UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
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)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Trading
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Name of Each Exchange on
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Common Shares of Beneficial Interest, $.03 par value |
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WRI |
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New York Stock Exchange |
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☒No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes☒No☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
⌧ |
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Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐No☒
As of July 30, 2020, there were 128,103,123 common shares of beneficial interest of Weingarten Realty Investors, $.03 par value, outstanding.
TABLE OF CONTENTS
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Financial Information: |
Page Number |
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3 |
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4 |
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Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 |
5 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 |
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7 |
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9 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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48 |
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49 |
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2
PART I-FINANCIAL INFORMATION
ITEM 1. Financial Statements
WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2020 |
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2019 |
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2020 |
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2019 |
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Revenues: |
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Rentals, net |
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$ |
95,813 |
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$ |
119,462 |
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$ |
203,863 |
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$ |
239,288 |
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Other |
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2,322 |
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3,198 |
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5,624 |
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6,510 |
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Total Revenues |
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98,135 |
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122,660 |
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209,487 |
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245,798 |
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Operating Expenses: |
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Depreciation and amortization |
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37,627 |
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34,967 |
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74,283 |
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68,939 |
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Operating |
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19,978 |
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22,767 |
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43,138 |
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47,015 |
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Real estate taxes, net |
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15,733 |
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15,736 |
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30,741 |
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31,867 |
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Impairment loss |
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— |
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— |
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44 |
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74 |
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General and administrative |
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12,920 |
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8,880 |
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15,227 |
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18,461 |
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Total Operating Expenses |
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86,258 |
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82,350 |
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163,433 |
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166,356 |
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Other Income (Expense): |
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Interest expense, net |
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(15,776) |
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(14,953) |
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(30,378) |
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(30,242) |
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Interest and other income (expense), net |
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5,293 |
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1,921 |
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(535) |
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6,305 |
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Gain on sale of property |
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7,898 |
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52,061 |
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21,474 |
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69,848 |
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Total Other (Expense) Income |
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(2,585) |
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39,029 |
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(9,439) |
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45,911 |
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Income Before Income Taxes and Equity in Earnings of Real Estate Joint Ventures and Partnerships |
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9,292 |
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79,339 |
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36,615 |
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125,353 |
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Provision for Income Taxes |
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(343) |
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(484) |
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(515) |
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(661) |
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Equity in Earnings of Real Estate Joint Ventures and Partnerships, net |
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3,428 |
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6,665 |
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30,525 |
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12,082 |
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Net Income |
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12,377 |
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85,520 |
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66,625 |
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136,774 |
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Less: Net Income Attributable to Noncontrolling Interests |
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(1,009) |
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(1,711) |
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(2,635) |
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(3,299) |
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Net Income Attributable to Common Shareholders |
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$ |
11,368 |
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$ |
83,809 |
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$ |
63,990 |
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$ |
133,475 |
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Earnings Per Common Share - Basic: |
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Net income attributable to common shareholders |
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$ |
0.09 |
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$ |
0.66 |
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$ |
0.50 |
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$ |
1.04 |
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Earnings Per Common Share - Diluted: |
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Net income attributable to common shareholders |
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$ |
0.09 |
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$ |
0.65 |
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$ |
0.50 |
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$ |
1.03 |
See Notes to Condensed Consolidated Financial Statements.
3
WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2020 |
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2019 |
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2020 |
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2019 |
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Net Income |
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$ |
12,377 |
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$ |
85,520 |
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$ |
66,625 |
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$ |
136,774 |
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Other Comprehensive Income: |
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Reclassification adjustment of derivatives and designated hedges into net income |
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(224) |
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(221) |
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(445) |
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(440) |
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Retirement liability adjustment |
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273 |
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299 |
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570 |
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587 |
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Total |
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49 |
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78 |
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125 |
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147 |
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Comprehensive Income |
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12,426 |
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85,598 |
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66,750 |
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136,921 |
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Comprehensive Income Attributable to Noncontrolling Interests |
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(1,009) |
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(1,711) |
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(2,635) |
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(3,299) |
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Comprehensive Income Adjusted for Noncontrolling Interests |
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$ |
11,417 |
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$ |
83,887 |
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$ |
64,115 |
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$ |
133,622 |
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See Notes to Condensed Consolidated Financial Statements.
4
WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share amounts)
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June 30, |
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December 31, |
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2020 |
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2019 |
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ASSETS |
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Property |
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$ |
4,202,337 |
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$ |
4,145,249 |
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Accumulated Depreciation |
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(1,156,304) |
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(1,110,675) |
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Property Held for Sale, net |
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24,421 |
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— |
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Property, net * |
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3,070,454 |
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3,034,574 |
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Investment in Real Estate Joint Ventures and Partnerships, net |
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401,724 |
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427,947 |
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Total |
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3,472,178 |
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3,462,521 |
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Unamortized Lease Costs, net |
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146,620 |
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148,479 |
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Accrued Rent, Accrued Contract Receivables and Accounts Receivable (net of allowance for doubtful accounts of $13,839 in 2020) * |
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73,760 |
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83,639 |
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Cash and Cash Equivalents * |
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14,203 |
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41,481 |
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Restricted Deposits and Escrows |
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14,063 |
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13,810 |
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Other, net |
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186,385 |
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188,004 |
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Total Assets |
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$ |
3,907,209 |
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$ |
3,937,934 |
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LIABILITIES AND EQUITY |
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Debt, net * |
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$ |
1,743,194 |
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$ |
1,732,338 |
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Accounts Payable and Accrued Expenses |
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97,776 |
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111,666 |
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Other, net |
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210,507 |
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217,770 |
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Total Liabilities |
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2,051,477 |
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2,061,774 |
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Commitments and Contingencies (see Note 12) |
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— |
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— |
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Equity: |
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Shareholders' Equity: |
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Common Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 275,000; shares issued and outstanding:128,103 in 2020 and 128,702 in 2019 |
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3,890 |
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3,905 |
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Additional Paid-In Capital |
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1,767,972 |
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1,779,986 |
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Net Income Less Than Accumulated Dividends |
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(85,008) |
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(74,293) |
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Accumulated Other Comprehensive Loss |
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(11,158) |
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(11,283) |
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Total Shareholders' Equity |
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1,675,696 |
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1,698,315 |
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Noncontrolling Interests |
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180,036 |
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177,845 |
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Total Equity |
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1,855,732 |
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1,876,160 |
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Total Liabilities and Equity |
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$ |
3,907,209 |
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$ |
3,937,934 |
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* Consolidated variable interest entities' assets and debt included in the above balances (see Note 13): |
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Property, net |
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$ |
195,886 |
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$ |
196,636 |
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Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net |
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9,071 |
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10,548 |
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Cash and Cash Equivalents |
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9,757 |
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8,135 |
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Debt, net |
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44,589 |
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44,993 |
See Notes to Condensed Consolidated Financial Statements.
