Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2015
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from [                      ] to [                      ]
Commission file number 1-9876
Weingarten Realty Investors
(Exact name of registrant as specified in its charter)
TEXAS
74-1464203
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
2600 Citadel Plaza Drive
 
P.O. Box 924133
 
Houston, Texas
77292-4133
(Address of principal executive offices)
(Zip Code)
 
(713) 866-6000
 
 
(Registrant's telephone number)
 
 
 
 
 
 
 
 
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ý NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     YES ý NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
        Large accelerated filer ý
Accelerated filer ¨
        Non-accelerated filer ¨
Smaller reporting company ¨
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     YES ¨ NO ý
As of April 30, 2015 , there were 123,904,939 common shares of beneficial interest of Weingarten Realty Investors, $.03 par value, outstanding.

Table of Contents

TABLE OF CONTENTS
PART I.
 
Financial Information:
Page Number
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
PART II.
 
Other Information:
 
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of Contents

PART I-FINANCIAL INFORMATION
ITEM 1. Financial Statements
WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
 
Three Months Ended 
 March 31,
 
2015
 
2014
Revenues:
 
 
 
Rentals, net
$
122,658

 
$
124,633

Other
2,941

 
2,959

Total
125,599

 
127,592

Expenses:
 
 
 
Depreciation and amortization
36,151

 
40,624

Operating
22,585

 
24,615

Real estate taxes, net
14,627

 
14,649

General and administrative
7,372

 
5,913

Total
80,735

 
85,801

Operating Income
44,864

 
41,791

Interest Expense, net
(26,458
)
 
(24,580
)
Interest and Other Income, net
2,722

 
1,994

Gain on Sale and Acquisition of Real Estate Joint Venture and
Partnership Interests
861

 
—

Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
5,372

 
4,402

Provision for Income Taxes
(661
)
 
(480
)
Income from Continuing Operations
26,700

 
23,127

Operating Income from Discontinued Operations
—

 
279

Gain on Sale of Property from Discontinued Operations
—

 
41,212

Income from Discontinued Operations
—

 
41,491

Gain on Sale of Property
22,522

 
163

Net Income
49,222

 
64,781

Less: Net Income Attributable to Noncontrolling Interests
(1,575
)
 
(1,478
)
Net Income Adjusted for Noncontrolling Interests
47,647

 
63,303

Dividends on Preferred Shares
(2,710
)
 
(2,710
)
Net Income Attributable to Common Shareholders
$
44,937

 
$
60,593

Earnings Per Common Share - Basic:
 
 
 
Income from continuing operations attributable to common shareholders
$
0.37

 
$
0.16

Income from discontinued operations
—

 
0.34

Net income attributable to common shareholders
$
0.37

 
$
0.50

Earnings Per Common Share - Diluted:
 
 
 
Income from continuing operations attributable to common shareholders
$
0.36

 
$
0.15

Income from discontinued operations
—

 
0.34

Net income attributable to common shareholders
$
0.36

 
$
0.49

See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents

WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
 
Three Months Ended 
 March 31,
 
2015
 
2014
Net Income
$
49,222

 
$
64,781

Other Comprehensive (Loss) Income:
 
 
 
Net unrealized gain on investments, net of taxes
79

 
57

Realized gain on investments
—

 
(38
)
Net unrealized (loss) gain on derivatives
(1,350
)
 
37

Amortization of loss on derivatives
388

 
473

Retirement liability adjustment
360

 
52

Total
(523
)
 
581

Comprehensive Income
48,699

 
65,362

Comprehensive Income Attributable to Noncontrolling Interests
(1,575
)
 
(1,478
)
Comprehensive Income Adjusted for Noncontrolling Interests
$
47,124

 
$
63,884

See Notes to Condensed Consolidated Financial Statements.


4

Table of Contents

WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
 
March 31,
2015
 
December 31,
2014
ASSETS
 
 
 
Property
$
4,163,531

 
$
4,076,094

Accumulated Depreciation
(1,045,495
)
 
(1,028,619
)
Property Held for Sale, net
1,775

 
3,670

Property, net *
3,119,811

 
3,051,145

Investment in Real Estate Joint Ventures and Partnerships, net
255,890

 
257,156

Total
3,375,701

 
3,308,301

Unamortized Debt and Lease Costs, net
141,726

 
141,122

Accrued Rent and Accounts Receivable (net of allowance for doubtful
 accounts of $6,519 in 2015 and $7,680 in 2014) *
68,810

 
77,781

Cash and Cash Equivalents *
40,168

 
23,189

Restricted Deposits and Mortgage Escrows
28,641

 
79,998

Other, net
181,963

 
183,703

Total Assets
$
3,837,009

 
$
3,814,094

LIABILITIES AND EQUITY
 
 
 
Debt, net *
$
1,940,897

 
$
1,938,188

Accounts Payable and Accrued Expenses
88,474

 
112,479

Other, net
132,110

 
124,484

Total Liabilities
2,161,481

 
2,175,151

Commitments and Contingencies
—

 
—

Equity:
 
 
 
Shareholders’ Equity:
 
 
 
Preferred Shares of Beneficial Interest - par value, $.03 per share;
 shares authorized: 10,000
 
 
 
6.5% Series F cumulative redeemable preferred shares of beneficial interest;
 140 shares issued; 60 shares outstanding in 2015 and 2014; liquidation
 preference $150,000 in 2015 and 2014
2

 
2

Common Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 275,000; shares issued and outstanding:
123,585 in 2015 and 122,489 in 2014
3,733

 
3,700

Additional Paid-In Capital
1,741,804

 
1,706,880

Net Income Less Than Accumulated Dividends
(210,499
)
 
(212,960
)
Accumulated Other Comprehensive Loss
(12,959
)
 
(12,436
)
Total Shareholders’ Equity
1,522,081

 
1,485,186

Noncontrolling Interests
153,447

 
153,757

Total Equity
1,675,528

 
1,638,943

Total Liabilities and Equity
$
3,837,009

 
$
3,814,094

* Consolidated variable interest entities' assets held as collateral and debt included in the above balances (see Note 15):
Property, net
$
46,505

 
$
47,085

Accrued Rent and Accounts Receivable, net
1,781

 
2,576

Cash and Cash Equivalents
10,973

 
12,189

Debt, net
96,952

 
97,362

See Notes to Condensed Consolidated Financial Statements.

5

Table of Contents

WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
Three Months Ended 
 March 31,
 
2015
 
2014
Cash Flows from Operating Activities:
 
 
 
Net Income
$
49,222

 
$
64,781

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
36,151

 
40,884

Amortization of debt deferred costs and intangibles, net
656

 
243

Equity in earnings of real estate joint ventures and partnerships, net
(5,372
)
 
(4,402
)
Gain on sale and acquisition of real estate joint venture and partnership interests
(861
)
 
—

Gain on sale of property
(22,522
)
 
(41,375
)
Distributions of income from real estate joint ventures and partnerships, net
1,024

 
261

Changes in accrued rent and accounts receivable, net
6,951

 
5,013

Changes in unamortized debt and lease costs and other assets, net
(1,994
)
 
(885
)
Changes in accounts payable, accrued expenses and other liabilities, net
(14,762
)
 
(23,476
)
Other, net
8,947

 
302

Net cash provided by operating activities
57,440

 
41,346

Cash Flows from Investing Activities:
 
 
 
Acquisition of real estate and land
(91,487
)
 
—

Development and capital improvements
(17,401
)
 
(14,494
)
Proceeds from sale of property and real estate equity investments, net
33,050

 
46,177

Change in restricted deposits and mortgage escrows
51,357

 
1,002

Notes receivable from real estate joint ventures and partnerships and other receivables - Collections
61

 
3,840

Real estate joint ventures and partnerships - Investments
(34
)
 
(752
)
Real estate joint ventures and partnerships - Distribution of capital
4,446

 
5,539

Proceeds from investments
500

 
50,038

Other, net
(535
)
 
(10,713
)
Net cash (used in) provided by investing activities
(20,043
)
 
80,637

Cash Flows from Financing Activities:
 
 
 
Proceeds from issuance of debt
200,000

 
—

Principal payments of debt
(112,236
)
 
(319,812
)
Changes in unsecured credit facilities
(85,000
)
 
159,900

Proceeds from issuance of common shares of beneficial interest, net
30,863

 
229

Common and preferred dividends paid
(44,914
)
 
(42,141
)
Debt issuance and extinguishment costs paid
(7,402
)
 
(204
)
Distributions to noncontrolling interests
(1,660
)
 
(2,351
)
Other, net
(69
)
 
19

Net cash used in financing activities
(20,418
)
 
(204,360
)
Net increase (decrease) in cash and cash equivalents
16,979

 
(82,377
)
Cash and cash equivalents at January 1
23,189

 
91,576

Cash and cash equivalents at March 31
$
40,168

 
$
9,199

Interest paid during the period (net of amount capitalized of $831 and $660, respectively)
$
23,471

 
$
26,616

See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents

WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands, except per share amounts)
Insert Title Here
 
Preferred
Shares of
Beneficial
Interest
 
Common
Shares of
Beneficial
Interest
 
Additional
Paid-In
Capital
 
Net Income
Less Than
Accumulated
Dividends
 
Accumulated 
Other
Comprehensive
Loss
 
Noncontrolling
Interests
 
Total
Balance, January 1, 2014
$
2

 
$
3,683

 
$
1,679,229

 
$
(300,537
)
 
$
(4,202
)
 
$
309,803

 
$
1,687,978

Net income
 
 
 
 
 
 
63,303

 
 
 
1,478

 
64,781

Shares issued under benefit plans
 
 
7

 
5,623

 
 
 
 
 
 
 
5,630

Dividends paid – common shares (1)
 
 
 
 
 
 
(39,703
)
 
 
 
 
 
(39,703
)
Dividends paid – preferred shares (2)
 
 
 
 
 
 
(2,438
)
 
 
 
 
 
(2,438
)
Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
(2,351
)
 
(2,351
)
Acquisition of noncontrolling interests
 
 
 
 
10,932

 
 
 
 
 
(10,932
)
 
—

Disposition of noncontrolling interests
 
 
 
 
 
 
 
 
 
 
(144,326
)
 
(144,326
)
Other comprehensive income
 
 
 
 
 
 
 
 
581

 
 
 
581

Other, net
 
 
 
 
51

 
(272
)
 
 
 


 
(221
)
Balance, March 31, 2014
$
2

 
$
3,690

 
$
1,695,835

 
$
(279,647
)
 
$
(3,621
)
 
$
153,672

 
$
1,569,931

Balance, January 1, 2015
$
2

 
$
3,700

 
$
1,706,880

 
$
(212,960
)
 
$
(12,436
)
 
$
153,757

 
$
1,638,943

Net income
 
 
 
 
 
 
47,647

 
 
 
1,575

 
49,222

Issuance of common shares, net
 
 
24

 
29,012

 
 
 
 
 
 
 
29,036

Shares issued under benefit plans, net
 
 
9

 
5,547

 
 
 
 
 
 
 
5,556

Shares issued in exchange for noncontrolling interests
 
 
 
 
111

 
 
 
 
 
(111
)
 
—

Dividends paid – common shares (1)
 
 
 
 
 
 
(42,476
)
 
 
 
 
 
(42,476
)
Dividends paid – preferred shares (2)
 
 
 
 
 
 
(2,438
)
 
 
 
 
 
(2,438
)
Distributions to noncontrolling interests
 
 
 
 
 
 
 
 
 
 
(1,660
)
 
(1,660
)
Other comprehensive loss
 
 
 
 
 
 
 
 
(523
)
 
 
 
(523
)
Other, net
 
 
 
 
254

 
(272
)
 
 
 
(114
)
 
(132
)
Balance, March 31, 2015
$
2

 
$
3,733

 
$
1,741,804

 
$
(210,499
)
 
$
(12,959
)
 
$
153,447

 
$
1,675,528

_______________
(1)
Common dividend per share was $.345 and $.325 for the three months ended March 31, 2015 and 2014 , respectively.
(2)
Series F preferred dividend per share was $40.63 for both the three months ended March 31, 2015 and 2014 .
See Notes to Condensed Consolidated Financial Statements.

