phoenix, Arizona was
sold.
New
Development and Capital Expenditures
At
June
30, 2007, we had 37 projects under construction or in preconstruction stages
with a total square footage of approximately 10.8 million. These
properties are slated to be completed over the next three to 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 $443.8 million and $221.9 million for the first six months of
2007 and 2006, respectively.
Financing
Activities:
Debt
Total
debt outstanding was unchanged at $2.9 billion at June 30, 2007 and December
31,
2006. Total debt at June 30, 2007 included $2.8 billion of which
interest rates are fixed and $134.2 million, including the effect of $75 million
of interest rate swaps, that bears interest at variable
rates. 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 July 31, 2007, there was $130.0 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 July 31, 2007, no amounts were outstanding under this
facility. The available balance under our revolving credit agreement
was $260.5 million at July 31, 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, 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). 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 interest 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 notes.
At
June
30, 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 June 30, 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 six months of 2007,
we
assumed $26.4 million of non-recourse debt secured by the related properties
and
a capital lease obligation of $12.9 million. During the first six
months of 2006, we assumed $18.9 million of non-recourse debt secured by the
related properties.
In
conjunction with the disposition of properties completed during the first six
months of 2007, we incurred a net loss of $.4 million on the early
extinguishment of two loans totaling $21.2 million.
Equity
Common
and preferred dividends increased to $96.1 million in the first six months
of
2007, compared to $88.4 million for the first six months of 2006. The
quarterly dividend rate for our common shares of beneficial interest increased
to $.495 in 2007 compared to $.465 for the same period of 2006. Our
dividend payout ratio on common equity for 2007 and 2006 approximated 64.9%
and
65.3%, 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.
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
July 31, 2007. In addition, we have $85.4 million available as of
July 31, 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.
In
July
2007 our board of trust managers authorized a common share repurchase
program as part of our ongoing investment strategy. Under the terms
of the program we may purchase up to a maximum value of $300 million of our
common shares of beneficial interest during the next two years. Share
repurchases may be made in the open market or in privately negotiated
transactions at the discretion of management and as market conditions
warrant. We anticipate funding the repurchase of shares primarily
through the proceeds received from our property disposition program, as well
as
from general corporate funds.
As
of
August 6, 2007, we have purchased or committed to purchase 1.1 million common
shares of beneficial interest at an average share price of $37.20 from the
net
proceeds of our property disposition program, as well as from general corporate
funds, during 2007.
Contractual
Obligations
The
following table summarizes our principal contractual obligations as of June
30,
2007 (in thousands):
|
2007
|
2008
|
2009
|
2010
|
2011
|
Thereafter
|
Total
|
||||||||||||||||||||||
|
Mortgages
and Notes
|
||||||||||||||||||||||||||||
|
Payable:(1)
|
||||||||||||||||||||||||||||
|
Unsecured
Debt
|
$ |
187,072
|
$ |
156,400
|
$ |
123,522
|
$ |
139,810
|
$ |
667,021
|
$ |
1,246,602
|
$ |
2,520,427
|
||||||||||||||
|
Secured
Debt
|
41,786
|
244,538
|
127,787
|
110,008
|
135,213
|
623,123
|
1,282,455
|
|||||||||||||||||||||
|
Ground
Lease Payments
|
996
|
2,435
|
2,961
|
2,917
|
2,862
|
116,389
|
128,560
|
|||||||||||||||||||||
|
Obligations
to Acquire
|
||||||||||||||||||||||||||||
|
Projects
|
223,516
|
223,516
|
||||||||||||||||||||||||||
|
Obligations
to Develop
|
||||||||||||||||||||||||||||
|
Projects
|
212,061
|
91,402
|
69,016
|
75,236
|
32,227
|
4,476
|
484,418
|
|||||||||||||||||||||
|
Total
Contractual
|
||||||||||||||||||||||||||||
|
Obligations
|
$ |
665,431
|
$ |
494,775
|
$ |
323,286
|
$ |
327,971
|
$ |
837,323
|
$ |
1,990,590
|
$ |
4,639,376
|
||||||||||||||
_________________________
(1)
Includes
principal and interest with interest on variable-rate debt calculated using
rates at June 30, 2007 excluding the effect of interest rate swaps.
As
of
June 30, 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 (“FFO”) 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 real estate joint ventures and
partnerships. We calculate FFO in a manner consistent with the NAREIT
definition.