5
WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Six Months Ended |
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June 30, |
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2020 |
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2019 |
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Cash Flows from Operating Activities: |
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Net Income |
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$ |
66,625 |
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$ |
136,774 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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74,283 |
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68,939 |
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Amortization of debt deferred costs and intangibles, net |
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1,392 |
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1,627 |
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Non-cash lease expense |
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|
641 |
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|
602 |
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Impairment loss |
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44 |
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|
74 |
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Equity in earnings of real estate joint ventures and partnerships, net |
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(30,525) |
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(12,082) |
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Gain on sale of property |
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(21,474) |
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(69,848) |
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Uncollectible revenue allowance |
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11,429 |
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— |
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Distributions of income from real estate joint ventures and partnerships |
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|
18,418 |
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|
9,508 |
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Changes in accrued rent, accrued contract receivables and accounts receivable, net |
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(1,812) |
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|
20,361 |
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Changes in unamortized lease costs and other assets, net |
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(1,925) |
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(11,791) |
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Changes in accounts payable, accrued expenses and other liabilities, net |
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(10,076) |
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(11,882) |
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Other, net |
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1,672 |
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|
2,404 |
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Net cash provided by operating activities |
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108,692 |
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|
134,686 |
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Cash Flows from Investing Activities: |
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Acquisition of real estate and land, net |
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(25,506) |
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(52,659) |
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Development and capital improvements |
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(78,258) |
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(95,895) |
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Proceeds from sale of property and real estate equity investments, net |
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|
58,448 |
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|
194,394 |
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Real estate joint ventures and partnerships - Investments |
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(4,391) |
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(24,355) |
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Real estate joint ventures and partnerships - Distribution of capital |
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17,520 |
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|
2,340 |
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Proceeds from investments |
|
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— |
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|
9,125 |
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Other, net |
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(1,513) |
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|
3,019 |
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Net cash (used in) provided by investing activities |
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(33,700) |
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|
35,969 |
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Cash Flows from Financing Activities: |
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Principal payments of debt |
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(20,123) |
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(3,173) |
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Changes in unsecured credit facilities |
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12,000 |
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(5,000) |
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Proceeds from issuance of common shares of beneficial interest, net |
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|
208 |
|
|
764 |
|
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Repurchase of common shares of beneficial interest, net |
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(18,219) |
|
|
— |
|
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Common share dividends paid |
|
|
(73,994) |
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|
(101,641) |
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Debt issuance and extinguishment costs paid |
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(6) |
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|
(310) |
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Distributions to noncontrolling interests |
|
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(1,594) |
|
|
(3,161) |
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Contributions from noncontrolling interests |
|
|
1,150 |
|
|
326 |
|
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Other, net |
|
|
(1,439) |
|
|
(1,521) |
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Net cash used in financing activities |
|
|
(102,017) |
|
|
(113,716) |
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Net (decrease) increase in cash, cash equivalents and restricted cash equivalents |
|
|
(27,025) |
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|
56,939 |
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Cash, cash equivalents and restricted cash equivalents at January 1 |
|
|
55,291 |
|
|
76,137 |
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|
Cash, cash equivalents and restricted cash equivalents at June 30 |
|
$ |
28,266 |
|
$ |
133,076 |
|
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Supplemental disclosure of cash flow information: |
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|
|
|
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Cash paid for interest (net of amount capitalized of $4,573 and $6,204, respectively) |
|
$ |
29,094 |
|
$ |
28,995 |
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Cash paid for income taxes |
|
$ |
793 |
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$ |
1,456 |
|
|
Cash paid for amounts included in operating lease liabilities |
|
$ |
1,555 |
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$ |
1,565 |
|
See Notes to Condensed Consolidated Financial Statements.
6
WEINGARTEN REALTY INVESTORS
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands, except per share amounts)
|
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|
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Six Months Ended June 30, 2020 |
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Common |
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|
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Net Income |
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Accumulated |
|
|
|
|
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|
|||
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Shares of |
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Additional |
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Less Than |
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Other |
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|
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Beneficial |
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Paid-In |
|
Accumulated |
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Comprehensive |
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Noncontrolling |
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|||||
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|
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Interest |
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Capital |
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Dividends |
|
Loss |
|
Interests |
|
Total |
||||||
|
Balance, January 1, 2020 |
|
$ |
3,905 |
|
$ |
1,779,986 |
|
$ |
(74,293) |
|
$ |
(11,283) |
|
$ |
177,845 |
|
$ |
1,876,160 |
|
Net income |
|
|
|
|
|
|
|
|
52,622 |
|
|
|
|
|
1,626 |
|
|
54,248 |
|
Shares repurchased and cancelled |
|
|
(25) |
|
|
(18,194) |
|
|
|
|
|
|
|
|
|
|
|
(18,219) |
|
Shares issued under benefit plans, net |
|
|
10 |
|
|
5,767 |
|
|
|
|
|
|
|
|
|
|
|
5,777 |
|
Cumulative effect adjustment of accounting standards |
|
|
|
|
|
|
|
|
(711) |
|
|
|
|
|
|
|
|
(711) |
|
Dividends paid – common shares ($.395 per share) |
|
|
|
|
|
|
|
|
(50,935) |
|
|
|
|
|
|
|
|
(50,935) |
|
Distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,301) |
|
|
(1,301) |
|
Contributions from noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,150 |
|
|
1,150 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
|
|
76 |
|
Balance, March 31, 2020 |
|
|
3,890 |
|
|
1,767,559 |
|
|
(73,317) |
|
|
(11,207) |
|
|
179,320 |
|
|
1,866,245 |
|
Net income |
|
|
|
|
|
|
|
|
11,368 |
|
|
|
|
|
1,009 |
|
|
12,377 |
|
Shares issued under benefit plans, net |
|
|
|
|
|
413 |
|
|
|
|
|
|
|
|
|
|
|
413 |
|
Dividends paid – common shares ($.18 per share) |
|
|
|
|
|
|
|
|
(23,059) |
|
|
|
|
|
|
|
|
(23,059) |
|
Distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(293) |
|
|
(293) |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
|
|
49 |
|
Balance, June 30, 2020 |
|
$ |
3,890 |
|
$ |
1,767,972 |
|
$ |
(85,008) |
|
$ |
(11,158) |
|
$ |
180,036 |
|
$ |
1,855,732 |
7
See Notes to Condensed Consolidated Financial Statements.
8
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 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 31.4 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 2.6% of base minimum rental revenues during the six months of 2020. Total revenues generated by our centers located in Houston and its surrounding areas was 20.1% of total revenue for the six months ended June 30, 2020, and an additional 9.6% of total revenue was generated during this period from centers that are located in other parts of Texas. Also, in Florida and California, an additional 20.9% and 17.3%, respectively, of total revenue was generated during the six months of 2020.
In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a pandemic. The impact of COVID-19 continues to evolve and most cities and states have imposed measures to control its spread including social distancing and limiting group gatherings. These measures have created risks and uncertainties surrounding our operations and geographic concentrations. The pandemic has resulted in, at certain locations, the closure or limited operations of non-essential businesses and consumer/employee stay-at-home provisions. Given this continually evolving situation, the duration and severity of these matters and their ultimate effect are uncertain at this time.
Basis of Presentation
Our condensed consolidated financial statements include the accounts of our subsidiaries, certain partially owned real estate joint ventures or partnerships and variable interest entities (“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, 2019 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 audited consolidated financial statements and related notes for the year ended December 31, 2019.
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 of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. We have evaluated subsequent events for recognition or disclosure in our condensed consolidated financial statements (see Note 15).