7

Table of Contents

WEINGARTEN REALTY INVESTORS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Business
Weingarten Realty Investors is a real estate investment trust (“REIT”) organized under the Texas Business Organizations Code. We currently operate, and intend to operate in the future, as a REIT.
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 centers we own or lease. We also provide property management services for which we charge fees to either joint ventures where we are partners or other outside owners.
We operate a portfolio of neighborhood and community shopping centers, totaling approximately 45.3 million square feet of gross leaseable area, that is either owned by us or others. We have a diversified tenant base, with our largest tenant comprising only 3.6% of base minimum rental revenue during the first three months of 2015 . Total revenues less operating expenses and real estate taxes from continuing operations ("net operating income from continuing operations") generated by our properties located in Houston and its surrounding areas was 18.4% of total net operating income from continuing operations for the three months ended March 31, 2015 , and an additional 10.2% of net operating income from continuing operations was generated during this period from properties that are located in other parts of Texas.
Basis of Presentation
Our consolidated financial statements include the accounts of our subsidiaries, certain partially owned real estate joint ventures or partnerships and variable interest entities (“VIEs”) which meet the guidelines for consolidation. All intercompany balances and transactions have been eliminated.
The condensed consolidated financial statements included in this report are unaudited; however, amounts presented in the condensed consolidated balance sheet as of December 31, 2014 are derived from our audited financial statements at that date. In our opinion, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year.
The condensed consolidated financial statements and notes are presented as permitted by Form 10-Q and certain information included in our annual financial statements and notes thereto has been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2014 .
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Such statements require management to make estimates and assumptions that affect the reported amounts on our consolidated financial statements. Actual results could differ from these estimates.
Restricted Deposits and Mortgage Escrows
Restricted deposits and mortgage escrows consist of escrow deposits held by lenders primarily for property taxes, insurance and replacement reserves and restricted cash that is held for a specific use or in a qualified escrow account for the purposes of completing like-kind exchange transactions.
Our restricted deposits and mortgage escrows consist of the following (in thousands):
 
March 31, 2015
 
December 31, 2014
Restricted cash (1)
$
26,314

 
$
77,739

Mortgage escrows
2,327

 
2,259

Total
$
28,641

 
$
79,998

_______________
(1)
The decrease between the periods presented is primarily attributable to the use of funds from a qualified escrow account of $71.3 million , offset by $19.8 million of funds placed in a qualified escrow account for the purpose of completing like-kind exchange transactions.

8


Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component consists of the following (in thousands):
 
Gain
on
Investments
 
Gain
on
Cash Flow
Hedges
 
Defined
Benefit
Pension
Plan
 
Total
Balance, December 31, 2014
$
(656
)
 
$
(3,416
)
 
$
16,508

 
$
12,436

Change excluding amounts reclassified
from accumulated other comprehensive loss
(79
)
 
1,350

 
 
 
1,271

Amounts reclassified from accumulated
other comprehensive loss


 
(388
)
(2)  
(360
)
(3)  
(748
)
Net other comprehensive (income) loss
(79
)
 
962

 
(360
)
 
523

Balance, March 31, 2015
$
(735
)
 
$
(2,454
)
 
$
16,148

 
$
12,959

 
Gain
on
Investments
 
Gain
on
Cash Flow
Hedges
 
Defined
Benefit
Pension
Plan
 
Total
Balance, December 31, 2013
$
(340
)
 
$
(1,233
)
 
$
5,775

 
$
4,202

Change excluding amounts reclassified
from accumulated other comprehensive loss
(57
)
 
(37
)
 
 
 
(94
)
Amounts reclassified from accumulated
other comprehensive loss
38

(1)  
(473
)
(2)  
(52
)
(3)  
(487
)
Net other comprehensive income
(19
)
 
(510
)
 
(52
)
 
(581
)
Balance, March 31, 2014
$
(359
)
 
$
(1,743
)
 
$
5,723

 
$
3,621

_______________
(1)    This reclassification component is included in interest and other income.
(2)    This reclassification component is included in interest expense (see Note 6 for additional information).
(3)    This reclassification component is included in th e computation of net periodic benefit cost (see Note 12 for additional information).
Note 2. Newly Issued Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." This ASU amends the criteria for reporting discontinued operations while enhancing disclosures in this area. The provisions of ASU No. 2014-08 are effective for us prospectively on January 1, 2015; however, early adoption is permitted. We adopted this update effective April 1, 2014. The adoption resulted in individual property disposals no longer qualifying for discontinued operations presentation; thus, the results of these disposals will remain in income from continuing operations, and any associated gains are included in gain on sale of property. Properties sold or classified as held for sale prior to April 1, 2014, are not subject to ASU No. 2014-08 and therefore, continue to be classified as discontinued operations using the previous definition.
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." This ASU's core objective is for an entity to recognize revenue based on the consideration it expects to receive in exchange for goods or services. Additionally, this ASU requires entities to use a single model in accounting for revenues derived from contracts with customers. ASU No. 2014-09 replaces prior guidance regarding the recognition of revenue from sales of real estate except for revenue from sales that are part of a sale-leaseback transaction. The provisions of ASU No. 2014-09 are effective for us on January 1, 2017 with a tentative deferral until January 1, 2018, and are required to be applied either on a retrospective or a modified retrospective approach. We are currently assessing the impact, if any, that the adoption of this ASU will have on our consolidated financial statements.

9


In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." This ASU's core objective is that management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued or are available to be issued. The provisions of ASU No. 2014-15 are effective for us as of December 31, 2016, and early adoption is permitted. We do not expect the adoption of this update to have any impact to our consolidated financial statements.
In January 2015, the FASB issued ASU No. 2015-01, "Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items." This ASU eliminates the concept of extraordinary items from GAAP. The provisions of ASU No. 2015-01 are effective for us as of January 1, 2016, and early adoption is permitted. We adopted this ASU on January 1, 2015, and the adoption of this ASU did not impact our consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, "Amendments to the Consolidation Analysis." This ASU amends the consolidation analysis required under GAAP and requires management to reevaluate all previous consolidation conclusions. ASU No. 2015-02 considers limited partnerships as VIEs, unless the limited partners have either substantive kick-out or participating rights. The presumption that a general partner should consolidate a limited partnership has also been eliminated. The ASU amends the effect that fees paid to a decision maker or service provider have on the consolidation analysis, as well as amends how variable interests held by a reporting entity's related parties affect the consolidation conclusion. The ASU also clarifies how to determine whether equity holders as a group have power over an entity. The provisions of ASU No. 2015-02 are effective for us as of January 1, 2016, and early adoption is permitted. We are currently assessing the impact, if any, that the adoption of this ASU will have on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs." The ASU requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, and amortization of the debt issuance costs will continue to be reported as interest expense. The provisions of ASU No. 2015-03 are effective for us as of January 1, 2016, and are required to be applied retrospectively. Early adoption of ASU No. 2015-03 is permitted. We do not expect the adoption of this update to have any impact on our consolidated statements of operations or cash flows; however, the presentation requirements under this ASU will impact certain line items of our consolidated balance sheet. As of March 31, 2015 and December 31, 2014 , the impact would include a decrease to both Unamortized Debt and Lease Costs, net and Debt, net of $11.0 million and $10.5 million , respectively.
Note 3. Property
Our property consists of the following (in thousands):
 
March 31, 2015
 
December 31, 2014
Land
$
878,994

 
$
821,614

Land held for development
103,163

 
103,349

Land under development
23,137

 
24,297

Buildings and improvements
3,089,778

 
3,061,616

Construction in-progress
68,459

 
65,218

Total
$
4,163,531

 
$
4,076,094

During the three months ended March 31, 2015 , we sold three centers and other property. Aggregate gross sales proceeds from these transactions approximated $34.6 million and generated gains of approximately $22.5 million . Also, during the three months ended March 31, 2015 , we acquired two centers with a gross purchase price of approximately $92.1 million and invested $7.5 million in new development projects.
At March 31, 2015 , one center, totaling $5.0 million before accumulated depreciation, was classified as held for sale. At December 31, 2014 , one center, totaling $9.4 million before accumulated depreciation, was classified as held for sale. Neither of these properties qualified to be reported as discontinued operations and each has been sold subsequent to the applicable reporting period.

10


Note 4. 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% for the periods presented. Combined condensed financial information of these ventures (at 100%) is summarized as follows (in thousands):
 
March 31, 2015
 
December 31, 2014
Combined Condensed Balance Sheets
 
 
 
ASSETS
 
 
 
Property
$
1,331,214

 
$
1,331,445

Accumulated depreciation
(286,376
)
 
(279,067
)
Property, net
1,044,838

 
1,052,378

Other assets, net
127,130

 
126,890

Total Assets
$
1,171,968

 
$
1,179,268

LIABILITIES AND EQUITY
 
 
 
Debt, net (primarily mortgages payable)
$
376,927

 
$
380,816

Amounts payable to Weingarten Realty Investors and Affiliates
12,871

 
13,749

Other liabilities, net
26,119

 
26,226

Total Liabilities
415,917

 
420,791

Equity
756,051

 
758,477

Total Liabilities and Equity
$
1,171,968

 
$
1,179,268

 
Three Months Ended 
 March 31,
 
2015
 
2014
Combined Condensed Statements of Operations
 
 
 
Revenues, net
$
37,118

 
$
37,768

Expenses:
 
 
 
Depreciation and amortization
9,380

 
9,917

Interest, net
4,417

 
5,912

Operating
6,465

 
6,816

Real estate taxes, net
4,532

 
4,880

General and administrative
202

 
106

Provision for income taxes
68

 
67

Total
25,064

 
27,698

Operating income
$
12,054

 
$
10,070

Our investment in real estate joint ventures and partnerships, as reported in our Condensed Consolidated Balance Sheets, differs from our proportionate share of the entities' underlying net assets due to basis differences, which arose upon the transfer of assets to the joint ventures. The net positive basis differences, which totaled $5.1 million and $5.2 million at March 31, 2015 and December 31, 2014 , respectively, are generally amortized over the useful lives of the related assets.

11


Fees earned by us for the management of these real estate joint ventures and partnerships totaled $1.2 million for both the three months ended March 31, 2015 and 2014 .
During the first three months of 2015, we sold one center held in a 50% owned unconsolidated real estate joint venture for approximately $1.1 million , of which our share of the gain totaled $0.6 million . Also, associated with this transaction, we realized a gain of $0.9 million on our investment.
During 2014 , we had a partial disposition of a 50% interest at an unconsolidated real estate joint venture for approximately $5.1 million , resulting in a gain on our investment of $1.7 million . Also, we sold four centers and other property held in unconsolidated real estate joint ventures, for approximately $19.9 million , of which our share of the gain totaled $4.9 million .
Note 5. Debt
Our debt consists of the following (in thousands):
 
March 31, 2015
 
December 31, 2014
Debt payable, net to 2038 (1)
$
1,743,792

 
$
1,656,083

Unsecured notes payable under credit facilities
104,000

 
189,000

Debt service guaranty liability
72,105

 
72,105

Obligations under capital leases
21,000

 
21,000

Total
$
1,940,897

 
$
1,938,188

_______________
(1)
At March 31, 2015 , interest rates ranged from 2.6% to 8.6% at a weighted average rate of 4.5% . At December 31, 2014 , interest rates ranged from 3.4% to 8.6% at a weighted average rate of 4.9% .
The allocation of total debt between fixed and variable-rate as well as between secured and unsecured is summarized below (in thousands):
 
March 31, 2015
 
December 31, 2014
As to interest rate (including the effects of interest rate contracts):
 
 
 
Fixed-rate debt
$
1,740,075

 
$
1,651,959

Variable-rate debt
200,822

 
286,229

Total
$
1,940,897

 
$
1,938,188

As to collateralization:
 
 
 
Unsecured debt
$
1,368,350

 
$
1,343,217

Secured debt
572,547

 
594,971

Total
$
1,940,897

 
$
1,938,188

We maintain a $500 million unsecured revolving credit facility, which was last amended on April 18, 2013. This facility expires in April 2017, provides for two consecutive six-month extensions upon our request and borrowing rates that float at a margin over LIBOR plus a facility fee. At March 31, 2015 , the borrowing margin and facility fee, which are priced off a grid that is tied to our senior unsecured credit ratings, were 115 and 20 basis points, respectively. The facility also contains a competitive bid feature that allows us to request bids for up to $250 million . Additionally, an accordion feature allows us to increase the facility amount up to $700 million .
Effective March 2015 , we entered into an agreement with a bank for a short-term unsecured facility totaling $20 million that we maintain for cash management purposes, which matures in March 2016 . The facility provides for fixed interest rate loans at a 30 -day LIBOR rate plus a borrowing margin and facility fee of 125 and 10 basis points, respectively.