Management
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
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
Net
income available to common shareholders
|
$ |
70,002
|
$ |
87,741
|
$ |
116,659
|
$ |
139,825
|
||||||||
|
Depreciation
and amortization
|
31,902
|
31,604
|
63,881
|
63,034
|
||||||||||||
|
Depreciation
and amortization of unconsolidated real estate joint ventures and
partnerships
|
2,536
|
1,106
|
4,593
|
2,124
|
||||||||||||
|
Gain
on sale of properties
|
(38,253 | ) | (56,157 | ) | (53,198 | ) | (73,299 | ) | ||||||||
|
Gain
on sale of properties of unconsolidated real estate joint ventures
and
partnerships
|
(2,497 | ) | (4,054 | ) | ||||||||||||
|
Funds
from operations
|
66,187
|
61,797
|
131,935
|
127,630
|
||||||||||||
|
Funds
from operations attributable to operating partnership
units
|
1,103
|
1,368
|
2,209
|
2,768
|
||||||||||||
|
Funds
from operations assuming conversion of OP units
|
$ |
67,290
|
$ |
63,165
|
$ |
134,144
|
$ |
130,398
|
||||||||
|
Weighted
average shares outstanding - basic
|
86,274
|
89,519
|
86,140
|
89,446
|
||||||||||||
|
Effect
of dilutive securities:
|
||||||||||||||||
|
Share
options and awards
|
1,011
|
854
|
1,063
|
905
|
||||||||||||
|
Operating
partnership units
|
2,450
|
3,160
|
2,565
|
3,151
|
||||||||||||
|
Weighted
average shares outstanding - diluted
|
89,735
|
93,533
|
89,768
|
93,502
|
||||||||||||
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. We adopted FIN 48 as of January 1, 2007, and its
adoption did not have a material effect on our financial
statements.
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 statements.
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 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 statements.
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 statements.
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.
On
July
25, 2007, the FASB authorized a FASB Staff Position (the “proposed FSP”) that,
if issued, would affect the accounting for our convertible and exchangeable
senior debentures. If issued in the form expected, the proposed FSP
would require that the initial debt proceeds from the sale of our convertible
and exchangeable senior debentures be allocated between a liability component
and an equity component. The resulting debt discount would be
amortized over the period the debt is expected to be outstanding as additional
interest expense. The proposed FSP is expected to be effective for
fiscal years beginning after December 15, 2007 and requires retroactive
application. We are currently evaluating the impact that this
proposed FSP will have on our financial statements.
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 June 30, 2007, we
had fixed-rate debt of $2.8 billion and variable-rate debt of $134.2 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
June
30, 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 June 30, 2007.
There
has
been no change to our internal control over financial reporting during the
quarter ended June 30, 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
Our
annual meeting of shareholders was held on May 3, 2007. At that
meeting:
|
(1)
|
The
shareholders elected each of the eight nominees to the Board of Trust
Managers for a one-year term:
|
|
TRUST
MANAGER
|
FOR
|
WITHHELD
|
||||||
|
Stanford
Alexander
|
78,688,905
|
691,192
|
||||||
|
Andrew
M. Alexander
|
78,645,406
|
734,691
|
||||||
|
James
W. Crownover
|
78,867,155
|
512,942
|
||||||
|
Robert
J. Cruikshank
|
78,851,029
|
529,068
|
||||||
|
Melvin
A. Dow
|
76,905,133
|
2,474,964
|
||||||
|
Stephen
A. Lasher
|
78,796,983
|
583,114
|
||||||
|
Douglas
W. Schnitzer
|
78,823,957
|
556,140
|
||||||
|
Marc
J. Shapiro
|
78,805,028
|
575,069
|
||||||
|
TOTAL
|
628,383,596
|
6,657,180
|
||||||
(2) The
shareholders ratified the appointment of Deloitte & Touche LLP as our
independent accountants:
|
FOR
|
78,947,928
|
|||
|
AGAINST
|
287,824
|
|||
|
ABSTAIN
|
144,342
|
|||
|
TOTAL
|
79,380,094
|
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: August
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).
|
|
3.8*
|
—
|
Amendment
of Bylaws-Direct Registration System, Section 7.2(a) dated May 3,
2007.
|
|
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).
|
|
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).
|
_______________
|
*
|
Filed
with this report.
|
|
**
|
Furnished
with this report.
|
|
†
|
Management
contract or compensation plan or
arrangement.
|
48