9
Leases
In April 2020, the Financial Accounting Standards Board ("FASB") published a Staff Q&A regarding Accounting for Lease Concessions Related to the Effects of the COVID-19 pandemic. As the pandemic is expected to result in numerous tenant rent and lease concessions, the intent of the publication was to provide relief to lessors in assessing whether a lease modification exists. The FASB publication provides for an election to bypass the lease-by-lease analysis and account for lease concessions, directly related to the effects of the COVID-19 pandemic, consistent with how those concessions would be accounted for as though enforceable rights and obligations for those concessions existed in the original contract. Accordingly, an entity would not have to analyze each contract to determine whether those rights exist in the contract and can elect to apply or not apply lease modification guidance to those contracts. Such election is required to be applied consistently to leases with similar characteristics and circumstances. This election is available for COVID-19 related concessions that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee and the total payments required by the modified lease are substantially the same as or less than total payments required by the original lease. As of April 1, 2020, we elected to not apply lease modification guidance to those contracts. As such, any lease deferral concessions will remain recorded in Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net, and rent abatements will be recorded as a reduction to Rentals, net in our consolidated financial statements. Subject to this guidance, as of June 30, 2020, we negotiated lease deferral concessions of $9.3 million and rent abatements of $.3 million (see Note 7 for additional information) that were granted to tenants related to the COVID-19 pandemic. Discussions are continuing with tenants as the effects of COVID-19 mandates evolve.
Accrued Rent, Accrued Contract Receivables and Accounts Receivable, net
Receivables are relatively short-term in nature with terms due in less than one year. Receivables include rental revenue, amounts billed and currently due from customer contracts and receivables attributable to straight-line rental commitments. Accrued contract receivables includes amounts due from customers for contracts that do not qualify as a lease in which we earned the right to the consideration through the satisfaction of the performance obligation, but before the customer pays consideration or before payment is due. Individual leases are assessed for collectability and upon the determination that the collection of rents is not probable, accrued rent and accounts receivables are reduced as an adjustment to rental revenues. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further, we assess whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical bad debt levels and current economic trends. An allowance for the uncollectible portion of the portfolio is recorded as an adjustment to rental revenues. Management’s estimate of the collectability of accrued rents and accounts receivable is based on the best information available to management at the time of evaluation.
The duration of the COVID-19 pandemic and its impact on our tenants’ operations, including, in some cases, their ability to resume operations once governmental and legislative restrictions are eased has caused uncertainty in our ongoing ability to collect rents when due. Considering the potential impact of these uncertainties, our collection assessment also took into consideration the type of retailer and current discussions with the tenants, as well as recent rent collection experience and tenant bankruptcies based on the best information available to management at the time of evaluation. For the three and six months ended June 30, 2020, we reduced rental revenues by $19.3 million and $28.7 million, respectively, due to lease related reserves and write-offs, which includes $4.8 million and $12.4 million, respectively, for straight-line rent receivables.
Restricted Deposits and Escrows
Restricted deposits are held or restricted for a specific use or in a qualified escrow account for the purposes of completing like-kind exchange transactions. Escrows consist of deposits held by third parties or lenders for a specific use, including capital improvements, rental income and taxes.
10
Our restricted deposits and escrows consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
2020 |
|
2019 |
||
|
Restricted deposits |
|
$ |
13,635 |
|
$ |
12,793 |
|
Escrows |
|
|
428 |
|
|
1,017 |
|
Total |
|
$ |
14,063 |
|
$ |
13,810 |
Other Assets, net
Other assets include an asset related to the debt service guaranty (see Note 5 for further information), tax increment revenue bonds, right-of-use assets, investments held in a grantor trust, deferred tax assets, the net value of above-market leases, deferred debt costs associated with our revolving credit facilities and other miscellaneous receivables. Right-of-use assets are amortized to achieve the recognition of rent expense on a straight-line basis after adjusting for the corresponding lease liabilities’ interest over the lives of the leases. Investments held in a grantor trust are adjusted to fair value at each period with changes included in our Condensed Consolidated Statements of Operations. Above-market leases are amortized as adjustments to rental revenues over terms of the acquired leases. Deferred debt costs, including those classified in debt, are amortized primarily on a straight-line basis, which approximates the effective interest rate method, over the terms of the debt. Other miscellaneous receivables are evaluated for credit risk and an allowance is established if there is an estimate for lifetime credit losses. These are based on available information, including historical loss information adjusted for current conditions and forecasts for future economic conditions. Prior to adoption of ASC No. 326, a reserve was applied to the carrying amount of other miscellaneous receivables when it became apparent that conditions existed that would lead to our inability to fully collect the outstanding amounts due. Such conditions included delinquent or late payments on receivables, deterioration in the ongoing relationship with the borrower and other relevant factors.
Our tax increment revenue bonds have been classified as held to maturity and are recorded at amortized cost offset by a recognized credit loss (see Note 14 for further information). Due to the recognized credit loss, interest on these bonds is recorded at an effective interest rate when cash payments are received. The bonds are evaluated for credit losses based on discounted estimated future cash flows. Any future receipts in excess of the amortized basis will be recognized as revenue when received. The credit risk associated with the amortized value of these bonds is low as the bonds are earmarked for repayments from sales and property taxes associated with a government entity. At June 30, 2020, no credit allowance has been recorded.
11
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined |
|
|
|
|
|
|
|
|
|
|
|
Benefit |
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
|
|
|
|
|
|
|
Gain on |
|
Plan- |
|
|
|
||
|
|
|
|
Cash Flow |
|
Actuarial |
|
|
|||
|
|
|
|
Hedges |
|
Loss |
|
Total |
|||
|
Balance, December 31, 2019 |
|
|
$ |
(3,614) |
|
$ |
14,897 |
|
$ |
11,283 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
221 |
(1) |
|
(297) |
(2) |
|
(76) |
|
Net other comprehensive loss (income) |
|
|
|
221 |
|
|
(297) |
|
|
(76) |
|
Balance, March 31, 2020 |
|
|
|
(3,393) |
|
|
14,600 |
|
|
11,207 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
|
|
224 |
(1) |
|
(273) |
(2) |
|
(49) |
|
Net other comprehensive loss (income) |
|
|
|
224 |
|
|
(273) |
|
|
(49) |
|
Balance, June 30, 2020 |
|
|
$ |
(3,169) |
|
$ |
14,327 |
|
$ |
11,158 |
| (1) | This reclassification component is included in interest expense. |
| (2) | This reclassification component is included in the computation of net periodic benefit cost (see Note 11 for additional information). |
Additionally, as of June 30, 2020 and December 31, 2019, the net gain balance in accumulated other comprehensive loss relating to previously terminated cash flow interest rate swap contracts was $3.2 million and $3.6 million, respectively, which will be reclassified to net interest expense as interest payments are made on the originally hedged debt. Within the next 12 months, approximately $.9 million in accumulated other comprehensive loss is expected to be reclassified as a reduction to interest expense related to our interest rate contracts.
Note 2. Newly Issued Accounting Pronouncements
Adopted
In June 2016, the FASB issued Accounting Standard Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments." This ASU was further updated by ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses," ASU No. 2019-05, "Targeted Transition Relief," ASU No. 2019-11, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses" and ASU No. 2020-02, “Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119.” These ASUs amend prior guidance on the impairment of financial instruments, and adds an impairment model that is based on expected losses rather than incurred losses with the recognition of an allowance based on an estimate of expected credit losses. The provisions of ASU No. 2016-13, as amended in subsequently issued amendments, were effective for us as of January 1, 2020.