12


Effective May 2010, we entered into an agreement with a bank for an unsecured and uncommitted overnight facility totaling $99 million that we maintain for cash management purposes. The facility provided for fixed interest rate loans at a 30 -day LIBOR rate plus a borrowing margin based on market liquidity. As of January 2, 2015, this facility was canceled.
The following table discloses certain information regarding our unsecured notes payable under our credit facilities (in thousands, except percentages):
 
March 31, 2015
 
December 31, 2014
Unsecured revolving credit facility:
 
 
 
Balance outstanding
$
104,000

 
$
189,000

Available balance
391,777

 
306,777

Letters of credit outstanding under facility
4,223

 
4,223

Variable interest rate (excluding facility fee)
1.0
%
 
0.8
%
Unsecured short-term facility:
 
 
 
Balance outstanding
$
—

 
 
Variable interest rate (excluding facility fee)
—
%
 
 
Both facilities:
 
 
 
Maximum balance outstanding during the period
$
243,000

 
$
270,000

Weighted average balance
167,500

 
151,036

Year-to-date weighted average interest rate (excluding facility fee)
0.9
%
 
0.8
%
Related to a development project in Sheridan, Colorado, we have provided a guaranty for the payment of any debt service shortfalls until a coverage rate of 1.4 x is met on tax increment revenue bonds issued in connection with the project. The bonds are to be repaid with incremental sales and property taxes and a public improvement fee (“PIF”) to be assessed on current and future retail sales and, to the extent necessary, any amounts we may have to provide under a guaranty. The incremental taxes and PIF are to remain intact until the earlier of the date the bond liability has been paid in full or 2040. Therefore, a debt service guaranty liability equal to the fair value of the amounts funded under the bonds was recorded. As of both March 31, 2015 and December 31, 2014 , we had $72.1 million outstanding for the debt service guaranty liability.
During March 2015, we entered into a $200 million unsecured term loan. We used the proceeds to pay down amounts outstanding under our $500 million unsecured revolving credit facility. The loan matures in March 2020, and we have the option to repay the loan without penalty at any time. Borrowing rates under the agreement float at a margin over LIBOR and are priced off a grid that is tied to our senior unsecured credit ratings, which is currently 115 basis points, but have been swapped to a fixed rate of 2.6% . Additionally, the loan contains an accordion feature which allows us to increase the loan amount up to an additional $100 million .
During the first three months of 2015, $90 million of fixed-rate medium term notes matured, were repaid with a weighted average interest rate of 5.4% and was funded through our unsecured revolving credit facility. Additionally, we amended an existing $66 million secured note by extending the maturity to 2025 and by reducing the interest rate from 7.4% to 3.5% . In connection with this transaction, we have recorded $6.1 million of debt extinguishment costs that have been classified as net interest expense in our Consolidated Statements of Operations.
During 2014, $315 million of fixed-rate medium term notes matured and were repaid at a weighted average interest rate of 5.2% , and we redeemed all $100 million of our 8.1% senior unsecured notes. The majority of the 8.1% senior unsecured notes were redeemed at a purchase price of 100% of the principal amount, plus accrued and unpaid interest through the redemption date. In conjunction with the redemption in the third quarter of 2014, we wrote off $1.2 million of debt costs.
Various leases and properties, and current and future rentals from those leases and properties, collateralize certain debt. At March 31, 2015 and December 31, 2014 , the carrying value of such assets aggregated $0.9 billion and $1.0 billion , respectively.

13


Scheduled principal payments on our debt (excluding $104.0 million due under our credit facilities, $21.0 million of certain capital leases, $3.9 million fair value of interest rate contracts, $(3.0) million net premium/(discount) on debt, $4.2 million of non-cash debt-related items, and $72.1 million debt service guaranty liability) are due during the following years (in thousands):  
2015 remaining
$
114,054

2016
169,043

2017
141,225

2018
61,567

2019
55,236

2020
236,725

2021
3,687

2022
306,266

2023
303,430

2024
253,589

Thereafter
93,864

Total
$
1,738,686

Our various debt agreements contain restrictive covenants, including minimum interest and fixed charge coverage ratios, minimum unencumbered interest coverage ratios, minimum net worth requirements and maximum total debt levels. We are not aware of any non-compliance with our public debt and revolving credit facility covenants as of March 31, 2015 .
Note 6. Derivatives and Hedging
The fair value of all our interest rate contracts is reported as follows (in thousands):
 
Assets
 
Liabilities
 
Balance Sheet
Location
 
Amount
 
Balance Sheet
Location
 
Amount
Designated Hedges:
 
 
 
 
 
 
 
March 31, 2015
Other Assets, net
 
$
3,944

 
Other Liabilities, net
 
$
1,459

December 31, 2014
Other Assets, net
 
3,891

 
Other Liabilities, net
 
109

The gross presentation, the effects of offsetting under master netting agreements and the net presentation of our interest rate contracts is as follows (in thousands):
 
 
 
 
 
 
 
Gross Amounts Not
Offset in Balance
Sheet
 
 
 
Gross
Amounts
Recognized
 
Gross
Amounts
Offset in
Balance
Sheet
 
Net
Amounts
Presented
in Balance
Sheet
 
Financial
Instruments
 
Cash
Collateral
Received
 
Net Amount
March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Assets
$
3,944

 
$
—

 
$
3,944

 
$
(694
)
 
$
—

 
$
3,250

Liabilities
1,459

 
—

 
1,459

 
(694
)
 
—

 
765

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Assets
3,891

 
—

 
3,891

 
—

 
—

 
3,891

Liabilities
109

 
—

 
109

 
—

 
—

 
109


14


Cash Flow Hedges
As of March 31, 2015 , we had four interest rate contracts, maturing through March 2020 , with an aggregate notional amount of $205.2 million that were designated as cash flow hedges and fix interest rates ranging from 1.5% to 2.4% . As of December 31, 2014 , we had one interest rate contract, maturing in December 2015 , with an aggregate notional amount of $5.2 million that was designated as a cash flow hedge and fixed the interest rate at 2.4% . We have determined that these contracts are highly effective in offsetting future variable interest cash flows.
As of March 31, 2015 and December 31, 2014 , the net gain balance in accumulated other comprehensive loss relating to cash flow interest rate contracts was $2.5 million and $3.4 million , respectively, and will be reclassified to net interest expense as interest payments are made on our fixed-rate debt. Within the next 12 months, a loss of approximately $2.8 million in accumulated other comprehensive loss is expected to be amortized to net interest expense related to settled interest rate contracts.
A summary of cash flow interest rate contract hedging activity is as follows (in thousands):
Derivatives Hedging
Relationships
 
Amount of
(Gain)
Loss 
Recognized
in Other
Comprehensive
Income on
Derivative 
(Effective
Portion)
 
Location of 
Gain (Loss)
Reclassified
from
Accumulated
Other
Comprehensive
Loss into
Income
 
Amount of
Gain (Loss)
Reclassified
from
Accumulated
Other
Comprehensive
Loss into
Income
(Effective
Portion)
 
Location of 
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amount 
Excluded from
Effectiveness
Testing)
 
Amount of 
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
Three Months Ended March 31, 2015
 
$
1,350

 
Interest expense,
net
 
$
(388
)
 
Interest expense,
net
 
$
—

Three Months Ended March 31, 2014
 
(37
)
 
Interest expense,
net
 
(473
)
 
Interest expense,
net
 
—

Fair Value Hedges
As of March 31, 2015 and December 31, 2014 , we had two interest rate contracts, maturing through October 2017, with an aggregate notional amount of $64.9 million and $65.3 million , respectively, that were designated as fair value hedges and convert fixed interest payments at rates of 7.5% to variable interest payments ranging from 4.25% to 4.28% and 4.23% to 4.26% , respectively. We have determined that our fair value hedges are highly effective in limiting our risk of changes in the fair value of fixed-rate notes attributable to changes in interest rates.
A summary of the impact on net income for our interest rate contracts is as follows (in thousands):
 
Gain (Loss) 
on
Contracts
 
Gain (Loss) 
on
Borrowings
 
Net Settlements
and Accruals
on Contracts (1)
 
Amount of Gain 
(Loss)
Recognized in
Income (2)
Three Months Ended March 31, 2015
 
 
 
 
 
 
 
Interest expense, net
$
53

 
$
(53
)
 
$
525

 
$
525

Three Months Ended March 31, 2014
 
 
 
 
 
 
 
Interest expense, net
(409
)
 
409

 
616

 
616

_______________
(1)
Amounts in this caption include gain (loss) recognized in income on derivatives and net cash settlements.
(2)
No ineffectiveness was recognized during the respective periods.
Note 7. Common Shares of Beneficial Interest
In February 2015, we established an at-the-market ("ATM") equity offering program. This program authorizes us to sell up to $200 million of common shares of beneficial interest ("common shares"), in amounts and at times as we determine, at prices determined by the market at the time of sale. Actual sales may depend on a variety of factors including, among others, market conditions, the trading price of our common shares, and determinations by management of the appropriate sources of funding for us. We intend to use the net proceeds for general trust purposes, which may include reducing borrowings under our $500 million unsecured revolving credit facility, repaying other indebtedness, repurchasing outstanding debt or equity securities. As of March 31, 2015 , $170.6 million of common shares remained available for sale under this ATM equity program.

15


The following shares were sold under the ATM equity program (in thousands, except share data):
 
 
Three Months Ended 
 March 31, 2015
Shares sold
 
809,100

Weighted average price per share
 
$
36.29

Gross proceeds
 
$
29,360

Subsequent to March 31, 2015 , an additional 319,600 common shares were sold with gross proceeds totaling $11.4 million .
Note 8. Noncontrolling Interests
The following table summarizes the effect of changes in our ownership interest in subsidiaries on the equity attributable to us as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Net income adjusted for noncontrolling interests
$
47,647

 
$
63,303

Transfers from the noncontrolling interests:
 
 
 
Increase in equity for operating partnership units
111

 
—

Net increase in equity for the acquisition
of noncontrolling interests
—

 
10,932

Change from net income adjusted for noncontrolling interests
and transfers from the noncontrolling interests
$
47,758

 
$
74,235

Note 9. Supplemental Cash Flow Information
Non-cash investing and financing activities are summarized as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Accrued property construction costs
$
6,159

 
$
5,751

Increase in equity for the acquisition of noncontrolling interests in consolidated
real estate joint ventures
—

 
10,932

Exchange of interests in real estate joint ventures and partnerships for common shares
111

 
—

Sale of property and property interest:
 
 
 
Decrease in property, net
—

 
(126,438
)
Decrease in real estate joint ventures and partnerships -
investments
—

 
(17
)
Decrease in other, net


 
(34
)
Decrease in debt, net due to debt assumption
—

 
(11,069
)
Decrease in security deposits
—

 
(459
)
Decrease in noncontrolling interests
—

 
(155,258
)

16


Note 10. Earnings Per Share
Earnings per common share – basic is computed using net income attributable to common shareholders and the weighted average number of shares outstanding – basic. Earnings per common share – diluted includes the effect of potentially dilutive securities. Income from continuing operations attributable to common shareholders includes gain on sale of property in accordance with Securities and Exchange Commission guidelines. Earnings per common share – basic and diluted components for the periods indicated are as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Numerator:
 
 
 
Continuing Operations:
 
 
 
Income from continuing operations
$
26,700

 
$
23,127

Gain on sale of property
22,522

 
163

Net income attributable to noncontrolling interests
(1,575
)
 
(1,557
)
Dividends on preferred shares
(2,710
)
 
(2,710
)
Income from continuing operations attributable to common shareholders – basic
44,937

 
19,023

Income attributable to operating partnership units
481

 
—

Income from continuing operations attributable to common shareholders – diluted
$
45,418

 
$
19,023

Discontinued Operations:
 
 
 
Income from discontinued operations
$
—

 
$
41,491

Net loss attributable to noncontrolling interests
—

 
79

Income from discontinued operations attributable to common shareholders – basic
and diluted
$
—

 
$
41,570

Net Income:
 
 
 
Net income attributable to common shareholders – basic
$
44,937

 
$
60,593

Net income attributable to common shareholders – diluted
$
45,418

 
$
60,593

Denominator:
 
 
 
Weighted average shares outstanding – basic
122,126

 
121,401

Effect of dilutive securities:
 
 
 
Share options and awards
1,430

 
1,244

Operating partnership units
1,487

 
—

Weighted average shares outstanding – diluted
125,043

 
122,645

Anti-dilutive securities of our common shares, which are excluded from the calculation of earnings per common share – diluted, are as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Share options (1)
897

 
1,924

Operating partnership units
—

 
1,500

Total anti-dilutive securities
897

 
3,424

_______________
(1)
Exclusion results as exercise prices were greater than the average market price for each respective period.

17


Note 11. Share Options and Awards
During 2015 , we granted restricted share awards incorporating both service-based and market-based measures to promote share ownership among the participants and to emphasize the importance of total shareholder return ("TSR"). The terms of each grant vary depending upon the participant's responsibilities and position within the Company. We categorize these share awards as either service-based share awards or market-based share awards. All awards were valued at the fair market value on the date of grant and earn dividends throughout the vesting period. Compensation expense is measured at the grant date and recognized over the vesting period. Generally, unvested restricted share awards are forfeited upon the termination of the participant’s employment with us.
The fair value of the market-based share awards was estimated on the date of grant using a Monte Carlo valuation model based on the following assumptions:
 
Three Months Ended 
 March 31, 2015
 
Minimum
 
Maximum
Dividend yield
0.0
%
 
3.6
%
Expected volatility (1)
12.6
%
 
18.0
%
Expected life (in years)
N/A

 
3

Risk-free interest rate
0.1
%
 
1.1
%
_______________
(1)    Includes the volatility of the FTSE NAREIT U.S. Shopping Center index and Weingarten Realty Investors.
A summary of the status of unvested restricted share awards for the three months ended March 31, 2015 is as follows:
 
Unvested
Restricted
Share
Awards
 
Weighted
Average 
Grant
Date Fair 
Value
Outstanding, January 1, 2015
693,805

 
$
28.76

Granted:
 
 
 
Service-based awards
99,250

 
36.59

Market-based awards relative to FTSE NAREIT U.S. Shopping Center
Index
42,687

 
37.26

Market-based awards relative to three-year absolute TSR
42,687

 
27.84

Vested
(254,159
)
 
25.86

Forfeited
(54
)
 
30.11

Outstanding, March 31, 2015
624,216

 
$
31.70

As of March 31, 2015 and December 31, 2014 , there was approximately $3.8 million and $2.7 million , respectively, of total unrecognized compensation cost related to unvested restricted shares, which is expected to be amortized over a weighted average of 1.4 years and 0.9 years, respectively.

18


Note 12. Employee Benefit Plans
Defined Benefit Plans
We sponsor a noncontributory qualified retirement plan. The components of net periodic benefit cost for this plan are as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Service cost
$
322

 
$
252

Interest cost
476

 
450

Expected return on plan assets
(772
)
 
(740
)
Recognized loss
360

 
96

Total
$
386

 
$
58

Subsequent to March 31, 2015 and 2014 , we contributed $1.5 million and $2.1 million , respectively, to the qualified retirement plan. Currently, we do not anticipate making any additional contributions to this plan during 2015 .
Defined Contribution Plans
Compensation expense related to our defined contribution plans was $1.3 million and $.9 million for the three months ended March 31, 2015 and 2014 , respectively.
Note 13. Related Parties
Through our management activities and transactions with our real estate joint ventures and partnerships, we had net accounts receivable of $1.3 million and $1.5 million outstanding as of March 31, 2015 and December 31, 2014 , respectively. We also had accounts payable and accrued expenses of $5.5 million and $6.0 million outstanding as of March 31, 2015 and December 31, 2014 , respectively. For both the three months ended March 31, 2015 and 2014 , we recorded joint venture fee income of $1.2 million .
In 2014, we completed the dissolution of our consolidated real estate joint venture with Hines Retail REIT (“Hines”), in which we owned a 30% interest. At December 31, 2013, this joint venture held a portfolio of 13 properties located in Texas, Tennessee, Georgia, Florida and North Carolina with $172.9 million in total assets and $11.1 million of debt, net, which was assumed by Hines. This transaction was completed through the distribution of five properties to us, resulting in an increase to our equity of $11.0 million , and eight properties to Hines. We realized a $23.3 million gain in discontinued operations associated with this transaction.
Note 14. Commitments and Contingencies
Commitments and Contingencies
As of March 31, 2015 and December 31, 2014 , we participated in three real estate ventures structured as DownREIT partnerships that have properties in Arkansas, California, North Carolina and Texas. As a general partner, we have operating and financial control over these ventures and consolidate them in our consolidated financial statements. These ventures allow the outside limited partners to put their interest in the partnership to us in exchange for our common shares 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 a real estate venture that has a property in Texas that allows its outside partner to put operating partnership units to us. We have the option to redeem these units in cash or a fixed number of our common shares, at our discretion. During the three months ended March 31, 2015 , common shares valued at $0.1 million were issued in exchange for certain of these interests. No common shares were issued in exchange for any of these interests during the three months ended March 31, 2014 . The aggregate redemption value of these interests was approximately $53 million and $52 million as of March 31, 2015 and December 31, 2014 , respectively.
As of March 31, 2015 , we have entered into commitments aggregating $65.1 million comprised principally of construction contracts which are generally due in 12 to 36 months.
As of December 31, 2014 , we have executed an agreement to purchase the retail portion of a mixed-use project for approximately $23.8 million at delivery by the developer, which is estimated to occur in 2016. Including this payment, our expected total investment in the retail portion of the project is approximately $29.1 million .

19


We issue letters of intent signifying a willingness to negotiate for acquisitions, dispositions or joint ventures, as well as other types of potential transactions, during the ordinary course of our business. Such letters of intent and other arrangements are non-binding to all parties unless and until a definitive contract is entered into by the parties. Even if definitive contracts relating to the acquisition or disposition of property are entered into, these contracts generally provide the purchaser a time period to evaluate the property and conduct due diligence. The purchaser, during this time, will have the ability to terminate a contract without penalty or forfeiture of any deposit or earnest money. No assurance can be provided that any definitive contracts will be entered into with respect to any matter covered by letters of intent, or that we will consummate any transaction contemplated by a definitive contract. Additionally, due diligence periods for property transactions are frequently extended as needed. An acquisition or disposition of property becomes probable at the time the due diligence period expires and the definitive contract has not been terminated. Our risk is then generally extended only to any earnest money deposits associated with property acquisition contracts, and our obligation to sell under a property sales contract.
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 contamination which may have been caused by us or any of our tenants that would have a material effect on our 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 additional liabilities to us.
Litigation
We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict the amounts involved, our management and counsel are of the opinion that, when such litigation is resolved, any additional liability, if any, will not have a material effect on our consolidated financial statements.
Note 15. Variable Interest Entities
Consolidated VIEs
At March 31, 2015 and December 31, 2014 , one of our real estate joint ventures, whose activities primarily consisted of owning and operating 15 neighborhood/community shopping centers located in Texas, was determined to be VIE. Based on a financing agreement that is guaranteed solely by us, we have determined that we are the primary beneficiary and have consolidated this joint venture.
A summary of our consolidated VIE is as follows (in thousands):
 
March 31, 2015
 
December 31, 2014
Maximum Risk of Loss (1)
$
37,178

 
$
37,178

Assets Held by VIEs
61,230

 
63,984

Assets Held as Collateral for Debt
59,259

 
61,850

_______________
(1)
The maximum risk of loss has been determined to be limited to our debt exposure for each real estate joint venture.
Restrictions on the use of these assets are significant because they serve as collateral for the VIEs’ debt, and we would generally be required to obtain our partners’ approval in accordance with the joint venture agreements for any major transactions. Transactions with these joint ventures on our consolidated financial statements have been limited to changes in noncontrolling interests and reductions in debt from our partners’ contributions. We and our partners are subject to the provisions of the joint venture agreements which include provisions for when additional contributions may be required to fund operating cash shortfalls and unplanned capital expenditures.

20


Unconsolidated VIEs
At March 31, 2015 and December 31, 2014 , one unconsolidated real estate joint venture was determined to be a VIE through the issuance of a secured loan, since the lender had the ability to make decisions that could have a significant impact on the success of the entity. A summary of our unconsolidated VIE is as follows (in thousands):
 
March 31, 2015
 
December 31, 2014
Investment in Real Estate Joint Ventures and Partnerships, net (1)
$
11,570

 
$
11,464

Maximum Risk of Loss (2)
10,992

 
10,992

_______________
(1)
The carrying amount of the investment represents our contributions to the real estate joint venture, net of any distributions made and our portion of the equity in earnings of the joint venture.
(2)
The maximum risk of loss has been determined to be limited to our debt exposure for the real estate joint venture.
We and our partners are subject to the provisions of the joint venture agreements that specify conditions, including operating shortfalls and unplanned capital expenditures, under which additional contributions may be required.
Note 16. Fair Value Measurements
Recurring Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 , aggregated by the level in the fair value hierarchy in which those measurements fall, are as follows (in thousands):
 
Quoted Prices
in Active
Markets for
Identical
Assets
and Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Fair Value at
March 31,
2015
Assets:
 
 
 
 
 
 
 
Investments, mutual funds held in a grantor trust
$
20,595

 
 
 
 
 
$
20,595

Investments, mutual funds
7,317

 
 
 
 
 
7,317

Derivative instruments:
 
 
 
 
 
 
 
Interest rate contracts
 
 
$
3,944

 
 
 
3,944

Total
$
27,912

 
$
3,944

 
$
—

 
$
31,856

Liabilities:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Interest rate contracts
 
 
$
1,459

 
 
 
$
1,459

Deferred compensation plan obligations
$
20,595

 
 
 
 
 
20,595

Total
$
20,595

 
$
1,459

 
$
—

 
$
22,054


21


 
Quoted Prices
in Active
Markets for
Identical
Assets
and Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Fair Value at
December 31,
2014
Assets:
 
 
 
 
 
 
 
Investments, mutual funds held in a grantor trust
$
19,864

 
 
 
 
 
$
19,864

Investments, mutual funds
7,446

 
 
 
 
 
7,446

Derivative instruments:
 
 
 
 
 
 
 
Interest rate contracts
 
 
$
3,891

 
 
 
3,891

Total
$
27,310

 
$
3,891

 
$
—

 
$
31,201

Liabilities:
 
 
 
 
 
 
 
Derivative instruments:
 
 
 
 
 
 
 
Interest rate contracts
 
 
$
109

 
 
 
$
109

Deferred compensation plan obligations
$
19,864

 
 
 
 
 
19,864

Total
$
19,864

 
$
109

 
$
—

 
$
19,973

Fair Value Disclosures
Unless otherwise described below, short-term financial instruments and receivables are carried at amounts which approximate their fair values based on their highly-liquid nature, short-term maturities and/or expected interest rates for similar instruments.
Schedule of our fair value disclosures is as follows (in thousands):
 
March 31, 2015
 
December 31, 2014
 
Carrying Value
 
Fair Value
Using
Significant 
Other
Observable 
Inputs
(Level 2)
 
Fair Value
Using
Significant
Unobservable
Inputs
(Level 3)
 
Carrying Value
 
Fair Value
Using
Significant 
Other
Observable 
Inputs
(Level 2)
 
Fair Value
Using
Significant
Unobservable
Inputs
(Level 3)
Tax increment revenue bonds (1)
$
25,377

 
 
 
$
25,377

 
$
25,392

 
 
 
$
25,392

Investments, held to maturity (2)
2,500

 
$
2,501

 
 
 
2,750

 
$
2,742

 
 
Debt:
 
 
 
 
 
 
 
 
 
 
 
Fixed-rate debt
1,740,075

 
 
 
1,809,751

 
1,651,959

 
 
 
1,719,775

Variable-rate debt
200,822

 
 
 
207,191

 
286,229

 
 
 
292,972

_______________
(1)
At March 31, 2015 and December 31, 2014 , the credit loss balance on our tax increment revenue bonds was $31.0 million .
(2)
Investments held to maturity are recorded at cost and have a gross unrealized gain of $1 thousand as of March 31, 2015 and an $8 thousand gross unrealized loss as of December 31, 2014 .