12
In identifying all of our financial instruments covered under this guidance, the majority of our instruments result from operating leasing transactions, which are not within the scope of the new standard and are to remain governed by the recently issued leasing guidance and other previously issued guidance. Upon adoption at January 1, 2020, we recognized, using the modified retrospective approach, a cumulative effect for credit losses, which has decreased retained earnings and other assets by $.7 million, respectively. In addition, we evaluated controls around the implementation of this ASU and have concluded there will be no significant impact on our control structure.
In August 2018, the FASB issued ASU No. 2018-13, "Changes to the Disclosure Requirements for Fair Value Measurement." This ASU amends and removes several disclosure requirements including the valuation processes for Level 3 fair value measurements. The ASU also modifies some disclosure requirements and requires additional disclosures for changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and requires the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The provisions of ASU No. 2018-13 were effective for us as of January 1, 2020 using a prospective transition method for amendments effecting changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and narrative description on uncertainty of measurements. The remaining provisions of the ASU were not applicable to us. The adoption of this ASU did not have a material impact to our consolidated financial statements.
Not Yet Adopted
In August 2018, the FASB issued ASU No. 2018-14, "Changes to the Disclosure Requirements for Defined Benefit Plans." This ASU clarifies current disclosures and removes several disclosures requirements including accumulated other comprehensive income expected to be recognized over the next fiscal year and amount and timing of plan assets expected to be returned to the employer. The ASU also requires additional disclosures for the weighted-average interest crediting rates for cash balance plans and explanations for significant gains and losses related to changes in the benefit plan obligation. The provisions of ASU No. 2018-14 are effective for us as of December 31, 2020 using a retrospective basis for all periods presented, and early adoption is permitted. Although we are still assessing the impact of this ASU’s adoption, we do not believe this ASU will have a material impact to our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes." This ASU clarifies/simplifies current disclosures and removes several disclosures requirements. Simplification includes franchise taxes based partially on income as an income-based tax; entities should reflect enacted tax law and rate changes in the interim period that includes the enactment date; and allowing entities to allocate consolidated tax amounts to individual legal entities under certain elections. The provisions of ASU No. 2019-12 are effective for us as of January 1, 2021, and early adoption is permitted. Although we are still assessing the impact of this ASU's adoption, we do not believe this ASU will have a material impact to our consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848).” This ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in this ASU is optional and may be elected over time as reference rate reform activities occur. At January 1, 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The adoption of this portion of the ASU did not have a material impact to our consolidated financial statements. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
13
Note 3. Property
Our property consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
2020 |
|
2019 |
||
|
Land |
|
$ |
934,629 |
|
$ |
911,521 |
|
Land held for development |
|
|
41,078 |
|
|
40,667 |
|
Land under development |
|
|
22,777 |
|
|
53,076 |
|
Buildings and improvements |
|
|
3,016,131 |
|
|
2,898,867 |
|
Construction in-progress |
|
|
187,722 |
|
|
241,118 |
|
Total |
|
$ |
4,202,337 |
|
$ |
4,145,249 |
During the six months ended June 30, 2020, we sold two centers and other property. Aggregate gross sales proceeds from these transactions approximated $33.5 million and generated gains of approximately $21.5 million. Also, during the six months ended June 30, 2020, we acquired one grocery-anchored shopping center and other property with an aggregate gross purchase price of approximately $43.0 million, and we invested $49.2 million in new development projects.
At June 30, 2020, we classified one real estate center, totaling $25.9 million before accumulated depreciation, as held for sale, which was sold subsequent to quarter-end. At December 31, 2019, no real estate centers were classified as held for sale.
14
Note 4. Investment in Real Estate Joint Ventures and Partnerships
We own interests in real estate joint ventures or limited partnerships and had 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 ranged for the periods presented from 20% to 90% in both 2020 and 2019. Combined condensed financial information of these ventures (at 100%) is summarized as follows (in thousands):
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 $11.1 million and $9.0 million at June 30, 2020 and December 31, 2019, respectively, are generally amortized over the useful lives of the related assets.
15
We recorded joint venture fee income of $1.1 million and $1.4 million included in Other revenue for the three months ended June 30, 2020 and 2019, respectively, and $2.7 million and $2.9 million for the six months ended June 30, 2020 and 2019, respectively. Additionally, as a result of COVID-19, for the three and six months ended June 30, 2020, our joint venture and partnerships have reduced revenues by $5.1 million and $5.9 million, respectively, due to lease related reserves and write-offs, which includes $1.7 million and $2.6 million, respectively, for straight-line rent receivables. Of these amounts for the three and six months ended June 30, 2020, our share totaled $1.7 million and $2.0 million, respectively, which includes $.4 million and $.7 million, respectively, for straight-line rent receivables. For additional information, see Note 1.
During 2020, we sold two centers and our interest in two centers, ranging from 20% to 50%, at an aggregate gross value of approximately $148.3 million, of which our share of the gain, included in equity earnings in real estate joint ventures and partnerships, totaled $23.4 million. Also during the six months ended June 30, 2020, we invested an additional $4.4 million in a 90% owned unconsolidated real estate joint venture for a mixed-use new development.
During 2019, a parcel of land was sold with gross sales proceeds of approximately $2.3 million, of which our share of the gain, included in equity earnings in real estate joint ventures and partnerships, totaled $1.1 million. In July 2019, a 51% owned unconsolidated real estate joint venture acquired a center with a gross purchase price of $52.6 million. Also during 2019, we invested an additional $47.6 million in a 90% owned unconsolidated real estate joint venture for a mixed-use new development.
Note 5. Debt
Our debt consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
||
|
|
|
2020 |
|
2019 |
||
|
Debt payable, net to 2038 (1) |
|
$ |
1,652,064 |
|
$ |
1,653,154 |
|
Unsecured notes payable under credit facilities |
|
|
12,000 |
|
|
— |
|
Debt service guaranty liability |
|
|
57,380 |
|
|
57,380 |
|
Finance lease obligation |
|
|
21,750 |
|
|
21,804 |
|
Total |
|
$ |
1,743,194 |
|
$ |
1,732,338 |
| (1) | At both June 30, 2020 and December 31, 2019, interest rates ranged from 3.3% to 7.0% at a weighted average rate of 3.9% for both periods. |
16
We maintain a $500 million unsecured revolving credit facility, which was amended and extended on December 11, 2019. This facility expires in March 2024, 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 both June 30, 2020 and December 31, 2019, the borrowing margin and facility fee, which are priced off a grid that is tied to our senior unsecured credit ratings, were 82.5 and 15 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 $850 million.
Additionally, we have a $10 million unsecured short-term facility, which was amended and extended on January 3, 2020, that we maintain for cash management purposes, which matures in March 2021. At both June 30, 2020 and December 31, 2019, the facility provided for fixed interest rate loans at a 30-day LIBOR rate plus a borrowing margin, facility fee and an unused facility fee of 125, 10, and 5 basis points, respectively.
The following table discloses certain information regarding our unsecured notes payable under our credit facilities (in thousands, except percentages):
| (1) | At March 31, 2020, we drew down the available balance of our unsecured revolving credit facility to increase liquidity and preserve financial flexibility in light of the uncertainty regarding the COVID-19 pandemic on the markets at that time. During the three months ended June 30, 2020, we paid down the majority of the balance due to the stability of the financial markets and the availability to us of other sources of liquidity. |
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 1.4x 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 June 30, 2020 and December 31, 2019, we had $57.4 million outstanding for the debt service guaranty liability.
During the year ended December 31, 2019, we repaid a $50 million secured fixed-rate mortgage with a 7.0% interest rate from cash from our disposition proceeds.
Various leases and properties, and current and future rentals from those leases and properties, collateralize certain debt. At June 30, 2020 and December 31, 2019, the carrying value of such assets aggregated $492.6 million and $463.7 million, respectively. Additionally, at both June 30, 2020 and December 31, 2019, investments of $5.3 million included in Restricted Deposits and Escrows are held as collateral for letters of credit totaling $5.0 million.
17
Scheduled principal payments on our debt (excluding $12.0 million outstanding under our revolving credit facility, $21.8 million of a finance lease obligation, $(3.5) million net premium/(discount) on debt, $(5.1) million of deferred debt costs, $1.8 million of non-cash debt-related items, and $57.4 million debt service guaranty liability) are due during the following years (in thousands):
|
|
|
|
|
|
2020 remaining |
|
$ |
2,853 |
|
2021 |
|
|
18,795 |
|
2022 |
|
|
308,298 |
|
2023 |
|
|
348,207 |
|
2024 |
|
|
252,561 |
|
2025 |
|
|
294,232 |
|
2026 |
|
|
277,733 |
|
2027 |
|
|
53,604 |
|
2028 |
|
|
92,159 |
|
2029 |
|
|
917 |
|
Thereafter |
|
|
9,518 |
|
Total |
|
$ |
1,658,877 |
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 June 30, 2020; however, our continued compliance with these covenants depends on many factors and could be impacted by current or future economic conditions, including those associated with the COVID-19 pandemic.
Note 6. Common Shares of Beneficial Interest
We have a $200 million share repurchase plan where we may repurchase common shares of beneficial interest ("common shares") from time-to-time in open-market or in privately negotiated purchases. The timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors. The repurchase plan may be suspended or discontinued at any time, and we have no obligations to repurchase any amount of our common shares under the plan.
During the six months ended June 30, 2020, .8 million common shares were repurchased at an average price of $21.47 per share, and no common shares were purchased during the year ended December 31, 2019. At June 30, 2020 and as of the date of this filing, $163.3 million of common shares remained available to be repurchased under this plan.
Note 7. Leasing Operations
As a commercial real estate lessor, generally our leases are for terms of 10 years or less and may include multiple options, upon tenant election, to extend the lease term in increments up to five years. Our leases typically do not include an option to purchase. Tenant terminations prior to the lease end date occasionally results in a one-time termination fee based on the remaining unpaid lease payments including variable payments and could be material to the tenant. Many of our leases have increasing minimum rental rates during the terms of the leases through escalation provisions. In addition, the majority of our leases provide for variable rental revenues, such as, reimbursements of real estate taxes, maintenance and insurance and may include an amount based on a percentage of the tenants’ sales. Also, rent abatements related to the COVID-19 pandemic of $.3 million were recorded as a reduction to variable lease payments for both the three and six months ended June 30, 2020 (see Note 1 for additional information).
18
Variable lease payments recognized in Rentals, net are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
|
|
June 30, |
|
June 30, |
||||||||
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Variable lease payments |
|
$ |
24,084 |
|
$ |
26,175 |
|
$ |
50,961 |
|
$ |
54,105 |
Note 8. Supplemental Cash Flow Information
Cash, cash equivalents and restricted cash equivalents consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
June 30, |
||
|
|
|
2020 |
|
2019 |
||
|
Cash and cash equivalents |
|
$ |
14,203 |
|
$ |
118,222 |
|
Restricted deposits and escrows (see Note 1) |
|
|
14,063 |
|
|
14,854 |
|
Total |
|
$ |
28,266 |
|
$ |
133,076 |
Supplemental disclosure of non-cash transactions is summarized as follows (in thousands):
Note 9. 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. Earnings per common share – basic and diluted components for the periods indicated are as follows (in thousands):
19
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 |
|
Six Months Ended |
|
||||
|
|
|
June 30, |
|
June 30, |
|
||||
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
Operating partnership units |
|
1,432 |
|
— |
|
1,432 |
|
— |
|
Note 10. Share Options and Awards
During 2020, we granted 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 term of each grant varies 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 from the date of grant. Compensation expense is measured at the grant date and recognized over the vesting period. Generally, unvested 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:
| (1) | Includes the volatility of the FTSE NAREIT U.S. Shopping Center Index and Weingarten Realty Investors. |
A summary of the status of unvested share awards for the six months ended June 30, 2020 is as follows:
As of June 30, 2020 and December 31, 2019, there was approximately $2.7 million and $2.1 million, respectively, of total unrecognized compensation cost related to unvested share awards, which is expected to be amortized over a weighted average of 1.9 years and 1.8 years at June 30, 2020 and December 31, 2019, respectively.
20
Note 11. Employee Benefit Plans
Defined Benefit Plan
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 |
|
Six Months Ended |
||||||||
|
|
|
June 30, |
|
June 30, |
||||||||
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
|
Service cost |
|
$ |
305 |
|
$ |
272 |
|
$ |
578 |
|
$ |
597 |
|
Interest cost |
|
|
397 |
|
|
564 |
|
|
677 |
|
|
1,039 |
|
Expected return on plan assets |
|
|
(840) |
|
|
(877) |
|
|
(1,432) |
|
|
(1,738) |
|
Amortization of net loss |
|
|
273 |
|
|
299 |
|
|
570 |
|
|
587 |
|
Total |
|
$ |
135 |
|
$ |
258 |
|
$ |
393 |
|
$ |
485 |
The components of net periodic benefit cost other than the service cost component are included in Interest and Other Income (Expense), net in the Condensed Consolidated Statements of Operations.
For both the six months ended June 30, 2020 and 2019, we contributed $1.0 million to the qualified retirement plan. Currently, we do not anticipate making any additional contributions to this plan during 2020.
Defined Contribution Plans
Compensation expense related to our defined contribution plans was $.9 million and $1.0 million for the three months ended June 30, 2020 and 2019, respectively, and $2.0 million for both the six months ended June 30, 2020 and 2019.
Note 12. Commitments and Contingencies
Commitments and Contingencies
As of June 30, 2020 and December 31, 2019, we participated in two real estate ventures structured as DownREIT partnerships. We have operating and financial control over these ventures and consolidate them in our condensed consolidated financial statements. These ventures allow the outside limited partners to put their interest in the partnership to us, 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. The aggregate redemption value of these interests was approximately $27 million and $45 million as of June 30, 2020 and December 31, 2019, respectively.
As a REIT, we generally will not be subject to corporate level federal income tax on taxable income we distribute to our shareholders. As long as we distribute at least 90% of the taxable income of the REIT to our shareholders as dividends, we will not be taxed on the portion of our income we distribute as dividends unless we have ineligible transactions. As such, due to the magnitude of our dispositions during 2020, it is likely we will pay a special dividend near year-end in addition to our quarterly dividend; however, the amount of such dividend is not yet determinable.
As of June 30, 2020, we have entered into commitments aggregating $61.3 million comprised principally of construction contracts which are generally due in 12 to 36 months.
21
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 condensed consolidated financial statements.