22


The quantitative information about the significant unobservable inputs used for our Level 3 fair value measurements as of March 31, 2015 and December 31, 2014 reported in the above tables, is as follows:

Description
 
Fair Value at
 
 
 
Unobservable
Inputs
 
Range
 
March 31, 2015
 
December 31, 2014
 
 
 
 
Minimum
 
Maximum
 
(in thousands)
 
Valuation Technique
 
 
2015
2014
 
2015
2014
Tax increment
revenue bonds
 
$
25,377

 
25,392

 
Discounted cash flows
 
Discount rate
 
 
 
 
7.5
%
7.5
%
 
 
 
 
 
 
 
 
Expected future
growth rate
 
1.0
%
1.0
%
 
5.0
%
2.0
%
 
 
 
 
 
 
 
 
Expected future
inflation rate
 
1.0
%
1.0
%
 
2.0
%
2.0
%
Fixed-rate debt
 
1,809,751

 
1,719,775

 
Discounted cash flows
 
Discount rate
 
1.9
%
1.3
%
 
5.1
%
5.1
%
Variable-rate
debt
 
207,191

 
292,972

 
Discounted cash flows
 
Discount rate
 
1.2
%
1.2
%
 
2.9
%
2.9
%
Note 17. Subsequent Events
In April 2015, we called our remaining outstanding 6.5% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest with an aggregate redemption value of $150 million , which will settle on May 8, 2015 and will be funded through existing resources and may include any or a combination of cash on hand, including proceeds from our ATM program, and borrowings under our revolving credit facilities. Upon the redemption of these shares, we expect the related original issuance costs of approximately $9.8 million to be reported as a deduction in arriving at net income attributable to common shareholders.
Subsequent to March 31, 2015, we acquired one center in Florida with a gross purchase price of $53.5 million and sold two centers and other property with aggregate gross sales proceeds totaling $9.3 million , which were owned by us either directly or through our interest in real estate joint ventures or partnerships. We anticipate that minimal impairment losses will be realized associated with these dispositions, and we have not completed the accounting for the recent acquisition, but anticipate that the purchase price will primarily be allocated to building, land and other identifiable intangible assets and liabilities.
Also, subsequent to March 31, 2015, we entered into two forward-starting contracts with an aggregate notional amount of $215 million hedging future fixed-rate debt issuances. These contracts are effective in May 2015 , mature in May 2025 and fix the 10 -year swap rates at 2.0% per annum.
*****


23


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. As described in "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014 , factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) disruptions in financial markets, (ii) general economic and local real estate conditions, (iii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or general downturn in their business, (iv) financing risks, such as the inability to obtain equity, debt, or other sources of financing on favorable terms, (v) changes in governmental laws and regulations, (vi) the level and volatility of interest rates, (vii) the availability of suitable acquisition opportunities, (viii) the ability to dispose of properties, (ix) changes in expected development activity, (x) increases in operating costs, (xi) tax matters, including failure to qualify as a real estate investment trust, and (xii) investments through real estate joint ventures and partnerships, which involve risks not present in investments in which we are the sole investor. Accordingly, there is no assurance that our expectations will be realized. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto and the comparative summary of selected financial data appearing elsewhere in this report. Historical results and trends which might appear should not be taken as indicative of future operations. Our results of operations and financial condition, as reflected in the accompanying consolidated 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 REIT organized under the Texas Business Organizations Code. We, and our predecessor entity, began the ownership and development of shopping centers and other commercial real estate in 1948 . Our primary business is leasing space to tenants in the shopping centers we own or lease. We also provide property management services for which we charge fees to either joint ventures where we are partners or other outside owners.
We operate a portfolio of rental properties, primarily neighborhood and community shopping centers, totaling approximately 45.3 million square feet of gross leasable area, that is either owned by us or others. We have a diversified tenant base with our largest tenant comprising only 3.6% of base minimum rental revenues during 2015 .
At March 31, 2015 , we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 232 developed income-producing properties and three properties under development, which are located in 20 states spanning the country from coast to coast.
We also owned interests in 34 parcels of land held for development that totaled approximately 25.3 million square feet at March 31, 2015 .
We had approximately 5,800 leases with 3,900 different tenants at March 31, 2015 . 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 real estate taxes, and additional rent payments based on a percentage of the tenants’ sales. 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 the 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.

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Table of Contents

Our goal is to remain a leader in owning and operating top-tier neighborhood and community shopping centers in certain markets of the United States. Our strategic initiatives include: (1) raising net asset value and cash flow through quality acquisitions, redevelopments and new developments, (2) maintaining a strong, flexible consolidated balance sheet and a well-managed debt maturity schedule and (3) growing net operating income from our existing portfolio by increasing occupancy and rental rates. We believe these initiatives will keep our portfolio of properties among the strongest in our sector.
We recycle non-core operating centers that no longer meet our ownership criteria and that will provide capital for growth opportunities. During the first three months of 2015 , we successfully disposed of real estate assets with our share of aggregate gross sales proceeds totaling $35.6 million , which were owned by us either directly or through our interest in real estate joint ventures or partnerships. We expect to complete dispositions in the range of $125 million to $175 million in 2015, but we can give no assurances that this will actually occur. We have approximately $67.9 million of dispositions currently under contracts or letters of intent; however, there are no assurances that these transactions will close. Subsequent to March 31, 2015, we sold two centers and other property with aggregate gross sales proceeds totaling $9.3 million , which were owned by us either directly or through our interest in real estate joint ventures or partnerships.
As we are generally selling lower-tier, non-core assets, potential buyers requiring financing for such acquisitions may find access to capital an issue, especially if long-term interest rates rise, but conditions are currently very good. We intend to continue to recycle capital according to our business plan, although a number of factors, including weaknesses in the secured lending markets or a downturn in the economy, could adversely impact our ability to execute this plan.
We continue to actively seek acquisition opportunities to grow our operations. Despite substantial competition for quality opportunities, we will continue to identify select acquisition properties that meet our return hurdles and to actively evaluate other opportunities as they enter the market. During the first three months of 2015, we acquired two centers with a total gross purchase price of $92.1 million . For 2015, we expect to invest in acquisitions in the range of $200 million to $250 million, but we can give no assurances that this will actually occur. Subsequent to March 31, 2015, we acquired one center with a gross purchase price of $53.5 million .
We continue to focus on identifying new development projects as another source of growth. Although we have only seen a few viable projects, a lack of supply in new retail space, combined with an increase in supermarket sales, has driven an increase in new development activity and retailer interest, which we believe is a positive trend. During the first three months of 2015 , we have invested $6.7 million in four on-going new development projects. For 2015, we expect to invest in new developments in the range of $50 million to $100 million, but we can give no assurances that this will actually occur.
In addition, we continue to look for internal growth opportunities. Currently, we have 10 redevelopment projects in which we plan to invest approximately $59.4 million over the next 24 months. Additionally, during the first three months of 2015, we completed four redevelopment projects, which has added approximately 48,600 incremental square feet to the total portfolio, with an incremental investment totaling $8.8 million. Upon completion, the average projected stabilized return on our incremental investment on these redevelopment projects is expected to range between 10% to 15%.
We strive to maintain a strong, conservative capital structure which should provide ready access to a variety of attractive long and short-term capital sources. We carefully balance lower cost short-term financing with long-term liabilities associated with acquired or developed long-term assets. In March 2015, we entered into a $200 million unsecured term loan with floating borrowing rates at a margin above LIBOR, but have been swapped to a fixed rate of 2.6% . The borrowing margin is priced off a grid in accordance with our senior unsecured credit ratings. The term loan matures on March 2, 2020, and we have the option to repay the loan without penalty at any time. Additionally, this loan contains an accordion feature which allows us to increase the loan amount up to an additional $100 million. We used the proceeds from the loan to repay amounts outstanding under our unsecured revolving credit facility. Additionally, we extended the maturity of an existing $66 million secured note to 2025 and reduced the interest rate associated with this note from 7.4% to 3.5% with approximately $6.1 million of debt extinguishment costs being realized. These transactions have decreased our interest costs by replacing high-cost debt with considerably lower rate debt.
Also during February 2015, we entered into an ATM equity offering program. This program authorizes us to sell up to $200 million of common shares, in amounts and at times as we determine, at prices determined by the market at the time of sale. We intend to use the net proceeds for general trust purposes, which may include reducing borrowings under our $500 million unsecured revolving credit facility, repaying other indebtedness or repurchasing outstanding debt or equity securities.

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Table of Contents

Subsequent to March 31, 2015, we called our remaining outstanding 6.5% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest with an aggregate redemption value of $150 million , which will settle on May 8, 2015 and will be funded through existing resources and may include any or a combination of cash on hand, including proceeds from our ATM program, and borrowings under our revolving credit facilities. Upon the redemption of these shares, we expect the related original issuance costs of approximately $9.8 million to be reported as a deduction in arriving at net income attributable to common shareholders. Also, we entered into two forward-starting contracts with an aggregate notional amount of $215 million hedging future fixed-rate debt issuances. These contracts are effective in May 2015 , mature in May 2025 and fix the 10 -year swap rates at 2.0% per annum.
We believe that these transactions should continue to strengthen our consolidated balance sheet and further enhance our access to various sources of capital, while reducing our cost of capital. While the availability of capital has improved over the past few years, there can be no assurance that favorable pricing and availability will not deteriorate in the future.
Operational Metrics
In assessing the performance of our centers, management carefully monitors various operating metrics of the portfolio. As a result of our strong leasing activity, low tenant fallout and lack of quality retail space in the market, the operating metrics of our portfolio strengthened in 2015 as we focused on increasing occupancy and same property net operating income ("SPNOI" and see Non-GAAP Financial Measures for additional information). Our portfolio delivered solid operating results with:
•
improved occupancy to 95.5% for the three months ended March 31, 2015 over the same period of 2014 of 94.5%;
•
an increase of 4.2% in SPNOI for the three months ended March 31, 2015 over the same period of 2014; and
•
rental rate increases of 9.2% for new leases and 8.9% for renewals were realized during the three months ended March 31, 2015.
Below are performance metrics associated with our signed occupancy, SPNOI growth and leasing activity on a pro rata basis:
 
March 31,
 
2015
 
2014
Anchor (space of 10,000 square feet or greater)
98.7
%
 
98.3
%
Non-Anchor
90.3
%
 
88.3
%
Total Occupancy
95.5
%
 
94.5
%
 
Three Months Ended 
 March 31, 2015
SPNOI Growth (1)
4.2
%
_______________
(1)
See Non-GAAP Financial Measures for a definition of the measurement of SPNOI and a reconciliation to operating income within this section of Item 2.