As part of our risk management activities, we have applied and been accepted into state sponsored environmental programs which will limit our expenses if contaminants need to be remediated. We also have an environmental insurance policy that covers us against third party liabilities and remediation costs.
While we believe that we do not have any material exposure to environmental remediation costs, changes in the law or new discoveries of contamination may 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 condensed consolidated financial statements.
Note 13. Variable Interest Entities
Consolidated VIEs:
At both June 30, 2020 and December 31, 2019, eight of our real estate joint ventures, whose activities primarily consisted of owning and operating 21 neighborhood/community shopping centers, were determined to be VIEs. Based on a financing agreement by one of our real estate joint ventures that has a bottom dollar guaranty, which is disproportionate to our ownership, we have determined that we are the primary beneficiary and have consolidated this joint venture. For the remaining real estate joint ventures, we concluded we are the primary beneficiary based primarily on our significant power to direct the entities’ activities without any substantive kick-out or participating rights.
A summary of our consolidated VIEs is as follows (in thousands):
| (1) | Represents the amount of debt and related assets held as collateral associated with the bottom dollar guaranty at one real estate joint venture. |
22
Restrictions on the use of these assets can be significant because they may serve as collateral for debt. Further, we are generally required to obtain our partner’s approval in accordance with the joint venture agreement for any major transactions. Transactions with these joint ventures in our condensed consolidated financial statements have primarily been positive as demonstrated by the generation of net income and operating cash flows, as well as the receipt of cash distributions. 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, development expenditures, unplanned capital expenditures and repayment of debts. For the six months ended June 30, 2020, $2.7 million in additional contributions were made to pay off an outstanding debt.
Unconsolidated VIEs:
At both June 30, 2020 and December 31, 2019, two unconsolidated real estate joint ventures were determined to be VIEs. We have determined that one entity was 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. Based on the associated agreements for the future development of a mixed-use project, we concluded that the other entity was a VIE, but we are not the primary beneficiary as the substantive participating rights associated with the entity are shared, and we do not have the power to direct the significant activities of the entity. Our analysis considered that all major decisions require unanimous member consent and those decisions include significant activities such as development, financing, leasing and operations of the entity.
A summary of our unconsolidated VIEs is as follows (in thousands):
| (1) | The carrying amount of the investment represents our contributions to a real estate joint venture, net of any distributions made and our portion of the equity in earnings of the real estate joint venture. The increase between periods represents new development funding of a mixed-use project. |
| (2) | Includes the carrying amount of an investment where distributions have exceeded our contributions and our portion of the equity in earnings for a real estate joint venture. |
| (3) | The maximum risk of loss has been determined to be limited to our debt exposure for the real estate joint ventures. Additionally, our investment, including contributions and distributions, associated with a mixed-use project is disclosed in (1) above. |
We and our partners are subject to the provisions of the joint venture agreements that specify conditions, including operating shortfalls, development expenditures and unplanned capital expenditures, under which additional contributions may be required. With respect to our future development of a mixed-used project, we anticipate future funding of approximately $4.7 million through 2020.
Note 14. Fair Value Measurements
Currently, the COVID-19 pandemic has created uncertainties surrounding the global economy and financial markets. As a result, the full magnitude of the pandemic and the ultimate effect upon the future of our fair value measurements are uncertain at this time. Any changes in fair value for financial instruments marked to fair value will have a direct impact to our financial statements, except for net changes in our investments held in grantor trust and its related obligations. Additionally, changes in fair values for financial instruments not marked to fair value will not have an impact to our financial statements unless plans change to sell or settle the instrument prior to its maturity.
23
Recurring Fair Value Measurements:
Assets and liabilities measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, 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 |
|
Significant |
|
|
|
|
|
|
||
|
|
|
Identical |
|
Other |
|
Significant |
|
|
|
|||
|
|
|
Assets |
|
Observable |
|
Unobservable |
|
Fair Value at |
||||
|
|
|
and Liabilities |
|
Inputs |
|
Inputs |
|
June 30, |
||||
|
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
2020 |
||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents, primarily money market funds (1) |
|
$ |
153 |
|
|
|
|
|
|
|
$ |
153 |
|
Restricted cash, primarily money market funds (1) |
|
|
11,170 |
|
|
|
|
|
|
|
|
11,170 |
|
Investments, mutual funds held in a grantor trust (1) |
|
|
37,314 |
|
|
|
|
|
|
|
|
37,314 |
|
Total |
|
$ |
48,637 |
|
$ |
— |
|
$ |
— |
|
$ |
48,637 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan obligations |
|
$ |
37,314 |
|
|
|
|
|
|
|
$ |
37,314 |
|
Total |
|
$ |
37,314 |
|
$ |
— |
|
$ |
— |
|
$ |
37,314 |
________________________________________
| (1) | For the three and six months ended June 30, 2020, a net gain of $5.1 million and a net loss of $(.9) million, respectively, was included in Interest and Other Income (Expense), net, of which $4.4 million and $(1.9) million represented an unrealized gain (loss), respectively. |
________________________________________
|
(1) |
For the year ended December 31, 2019, a net gain of $9.4 million was included in Interest and Other Income, net, of which $6.7 million represented an unrealized gain. Included in these amounts for the three and six months ended June 30, 2019 was a net gain of $1.7 million and $5.2 million, respectively, of which $.9 million and $3.9 million, respectively, represented an unrealized gain. |
24
Nonrecurring Fair Value Measurements:
Investment in Real Estate Joint Ventures and Partnerships Impairments
Estimated fair values are determined by management utilizing the performance of each investment, the life and other terms of the investment, holding periods, market conditions, cash flow models, market capitalization rates and market discount rates, or by obtaining third-party broker valuation estimates, appraisals, bona fide purchase offers or the expected sales price of an executed sales agreement in accordance with our fair value measurements accounting policy. Market capitalization rates and market discount rates are determined by reviewing current sales of similar properties and transactions, and utilizing management’s knowledge and expertise in property marketing.
No assets were measured at fair value on a nonrecurring basis at June 30, 2020. Assets measured at fair value on a nonrecurring basis at December 31, 2019 aggregated by the level in the fair value hierarchy in which those measurements fall, are as follows (in thousands):
| (1) | Total gains (losses) presented in this table relate to assets that were held by us at December 31, 2019. |
| (2) | In accordance with our policy of evaluating and recording impairments on the disposal of investments in real estate joint ventures and partnerships, investments with a carrying amount of $29.1 million were written down to a fair value of $26.0 million, resulting in a loss of $3.1 million, which was included in earnings for the fourth quarter of 2019. Management’s estimate of fair value of these investments were determined using a bona fide purchase offer for the Level 2 inputs, and see the quantitative information about the significant unobservable inputs used for our Level 3 fair value measurements in the table below. |
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):
| (1) | At December 31, 2019, prior to the adoption of ASC 326, the amortized cost basis was net of a previously recognized other-than-temporary impairment on our tax increment revenue bonds of $31.0 million. |
25
The quantitative information about the significant unobservable inputs used for our nonrecurring Level 3 fair value measurements as of December 31, 2019 reported in the above table, is as follows:
Note 15. Subsequent Events
COVID-19, which was characterized on March 11, 2020 by the World Health Organization as a pandemic, has resulted in a widespread health crisis, which has adversely affected international, national and local economies and financial markets, and has had an unprecedented effect on the commercial real estate industry. Given the evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 pandemic on our results of operations, cash flows, financial condition, or liquidity for fiscal year 2020.