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Table of Contents

 
Number
of
Leases
 
Square
Feet
('000's)
 
Average
New
Rent per
Square
Foot ($)
 
Average
Prior
Rent per
Square
Foot ($)
 
Average Cost
of Tenant
Improvements
per Square
Foot ($)
 
Change in
Base Rent
on Cash
Basis
Leasing Activity:
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2015
 
 
 
 
 
 
New leases (1)
49

 
142

 
$
18.84

 
$
17.26

 
$
24.69

 
9.2
%
Renewals
167

 
1,064

 
13.50

 
12.40

 
—

 
8.9
%
Not comparable spaces
55

 
182

 
 
 
 
 
 
 
 
Total
271

 
1,388

 
$
14.13

 
$
12.97

 
$
2.91

 
8.9
%
_______________
(1)
Average external lease commissions per square foot for the three months ended March 31, 2015 were $4.90.
While we will continue to monitor the economy and the effects on our tenants, over the long-term, we believe the significant diversification of our portfolio, both geographically and by tenant base, and the quality of our portfolio will allow us to further increase occupancy levels slightly; however, occupancy may oscillate over the next several quarters as we continue to maximize our long-term portfolio value by repositioning some of our anchor space. A reduction in quality retail space available contributed to the increase in overall rental rates on a same-space basis as we completed new leases and renewed existing leases. Leasing volume is anticipated to decline as we have less vacant space available for leasing. Our expectation is that SPNOI will average between 2.5% to 3.5% for 2015.
New Development
At March 31, 2015 , we had four projects under development. We have funded $89.5 million through March 31, 2015 on these projects, and we estimate our aggregate net investment upon completion to be $155.9 million . Overall, the average projected stabilized return on investmen t for these properties is expected to be approximately 7.8% upon completion.
We had approximately $103.2 million in land held for development at March 31, 2015 . While we are experiencing a greater interest from retailers and other market participants in our land held for development, opportunities for economically viable developments remain scarce. We intend to continue to pursue additional development and redevelopment opportunities in multiple markets; however, finding the right opportunities remains challenging.
Acquisitions and Joint Ventures
Acquisitions are a key component of our long-term growth strategy. The availability of quality acquisition opportunities in the market remains sporadic in our targeted markets. Intense competition, along with a decline in the volume of high-quality core properties on the market, has in many cases driven pricing to pre-recession highs. We remain disciplined in approaching these opportunities, pursuing only those t hat provide appropriate risk-adjusted returns.
Dispositions
Dispositions are also a key component of our ongoing management process where we selectively prune properties from our portfolio that no longer meet our geographic or growth targets. Dispositions provide capital, which may be recycled into properties that are high barrier-to-entry locations within high growth metropolitan markets, and thus have higher long-term growth potential. Additionally, proceeds from dispositions may be used to reduce outstanding debt, further deleveraging our consolidated balance sheet.
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 GAAP. 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.

27

Table of Contents

A disclosure of our critical accounting policies which affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements is included in our Annual Report on Form 10-K for the year ended December 31, 2014 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no significant changes to our critical accounting policies during 2015 . See the Newly Issued Accounting Pronouncements section below for the impact of accounting pronouncements that have been issued, but not yet adopted.
Results of Operations
Comparison of the Three Months Ended March 31, 2015 to the Three Months Ended March 31, 2014
The following table is a summary of certain items in income from continuing operations from our Condensed Consolidated Statements of Operations, which we believe represent items that significantly changed during the first quarter of 2015 as compared to the same period in 2014 :
 
Three Months Ended March 31,
 
2015
 
2014
 
Change
 
% Change
Revenues
$
125,599

 
$
127,592

 
$
(1,993
)
 
(1.6
)%
Depreciation and amortization
36,151

 
40,624

 
(4,473
)
 
(11.0
)
Operating expenses
22,585

 
24,615

 
(2,030
)
 
(8.2
)
General and administrative expenses
7,372

 
5,913

 
1,459

 
24.7

Interest expense, net
26,458

 
24,580

 
1,878

 
7.6

Interest and other income, net
2,722

 
1,994

 
728

 
36.5

Gain on sale and acquisition of real estate joint
venture and partnerships interests
861

 
—

 
861

 
—

Equity in earnings of real estate joint
ventures and partnerships, net
5,372

 
4,402

 
970

 
22.0

Revenues
The decrease in revenues of $2.0 million is primarily attributable to our dispositions in 2015 and 2014 that totaled $10.1 million, which is offset by an increase in our acquisitions and new development completions totaling $2.6 million, as well as increases in occupancy and rental rates.
Depreciation and Amortization
The decrease of $4.5 million is primarily attributable to the acceleration of depreciation totaling $3.6 million in the first quarter of 2014 for a redevelopment project.
Operating Expenses
The decrease of $2.0 million is primarily attributable to our dispositions in 2014 and 2015.
General and Administrative Expenses
The increase of $1.5 million is primarily attributable to an increase in share-based compensation and a reduction in the capitalization allocation of overhead primarily associated with our leasing department.

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Table of Contents

Interest Expense, net
Net interest expense decreased $1.9 million or 7.6%. The components of net interest expense were as follows (in thousands): 
 
Three Months Ended 
 March 31,
 
2015
 
2014
Gross interest expense
$
20,632

 
$
24,933

Extinguishment of debt
6,100

 
—

Amortization of debt deferred costs, net
745

 
705

Over-market mortgage adjustment
(188
)
 
(398
)
Capitalized interest
(831
)
 
(660
)
Total
$
26,458

 
$
24,580

Gross interest expense totaled $20.6 million during the first quarter of 2015, down $4.3 million or 17.3% from the first quarter of 2014. The decrease in gross interest expense is primarily attributable to a reduction in both the weighted average debt outstanding and interest rates as a result of the repayment of notes through the unsecured revolving credit facility, dispositions proceeds and proceeds from an ATM equity offering program. In the first quarter of 2015, the weighted average debt outstanding was $1.9 billion at a weighted average interest rate of 4.4% as compared to $2.1 billion outstanding at a weighted average interest rate of 4.7% in the same period of 2014. The extinguishment of debt totaling $6.1 million is associated with the refinancing of a $66 million secured note.
Interest and Other Income, net
The increase of $.7 million is primarily attributable a $.5 million increase in the fair value of assets held in a grantor trust related to our deferred compensation plan and a $1.7 million litigation settlement received in 2015, which is offset by a $1.5 million repayment of a note receivable in the prior period.
Gain on Sale and Acquisition of Real Estate Joint Ventures and Partnerships Interests
The increase of $.9 million is attributable to our return of equity associated with an unconsolidated joint venture's disposition of its real estate property in the first quarter of 2015.
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
The increase of $1.0 million is primarily attributable to our share of a gain in the first quarter of 2015 associated with the disposition of a single property .
Capital Resources and Liquidity
Our primary operating liquidity needs are paying our share dividends, maintaining and operating our existing properties, paying our debt service costs, excluding debt maturities, and funding capital expenditures. Under our 2015 business plan, cash flows from operating activities are expected to meet these planned capital needs.
The primary sources of capital for funding any debt maturities, acquisitions and new development are our excess cash flow generated by our operating properties; credit facilities; proceeds from both secured and unsecured debt issuances; proceeds from common and preferred equity issuances; and cash generated from the sale of property and the formation of joint ventures. Amounts outstanding under the unsecured revolving credit facility are retired as needed with proceeds from the issuance of long-term debt, common and preferred equity, cash generated from the disposition of properties and cash flow generated by our operating properties.
As of March 31, 2015 , we had an available borrowing capacity of $391.8 million under our unsecured revolving credit facility, and our remaining debt maturities for 2015 total $114.1 million . We repaid $90 million of medium term notes during the first three months of 2015, which was funded through our unsecured revolving credit facility.
In March 2015, we entered into a $200 million unsecured term loan with floating borrowing rates at a margin above LIBOR, but have been swapped to a fixed rate of 2.6% . The borrowing margin is priced off a grid in accordance with our senior unsecured credit ratings. The term loan matures on March 2, 2020, and we have the option to repay the loan without penalty at any time. Additionally, this loan contains an accordion feature which allows us to increase the loan amount up to an additional $100 million. We used the proceeds from the loan to repay amounts outstanding under our unsecured revolving credit facility.

29

Table of Contents

Also during February 2015, we entered into an ATM equity offering program. This program authorizes us to sell up to $200 million of common shares, in amounts and at times as we determine, at prices determined by the market at the time of sale. We intend to use the net proceeds for general trust purposes, which may include reducing borrowings under our $500 million unsecured revolving credit facility, repaying other indebtedness or repurchasing outstanding debt or equity securities. As of March 31, 2015 , we received gross proceeds of $29.4 million for common shares sold under this ATM equity program.
Subsequent to March 31, 2015, we called our remaining outstanding 6.5% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest with an aggregate redemption value of $150 million , which will settle on May 8, 2015 and will be funded through existing resources and may include any or a combination of cash on hand, including proceeds from our ATM program, and borrowings under our revolving credit facilities. Also, an additional 319,600 common shares were sold under the ATM equity program with gross proceeds totaling $11.4 million .
We believe net proceeds from these transactions and planned capital recycling, combined with our available capacity under the credit facilities, will provide adequate liquidity to fund our capital needs, including acquisitions and new development activities. In the event our capital recycling program does not progress as expected, we believe other debt and equity alternatives are available to us. Although external market conditions are not within our control, we do not currently foresee any reason that would prevent us from entering the capital markets if needed.
During the first three months of 2015 , aggregate gross sales proceeds from our dispositions totaled $35.6 million . Operating cash flows from dispositions are included in net cash from operating activities in our Consolidated Statements of Cash Flows, while proceeds from dispositions are included as investing activities.
We have non-recourse debt secured by acquired or developed properties held in several of our real estate joint ventures and partnerships. Off-balance sheet mortgage debt for our unconsolidated real estate joint ventures and partnerships totaled $376.9 million , of which our pro rata ownership is $154.4 million , at March 31, 2015 . Scheduled principal mortgage payments on this debt, excluding non-cash related items totaling $1.1 million , at 100% are as follows (in millions): 
2015 remaining
$
73.7

2016
110.9

2017
56.8

2018
6.3

2019
6.6

Thereafter
121.5

Total
$
375.8

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 contracts 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 our joint venture partners’ consent or a third party consent for assets held in special purpose entities that are 100% owned by us.
Investing Activities
Acquisitions
During 2015 , we acquired two centers with a total gross purchase price of $92.1 million .
Dispositions
During 2015 , we sold four centers and other property, including real estate assets through our interest in unconsolidated real estate joint ventures and partnerships. Our share of aggregate gross sales proceeds from these transactions totaled $35.6 million and generated our share of the gains of approxima tely $23.9 million.
New Development
At March 31, 2015 , we had four projects under development with a total square footage of approximately .7 million , of which we have funded $89.5 million through March 31, 2015 on these projects. Upon completion, we expect our aggregate net investme nt in these properties to be $155.9 million .

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Our new development projects are financed generally under our unsecured revolving credit facility, as it is our general practice not to use third party construction financing. Management monitors amounts outstanding under our unsecured revolving credit facility and periodically pays down such balances using cash generated from operations, from debt issuances, from common and preferred share issuances and from the disposition of properties.
Capital Expenditures
Capital expenditures for additions to the existing portfolio, acquisitions, tenant improvements, new development and our share of investments in unconsolidated real estate joint ventures and partnerships are as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Acquisitions
$
91,487

 
$
—

Tenant Improvements
5,930

 
5,853

New Development
7,454

 
3,592

Capital Improvements
1,206

 
1,576

Other (includes certain redevelopment costs)
2,811

 
4,225

Total
$
108,888

 
$
15,246

The increase in capital expenditures is attributable primarily to the 2015 acquisition activity.
For 2015 , we anticipate our acquisitions to total between $200 million and $250 million. We anticipate our 2015 tenant improvement expenditures to be consistent with 2014. Our new development investment for 2015 is estimated to be approximately $50 million to $100 million. For 2015 , capital improvement spending is expected to be consistent with 2014 expenditures. No assurances can be provided that our planned capital activities will occur. Further, we have entered into commitments aggregating $65.1 million comprised principally of construction contracts which are generally due in 12 to 36 months and anticipated to be funded under our unsecured revolving credit facility.
Capital expenditures for additions described above relate to cash flows from investing activities as follows(in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Acquisition of real estate and land
$
91,487

 
$
—

Development and capital improvements
17,401

 
14,494

Real estate joint ventures and partnerships - Investments
—

 
752

Total
$
108,888

 
$
15,246

Capitalized soft costs, including payroll and other general and administrative costs, interest and real estate taxes, totaled $2.5 million and $2.4 million for the three months ended March 31, 2015 and 2014 , respectively.
Financing Activities
Debt
Total debt outstanding was $1.9 billion at March 31, 2015 and included $1.7 billion which bears interest at fixed rates and $200.8 million , including the effect of $64.9 million of interest rate contracts, which bears interest at variable rates. Additionally, of our total debt, $572.5 million was secured by operating properties while the remaining $1.4 billion was unsec ured.
At March 31, 2015 , we have a $500 million unsecured revolving credit facility which expires in April 2017 and provides borrowing rates that float at a margin over LIBOR plus a facility fee. At March 31, 2015 , the borrowing margin and facility fee, which are priced off a grid that is tied to our senior unsecured credit ratings, were 115 and 20 basis points, respectively. The facility also contains a competitive bid feature that allows us to request bids for up to $250 million . Additionally, an accordion feature allows us to increase the facility amount up to $700 million . As of April 30, 2015 , we had $120.0 million outstanding, and the available balance was $375.8 million , ne t of $4.2 million in outstanding letters of credit.

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Effective March 2015 , we entered into an agreement with a bank for an unsecured short-term facility totaling $20 million that we maintain for cash management purposes which matures in March 2016 . The facility provides for fixed interest rate loans at a 30 -day LIBOR rate plus a borrowing margin and facility fee of 125 and 10 basis points, respectively. As of April 30, 2015 , we ha d no amounts out standing.
For the three months ended March 31, 2015 , the maximum balance and weighted average balance outstanding under both facilities combined were $243.0 million and $167.5 million , respectively, at a weighted average interest rate of .9% .
In March 2015, we entered into a $200 million unsecured term loan with floating borrowing rates at a margin above LIBOR, but have been swapped to a fixed rate of 2.6% . The borrowing margin is priced off a grid in accordance with our senior unsecured credit ratings. The term loan matures on March 2, 2020, and we have the option to repay the loan without penalty at any time. Additionally, this loan contains an accordion feature which allows us to increase the loan amount up to an additional $100 million. We used the proceeds from the loan to repay amounts outstanding under our unsecured revolving credit facility.
During the first three months of 2015 , we repaid $90 million of medium term notes, which was funded through our unsecured revolving credit facility. Additionally, we amended an existing $66 million secured note by extending the maturity to 2025 and by reducing the interest rate from 7.4% to 3.5% . In connection with this transaction, we have recorded $6.1 million of debt extinguishment costs.
Our five most restrictive covenants include debt to assets, secured debt to assets, fixed charge and unencumbered interest coverage and debt yield ratios. We are not aware of any non-compliance with our public debt and revolving credit facility covenants as of March 31, 2015 .
Our most restrictive public debt covenant ratios, as defined in our indenture and supplemental indenture agreements, were as follows at March 31, 2015 :
Covenant
 
Restriction
 
Actual
Debt to Asset Ratio
 
Less than 60.0%
 
41.4%
Secured Debt to Asset Ratio
 
Less than 40.0%
 
12.2%
Annual Service Charge Ratio
 
Greater than 1.5
 
3.9
Unencumbered Asset Test
 
Greater than 150%
 
254.8%
At March 31, 2015 , we had two interest rate contracts, maturing through October 2017 , with an aggregate notional amount of $64.9 million that were designated as fair value hedges and convert fixed interest payments at rates of 7.5% to variable interest payments ranging from 4.25% to 4.28% .
At March 31, 2015 , we had four interest rate contracts with an aggregate notional amount of $205.2 million that were designated as cash flow hedges. These contracts mature through March 2020 and fix interest rates ranging from 1.5% to 2.4% . We have determined that these contracts are highly effective in offsetting future variable interest cash flows.
Subsequent to March 31, 2015, we entered into two forward-starting contracts with an aggregate notional amount of $215 million hedging future fixed-rate debt issuances. These contracts are effective in May 2015 , mature in May 2025 and fix the 10 -year swap rates at 2.0% per annum.
We could be exposed to losses in the event of nonperformance by the counter-parties related to our interest rate contracts; however, management believes such nonperformance is unlikely.
Equity
In February 2015 , our Board of Trust Managers approved an increase in our 2015 first quarter dividend on our common shares from $.325 to $.345 per share. Common and preferred dividends paid totaled $44.9 million during the first three months of 2015 . Our dividend payout ratio (as calculated as dividends paid on common shares divided by funds from operations (“FFO”) - basic) for the three months ended March 31, 2015 approximated 71.0%. FFO - basic for the three months ended March 31, 2015 included the following transactions; the extinguishment of debt costs, a litigation settlement gain, net of taxes and other non-cash items.

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Also during February 2015, we entered into an ATM equity offering program. This program authorizes us to sell up to $200 million of common shares, in amounts and at times as we determine, at prices determined by the market at the time of sale. We intend to use the net proceeds for general trust purposes, which may include reducing borrowings under our $500 million unsecured revolving credit facility, repaying other indebtedness or repurchasing outstanding debt or equity securities. As of the date of this filing, $159.2 million of common shares remained available for sale under this ATM equity program.
Subsequent to March 31, 2015 , we called our remaining outstanding 6.5% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest with an aggregate redemption value of $150 million , which will settle on May 8, 2015 and will be funded through existing resources and may include any or a combination of cash on hand, including proceeds from our ATM program, and borrowings under our revolving credit facilities. Upon the redemption of these shares, we expect the related original issuance costs of approximately $9.8 million to be reported as a deduction in arriving at net income attributable to common shareholders.
We have an effective universal shelf registration statement which expires in September 2017. We will continue to closely monitor both the debt and equity markets and carefully consider our available financing alternatives, including both public offerings and private placements.
Contractual Obligations
We have debt obligations related to our mortgage loans and unsecured debt, including any draws on our credit facilities. We have shopping centers that are subject to non-cancelable long-term ground leases where a third party owns and has leased the underlying land to us to construct and/or operate a shopping center. In addition, we have non-cancelable operating leases pertaining to office space from which we conduct our business. The table below excludes obligations related to our new development projects because such amounts are not fixed or determinable, and commitments aggregating $65.1 million comprised principally of construction contracts which are generally due in 12 to 36 months. The following table summarizes our primary contractual obligations as of March 31, 2015 (in thousands):
 
Remaining
 
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Mortgages and Notes
Payable (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured Debt
$
42,246

 
$
120,444

 
$
65,584

 
$
153,082

 
$
39,134

 
$
1,204,823

 
$
1,625,313

Secured Debt
135,764

 
117,807

 
135,252

 
62,371

 
63,776

 
156,810

 
671,780

Lease Payments
2,314

 
3,032

 
2,857

 
2,824

 
2,721

 
117,734

 
131,482

Other Obligations (2)
32,523

 
58,159

 
50

 
—

 
—

 
—

 
90,732

Total Contractual
Obligations
$
212,847

 
$
299,442

 
$
203,743

 
$
218,277

 
$
105,631

 
$
1,479,367

 
$
2,519,307

 
_______________
(1)
Includes principal and interest with interest on variable-rate debt calculated using rates at March 31, 2015 , excluding the effect of interest rate swaps. Also, excludes a $72.1 million debt service guaranty liability.
(2)
Other obligations include income and real estate tax payments, commitments associated with our secured debt and other employee payments. Included in 2015 is the estimated contribution to our retirement plan, which meets or exceeds the minimum statutory funding requirements. See Note 12 for additional information. Included in 2016 is a purchase obligation of $23.8 million . See Note 14 for additional information.
Related to a development project in Sheridan, Colorado, we have provided a guaranty for the payment of any debt service shortfalls on tax increment revenue bonds issued in connection with the project. The Sheridan Redevelopment Agency ("Agency") issued Series A bonds used for an urban renewal project, of which $72.1 million remain outstanding at March 31, 2015 . The bonds are to be repaid with incremental sales and property taxes and a PIF to be assessed on current and future retail sales and, to the extent necessary, any amounts we may have to provide under a guaranty. The incremental taxes and PIF are to remain intact until the earlier of the payment of the bond liability in full or 2040. The debt associated with this guaranty has been recorded in our consolidated financial statements as of March 31, 2015 .
Off-Balance Sheet Arrangements
As of March 31, 2015 , none of our off-balance sheet arrangements had a material effect on our liquidity or availability of, or requirement for, our capital resources. Letters of credit totaling $4.2 million were outstanding under the unsecured revolving credit facility at March 31, 2015 .

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We have entered into several unconsolidated real estate joint ventures and partnerships. Under many of these agreements, we and our joint venture partners are required to fund operating capital upon shortfalls in working capital. We have also committed to fund the capital requirements of new development joint ventures. As operating manager of most of these entities, we have considered these funding requirements in our business plan.
Reconsideration events, including changes in variable interests, could cause us to consolidate these joint ventures and partnerships. We continuously evaluate these events as we become aware of them. Some triggers to be considered are additional contributions required by each partner and each partner’s ability to make those contributions. Under certain of these circumstances, we may purchase our partner’s interest. Our material unconsolidated real estate joint ventures are with entities which appear sufficiently stable; however, if market conditions were to deteriorate and our partners are unable to meet their commitments, there is a possibility we may have to consolidate these entities. If we were to consolidate all of our unconsolidated real estate joint ventures, we would continue to be in compliance with our debt covenants.
As of March 31, 2015 , one unconsolidated real estate joint venture was determined to be a VIE through the issuance of a secured loan, since the lender had the ability to make decisions that could have a significant impact on the profitability of the entity. Our maximum risk of loss associated with this VIE was limited to $11.0 million at March 31, 2015 .
We are working with a developer of a mixed-use project in Washington and have executed an agreement to purchase the retail portion of the project for approximately $23.8 million at closing, which is estimated to be in August 2016 .
We have a real estate limited partnership agreement with a foreign institutional investor with a remaining potential obligation to purchase up to $240 million through December 31, 2015. Our ownership in this unconsolidated real estate limited partnership is 51%. To date, one property has been purchased.
Non-GAAP Financial Measures
Certain of our key performance indicators are considered non-GAAP financial measures. Management uses these measures along with our GAAP financial statements in order to evaluate our operating results. We believe these additional measures provide users of our financial information additional comparable indicators of our industry, as well as, our performance.
Funds from Operations
The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) attributable to common shareholders computed in accordance with GAAP, excluding extraordinary items and gains or losses from sales of operating real estate assets and interests in real estate equity investments, plus depreciation and amortization of operating properties and impairment of depreciable real estate and in substance real estate equity investments, including our share of unconsolidated real estate joint ventures and partnerships. We calculate FFO in a manner consistent with t he NAREIT definition.
We believe FFO is a widely recognized measure of REIT operating performance which provides our shareholders with a relevant basis for comparison among other REITs. Management uses FFO as a supplemental internal 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.

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Table of Contents

FFO is calculated as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Net income attributable to common shareholders
$
44,937

 
$
60,593

Depreciation and amortization
35,263

 
39,720

Depreciation and amortization of unconsolidated real
estate joint ventures and partnerships
3,510

 
3,700

Gain on sale of property and interests in real estate
equity investments
(23,333
)
 
(41,371
)
Gain on dispositions of unconsolidated real estate
joint ventures and partnerships
(562
)
 
(9
)
Funds from operations – basic
59,815

 
62,633

Income attributable to operating partnership units
481

 
456

Funds from operations – diluted
$
60,296

 
$
63,089

 
 
 
 
Weighted average shares outstanding – basic
122,126

 
121,401

Effect of dilutive securities:
 
 
 
Share options and awards
1,430

 
1,244

Operating partnership units
1,487

 
1,500

Weighted average shares outstanding – diluted
125,043

 
124,145

 
 
 
 
Funds from operations per share – basic
$
0.49

 
$
0.52

 
 
 
 
Funds from operations per share – diluted
$
0.48

 
$
0.51

Same Property Net Operating Income
We consider SPNOI to be a key indicator of our financial performance as it provides a better indication of the recurring cash return on our properties by excluding certain non-cash revenues and expenses, as well as other infrequent or one-time items. We believe a pro rata basis is the most useful measurement as it provides our proportional share of SPNOI from all owned properties, including our share of SPNOI from unconsolidated joint ventures and partnerships, which cannot be readily determined under GAAP measurements and presentation. Although SPNOI is a widely used measure among REITs, there can be no assurance that SPNOI presented by us is comparable to similarly titled measures of other REITs .