As of July 27, 2020, we negotiated with tenants an additional $8.5 million that will be deferred over the next several months. Also as of July 27, 2020, tenant rent collections for July, which includes base minimum rental revenues and escrows for CAM, real estate taxes and insurance, either directly or through our interest in real estate joint ventures or partnerships approximated 82%.
Subsequent to quarter-end, we sold real estate assets with aggregate gross sales proceeds totaling $42.6 million. No impairment losses are anticipated with these dispositions.
*****
26
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The COVID-19 pandemic has resulted in a widespread health crisis, which has adversely affected international, national and local economies and financial markets generally, and has had an unprecedented negative effect on the commercial real estate industry. It also has contributed to the recent historic price fluctuations for oil and natural gas. The discussions below, including without limitation with respect to outlooks and liquidity, are subject to the future effects of the COVID-19 pandemic and the responses to curb its spread, and changes in energy prices, both of which continue to evolve. As such, as described in Part II, Item 1A entitled “Risk Factors,” it is uncertain as to the magnitude of the impact of the pandemic, including any fluctuations in energy prices, on our results of operations, cash flows, financial condition, or liquidity for fiscal year 2020 and beyond.
Forward-Looking Statements
This quarterly report on Form 10-Q, together with other statements and information publicly disseminated by us, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect actual results, performances or achievements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) disruptions in financial markets, (ii) general and regional economic and 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 and changes in LIBOR availability, (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 the effect of changes in tax laws and the failure to qualify as a real estate investment trust, (xii) investments through real estate joint ventures and partnerships, which involve risks not present in investments in which we are the sole investor, and (xiii) the impact of public health issues, such as the recent COVID-19 pandemic. Accordingly, there is no assurance that our expectations will be realized. For further discussion of the factors that could materially affect the outcome of our forward-looking statements and our future results and financial condition, see Item 1A. "Risk Factors” in our Form 10-K for the year ended December 31, 2019 and in Part II, Item 1A of this Quarterly Report on Form 10-Q. 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 condensed consolidated financial statements and notes thereto and the comparative summary of selected financial data appearing elsewhere in this report. Historical results and trends which might appear should not be taken as indicative of future operations. Our results of operations and financial condition, as reflected in the accompanying condensed 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.
27
Executive Overview
Weingarten Realty Investors is a REIT organized under the Texas Business Organizations Code. We, and our predecessor entity, began the ownership 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. Several of these centers are mixed-use properties that have both retail and residential components. 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 31.4 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 2.6% of base minimum rental revenues during the first six months of 2020.
At June 30, 2020, we owned or operated under long-term leases, either directly or through our interest in real estate joint ventures or partnerships, a total of 165 properties, which are located in 16 states spanning the country from coast to coast.
We also owned interests in 23 parcels of land held for development that totaled approximately 11.9 million square feet at June 30, 2020.
We had approximately 3,600 leases with 2,800 different tenants at June 30, 2020. Rental revenue is primarily derived from operating leases with terms of 10 years or less, and may include multiple options, upon tenant election, to extend the lease term in increments up to five years. Many of our leases have increasing minimum rental rates during the terms of the leases through escalation provisions. In addition, the majority of our leases provide for variable rental revenues, such as reimbursements of real estate taxes, maintenance and insurance and may include an amount 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. Although there is a broad shift in shopping patterns, including internet shopping that continues to affect our tenants, we believe our anchor tenants, most of which have adopted omni-channel networks which help drive foot traffic, combined with convenient locations, attractive and well-maintained properties, high quality retailers and a strong tenant mix, should lessen the effects of these conditions and maintain the viability of our portfolio.
28
The COVID-19 pandemic has dramatically impacted our business due largely to the extreme hardships facing our retailers. The retail industry has been impacted greatly due to a number of factors, including governmental and legislative mandates to temporarily close and/or limit the operations of non-essential businesses, as well as encouraging or mandating most employees work from home, as well as general economic conditions. While most states have embarked upon a re-opening of select businesses, including retailers and restaurants, the impact of these measures on the ability of our tenants to pay rent is indeterminable at this time, particularly as some areas are currently experiencing a resurgence of COVID-19. Many of our retailers have moved to include on-line sales with curbside pickup or delivery, including restaurants, apparel discounters and electronics. The grocery stores and other retailers with a grocery component that anchor the majority of our shopping centers remain strong in this environment with the only slow down being the availability of a healthy workforce. Although we encouraged many of our smaller tenants to apply for the federal loans being offered under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) program, the impact of these programs is also indeterminable at this time. Based on annualized base rents, including our share of interest in real estate joint ventures or partnerships, we have estimated that 44% and 19% of our tenants are designated as essential businesses and restaurants, respectively. Additionally, as of mid-July, approximately 95% of our tenants were open for business. During the second quarter of 2020, we experienced an increase in tenant fallout of approximately 400,000 square feet representing approximately $9.6 million in annualized base rents, either directly or through our interest in real estate joint ventures or partnerships. There has also been an increase in announced bankruptcies for the quarter that represents approximately 400,000 square feet representing approximately $9.0 million in annualized base rents, either directly or through our interest in real estate joint ventures or partnerships, of which 116,000 square feet and $3.2 million is included in tenant fallout amounts above. Accordingly, we continue to omit 2020 guidance due to the uncertainties surrounding the impact and duration of the pandemic.
Beginning in the second quarter of 2020, we began to finalize and record deferrals and, in limited instances, abatement agreements with our tenants to provide some relief to the tenants greatly impacted by the COVID-19 shut down. As of July 27, 2020, we have negotiated deferrals with tenants on approximately 860 leases, which represents nearly $17.8 million that will be deferred over the next several months. In addition, for the three and six months ended June 30, 2020, we have reduced rental revenues by $19.3 million and $28.7 million, respectively, due to lease related reserves and write-offs, which includes $4.8 million and $12.4 million, respectively, for straight-line rent receivables. As markets within our geographic footprint continue to reopen retail operations, our current expectation is that rent collections will trend upward throughout 2021; however, no assurances can be given that this will occur due to the uncertainties surrounding our tenants’ reopening and any resurgence of the pandemic and the governmental reaction to any resurgence. As of July 27, 2020, tenant billing data, which includes base minimum rental revenues and escrows for CAM, real estate taxes and insurance either directly or through our interest in real estate joint ventures or partnerships, was as follows:
|
|
|
|
|
|
|
|
|
|
Percent of Annualized Base Rent |
Percent of Cash Collections for the Three Months Ending June 30, 2020 |
Percent of Cash Collections for July 1, 2020 through July 27, 2020 |
|||||
|
Essential |
44 |
% |
92 |
% |
94 |
% |
|
|
Restaurant |
19 |
69 |
71 |
||||
|
Non-essential |
37 |
63 |
73 |
||||
|
Total Cash Collections |
100 |
% |
77 |
82 |
|||
|
Deferrals |
13 |
7 |
|||||
|
Abatements |
1 |
0 |
|||||
|
Total Cash Collections and Other |
91 |
% |
89 |
% |
29
During the first quarter 2020, we drew down the available balance of our $500 million unsecured revolving credit facility to increase liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of COVID-19. During the second quarter 2020, we paid down $485 million under our unsecured revolving credit facility due to the then stabilization of the financial markets and our access to other sources of liquidity. Additionally, we reduced dividend payments for the second quarter to $.18 per share from $.395 per share to conserve liquidity. Due to the magnitude of our dispositions during 2020, it is also likely we will pay a special dividend near year-end; however, the amount of such dividend is not yet determinable. Absent a significant deterioration in cash collections as compared to those received in this quarter, we believe our cash flow from operations will meet our planned capital needs for the remainder of 2020 and 2021. Further, the ability to draw down under our revolving credit facility will provide ample liquidity for us to operate and maintain compliance with our debt covenants; however, no assurances can be given that this level of cash flow will occur due to the uncertainty in the duration and restrictions of the limitations in place for retailers.