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Table of Contents

Properties are included in the SPNOI calculation if they are owned and operated for the entirety of the most recent two fiscal year periods, except for properties for which significant redevelopment or expansion occurred during either of the periods presented, and properties classified as discontinued operations. While there is judgment surrounding changes in designations, we move new development and redevelopment properties once they have stabilized, which is typically upon attainment of 90% occupancy. A rollforward of the properties included in our same property designation is as follows:
 
Three Months Ended 
 March 31, 2015
Beginning of the period
218

Properties added:
 
Acquisitions
4

New Developments
1

Redevelopments
1

Properties removed:
 
Dispositions
(4
)
Redevelopments
(4
)
End of the period
216

We calculate SPNOI using operating income as defined by GAAP excluding property management fees, certain non-cash revenues and expenses such as straight-line rental revenue and the related reversal of such amounts upon early lease termination, depreciation, amortization, impairment losses, general and administrative expenses, acquisition costs and other nonrecurring items such as lease cancellation income, environmental abatement costs and demolition expenses. Consistent with the capital treatment of such costs under GAAP, tenant improvements, leasing commissions and other direct leasing costs are excluded from SPNOI. A reconciliation of operating income to SPNOI is as follows (in thousands):
 
Three Months Ended 
 March 31,
 
2015
 
2014
Operating Income
$
44,864

 
$
41,791

Less:
 
 
 
Revenue adjustments (1)
3,352

 
1,444

Add:
 
 
 
Property management fees
936

 
928

Depreciation and amortization
36,151

 
40,624

General and administrative
7,372

 
5,913

Acquisition costs
204

 
17

Other (2)
50

 
499

Net Operating Income
86,225

 
88,328

Less: NOI related to consolidated entities not defined as same property and noncontrolling interests
(6,923
)
 
(12,141
)
Add: Pro rata share of unconsolidated entities defined as same property
9,598

 
9,127

Same Property Net Operating Income
$
88,900

 
$
85,314

_______________
(1)
Revenue adjustments consist primarily of straight-line rentals, lease cancellation income and fee income primarily from real estate joint ventures and partnerships.
(2)
Other includes it ems such as environmental abatement costs and demolition expenses.

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Newly Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." This ASU's core objective is for an entity to recognize revenue based on the consideration it expects to receive in exchange for goods or services. Additionally, this ASU requires entities to use a single model in accounting for revenues derived from contracts with customers. ASU No. 2014-09 replaces prior guidance regarding the recognition of revenue from sales of real estate except for revenue from sales that are part of a sale-leaseback transaction. The provisions of ASU No. 2014-09 are effective for us on January 1, 2017 with a tentative deferral until January 1, 2018, and are required to be applied either on a retrospective or a modified retrospective approach. We are currently assessing the impact, if any, that the adoption of this ASU will have on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern." This ASU's core objective is that management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued or are available to be issued. The provisions of ASU No. 2014-15 are effective for us as of December 31, 2016, and early adoption is permitted. We do not expect the adoption of this update to have any impact to our consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, "Amendments to the Consolidation Analysis." This ASU amends the consolidation analysis required under GAAP and requires management to reevaluate all previous consolidation conclusions. ASU No. 2015-02 considers limited partnerships as VIEs, unless the limited partners have either substantive kick-out or participating rights. The presumption that a general partner should consolidate a limited partnership has also been eliminated. The ASU amends the effect that fees paid to a decision maker or service provider have on the consolidation analysis, as well as amends how variable interests held by a reporting entity's related parties affect the consolidation conclusion. The ASU also clarifies how to determine whether equity holders as a group have power over an entity. The provisions of ASU No. 2015-02 are effective for us as of January 1, 2016, and early adoption is permitted. We are currently assessing the impact, if any, that the adoption of this ASU will have on our consolidated financial statements.
In April 2015, the FASB issued ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs." The ASU requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, and amortization of the debt issuance costs will continue to be reported as interest expense. The provisions of ASU No. 2015-03 are effective for us as of January 1, 2016, and are required to be applied retrospectively. Early adoption of ASU No. 2015-03 is permitted. We do not expect the adoption of this update to have any impact on our consolidated statements of operations or cash flows; however, the presentation requirements under this ASU will impact certain line items of our consolidated balance sheet. As of March 31, 2015 and December 31, 2014 , the impact would include a decrease to both Unamortized Debt and Lease Costs, net and Debt, net of $11.0 million and $10.5 million , respectively.
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 contracts with major financial institutions. These agreements expose us to credit risk in the event of non-performance by the counter-parties. We do not engage in the trading of derivative financial instruments in the normal course of business. At March 31, 2015 , we had fixed-rate debt of $1.7 billion and variable-rate debt of $200.8 million , after adjusting for the net effect of $64.9 million notional amount of interest rate contracts. In the event interest rates were to increase 100 basis points and holding all other variables constant, annual net income and cash flows for the following year would decrease by approximately $2.0 million associated with our variable-rate debt, including the effect of the interest rate contracts. The effect of the 100 basis points increase would decrease the fair value of our variable-rate and fixed-rate debt by approximately $3.5 million and $102.1 million, respectively.
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 Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of March 31, 2015 . Based on that evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2015 .

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There has been no change to our internal control over financial reporting during the quarter ended March 31, 2015 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 the amounts involved, our management and counsel believe that when such litigation is resolved, our resulting liability, if any, will not have a material effect on our consolidated financial statements.
ITEM 1A.  Risk Factors
We have no material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2014 .
ITEM 2.     Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Repurchases of our common shares for the quarter ended March 31, 2015 are as follows:
 
 
(a)
 
(b)
 
(c)
 
(d)
Period
 
Total
Number
of Shares
Purchased (1)
 
Average
Price Paid
Per Share
 
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Program
 
Maximum
Number of
Shares that
May Yet be
Purchased
Under the
Program
January 1, 2015 to January 31, 2015
 
7,380

 
$
38.00

 
 
 
 
February 1, 2015 to February 28, 2015
 
41,530

 
35.97

 
 
 
 
March 1, 2015 to March 31, 2015
 
4,261

 
35.96

 
 
 
 
_______________
(1)
Common shares surrendered or deemed surrendered to us to satisfy such employees' tax withholding obligations in connection with the vesting and/or exercise of awards under our equity-based compensation plans.
ITEM 3.     Defaults Upon Senior Securities
None.
ITEM 4.     Mine Safety Disclosures
Not applicable.
ITEM 5.     Other Information
Not applicable.
ITEM 6.     Exhibits
The exhibits required by this item are set forth on the Exhibit Index attached hereto.

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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
 
 
President and Chief Executive Officer
 
 
 
 
By:
/s/ Joe D. Shafer
 
 
Joe D. Shafer
 
 
Senior Vice President/Chief Accounting Officer
 
 
(Principal Accounting Officer)
DATE: May 4, 2015

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EXHIBIT INDEX
(a)
 
Exhibits:
 
 
 
10.1
—
Term Loan Agreement dated March 2, 2015 among Weingarten Realty Investors, the Lenders Party Hereto and Regions Bank, as Administrative Agent, Region Capital Markets, a division of Regions Bank and U.S. Bank National Association, as Joint Lead Arrangers and Joint Bookrunners, and U.S. Bank National Association, as Syndication Agent (filed as Exhibit 10.1 to WRI’s Form 8-K on March 3, 2015 and incorporated herein by reference).
10.2*
—
Sixth Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement Plan and Weingarten Realty Investors Retirement Benefit Restoration Plan dated March 11, 2015.
31.1*
—
Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
31.2*
—
Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
32.1**
—
Certification pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
32.2**
—
Certification pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
101.INS**
—
XBRL Instance Document
101.SCH**
—
XBRL Taxonomy Extension Schema Document
101.CAL**
—
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**
—
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**
—
XBRL Taxonomy Extension Labels Linkbase Document
101.PRE**
—
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
*
Filed with this report.
 
**
Furnished with this report.


40



Exhibit 10.2



March 11, 2015


SIXTH AMENDMENT TO PROMISSORY NOTE


This Sixth Amendment to Promissory Note (this “Amendment”) is to be effective as of the close of business March 11, 2015, or as otherwise stated herein.

WHEREAS, the undersigned are parties to that certain Promissory Note (as the same has been and may be hereafter renewed, amended, modified, or extended, the “Note”) dated as of March 12, 2009 in the original amount of $12,910,386.14, made by WEINGARTEN REALTY INVESTORS (“Weingarten”), a Texas real estate investment trust, and payable to the order of RELIANCE TRUST COMPANY, as Trustee of the Master Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement Plan and Weingarten Realty Investors Retirement Benefit Restoration Plan (“Reliance”); and

WHEREAS, the scheduled maturity date of the Note is March 12, 2015; and

WHEREAS, the parties desire to extend the maturity date under the Note to a date one year from the date of its currently-scheduled maturity; and

WHEREAS, the parties desire to amend the Note to reflect this change and desire to memorialize the outstanding balance due under the Note as of March 11, 2015;

NOW, THEREFORE, it is agreed:

1.
The second paragraph of the Note shall be revised to be and read as follows:

“The entire unpaid balance of the Note, including accrued interest, shall be due and payable March 12, 2016.”

2.
As of the close of business March 11, 2015, the balance due under the Note, including accrued interest, is $9,378,645.58 .

In all other respects, the Note is hereby ratified and confirmed.

This instrument may be executed by the parties individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall together constitute one and the same instrument. Individuals authorized to enter into this amendment on behalf of Weingarten are identified on Exhibit A hereto.



Sixth Amendment to Promissory Note - 1



 
 
 
RELIANCE TRUST COMPANY
 
 
 
 
 
 
By:
/s/ Kimberly Lowe
 
 
Its (Title):
SVP
 
 
Date:
3/9/15



 
 
 
WEINGARTEN REALTY INVESTORS
 
 
 
 
 
 
By:
/s/ Stephen C. Richter
 
 
Its (Title):
Executive VP & CFO
 
 
Date:
 
                            



Sixth Amendment to Promissory Note - 2

Exhibit A

Individuals Authorized to Enter into the Sixth Amendment to Promissory Note
on behalf of Weingarten


Andrew M. Alexander
Stephen C. Richter

Sixth Amendment to Promissory Note - 3


EXHIBIT 31.1
CERTIFICATION
I, Andrew M. Alexander, certify that:
1. I have reviewed this report on Form 10-Q of Weingarten Realty Investors;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
BY:
/s/ Andrew M. Alexander
 
 
Andrew M. Alexander
 
 
President/Chief Executive Officer
 
May 4, 2015




EXHIBIT 31.2
CERTIFICATION
I, Stephen C. Richter, certify that:
1. I have reviewed this report on Form 10-Q of Weingarten Realty Investors;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
BY:
/s/ Stephen C. Richter
 
 
Stephen C. Richter
 
 
Executive Vice President/Chief Financial Officer
 
May 4, 2015




EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Weingarten Realty Investors (the “Company”) on Form 10-Q for the period ended March 31, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew M. Alexander, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
BY:
/s/ Andrew M. Alexander
 
 
Andrew M. Alexander
 
 
President/Chief Executive Officer
 
May 4, 2015




EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Weingarten Realty Investors (the “Company”) on Form 10-Q for the period ended March 31, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen C. Richter, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
BY:
/s/ Stephen C. Richter
 
 
Stephen C. Richter
 
 
Executive Vice President/Chief Financial Officer
 
May 4, 2015