Finally, most of our employees have been working remotely to stay healthy, support operations and in response to stay-at-home mandates or recommendations. Recent changes in Texas and other states stay-at-home mandates currently will allow our employees, who are not considered high risk, to return to the office subject to health and safety measures. Working remotely presents various challenges, including (but not all inclusive) concerns about productivity, connectivity, consumer privacy and IT security.
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) owning quality shopping centers in preferred locations that attract strong tenants, (2) growing net income from our existing portfolio by increasing occupancy and rental rates, (3) raising net asset value and cash flow through quality acquisitions and new developments, (4) continuously redeveloping our existing shopping centers to increase cash flow and enhance the value of the centers and (5) maintaining a strong, flexible consolidated balance sheet and a well-managed debt maturity schedule. We believe these initiatives will keep our portfolio of properties among the strongest in our sector. Due to current capitalization rates in the market along with the uncertainty of changes in interest rates and various other market conditions, we intend to continue to be very prudent in our evaluation of all new investment opportunities. We believe the pricing of assets that no longer meet our ownership criteria remains reasonably stable while the price of our common shares remains below our net asset value. Given these conditions, we have been focused on dispositions of properties with risk factors that impact our willingness to own them going forward, and although we intend to continue with this strategy subject to evolving market conditions, our dispositions are expected to be significantly lower in 2020. We intend to utilize the proceeds from dispositions to, among other things, fund acquisitions along with both new development and redevelopment projects.
As we discussed above, subject to evolving market conditions, we continuously recycle non-core operating centers that no longer meet our ownership criteria and that will provide capital for growth opportunities. During the six months ended June 30, 2020, we disposed of real estate assets, which were owned by us either directly or through our interest in real estate joint ventures or partnerships, with our share of aggregate gross sales proceeds totaling $88.4 million. We have approximately $74.8 million of dispositions currently under contracts or letters of intent; however, there are no assurances that these transactions will close at such prices or at all. Subsequent to quarter-end, we sold two shopping centers for total proceeds of $42.6 million. For 2020, we expect the volume of dispositions will significantly decrease from those in 2019.
Subject to evolving market conditions, we intend to continue to seek acquisition properties that meet our return hurdles and to actively evaluate other opportunities as they enter the market. Previously, due to the significant amount of capital available in the market, it has been difficult to participate at price points that meet our investment criteria. During the six months ended June 30, 2020, we acquired one grocery-anchored shopping center and other property, adding 78,000 square feet to the portfolio with an aggregate gross purchase price totaling $43.0 million. For 2020, we will continue to look for acquisition investments; however, during this current environment, even if we were to find transactions, there are no assurances that we would proceed with closing the transaction.
30
We intend to continue to focus on identifying new development projects as another source of growth, as well as continue to look for redevelopment opportunities. The opportunities for additional new development projects are limited at this time primarily due to a lack of demand for new retail space. During the six months ended June 30, 2020, we invested $47.5 million in two mixed-use new development projects that are partially or wholly owned and a 30-story, high-rise residential tower at our River Oaks Shopping Center in Houston, Texas, and we invested $5.8 million in redevelopment projects that were partially or wholly owned. Also during the six months ended June 30, 2020, completed redevelopment projects added approximately 142,000 square feet to the portfolio with an incremental investment totaling $23.1 million. For 2020, we expect these developments to proceed as planned; however, no assurance can be given due to the impact of the pandemic.
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. Subject to evolving market conditions, we continue to look for transactions that will strengthen our consolidated balance sheet and further enhance our access to various sources of capital, while reducing our cost of capital. Due to the current variability in the capital markets, there can be no assurance that favorable pricing and accessibility will be available in the future.
Operational Metrics
In assessing the performance of our centers, management carefully monitors various operating metrics of the portfolio. In light of current circumstance and the negative impact related to potentially uncollectible revenues, the operating metrics of our portfolio performed fairly well through the first six months of 2020. We focused on collections and maintaining tenants to minimize the decline in same property net operating income (“SPNOI” and see Non-GAAP Financial Measures for additional information) due to the impact associated with the COVID-19 pandemic. Our portfolio delivered the following operating results:
| ● | occupancy of 93.4% at June 30, 2020 showed a decrease from 94.8% in the prior year; |
| ● | a decrease of 9.8% in SPNOI for the six months ended June 30, 2020 over the same period of 2019; and |
| ● | rental rate increases of 13.2% for new leases and 8.4% for renewals during the six months ended June 30, 2020. |
Below are performance metrics associated with our signed occupancy, SPNOI growth and leasing activity on a pro rata basis:
|
|
|
|
|
|
|
|
|
|
June 30, |
|
||
|
|
|
2020 |
|
2019 |
|
|
Anchor (space of 10,000 square feet or greater) |
|
95.9 |
% |
97.4 |
% |
|
Non-Anchor |
|
89.0 |
% |
90.4 |
% |
|
Total Occupancy |
|
93.4 |
% |
94.8 |
% |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
June 30, 2020 |
|
June 30, 2020 |
|
|
SPNOI (1) |
|
(19.7) |
% |
(9.8) |
% |
| (1) | See Non-GAAP Financial Measures for a definition of the measurement of SPNOI and a reconciliation to net income attributable to common shareholders within this section of Item 2. |
31
| (1) | Average external lease commissions per square foot for the three and six months ended June 30, 2020 were $5.57 and $6.39. |
Changing shopping habits, driven by rapid expansion of internet-driven procurement, has led to increased financial problems for many retailers, which has had a negative impact on the retail real estate sector. We continue to monitor the effects of these trends, including the impact of retail customer spending over the long-term. We believe the desirability of our physical locations, the significant diversification of our portfolio, both geographically and by tenant base, and the quality of our portfolio, along with its leading retailers and service providers that sell primarily grocery and basic necessity-type goods and services, position us well to mitigate the impact of these changes. Additionally, most retailers have implemented omni-channel networks that integrate on-line shopping with in-store experiences that has further reinforced the need for bricks and mortar locations. Despite recent market disruption and tenant bankruptcies, we continue to believe there is long-term retailer demand for quality space within strong, strategically located centers.
In 2020, we are experiencing some fluctuations due to announced bankruptcies and the repositioning of those spaces. Currently, the impact to occupancy is unknown due to the uncertainty and duration of the pandemic. Previously, a reduction in the availability of quality retail space, as well as continued retailer demand, contributed to the increase in overall rental rates on a same-space basis as we completed new leases and renewed existing leases; however, the magnitude of these increases declined in comparison to previous years due to, among other factors, a continued shift in negotiating leverage to the tenant. Given the uncertainty surrounding the impact of the pandemic, we are unclear of its impact to rental rates and the funding of tenant improvements and allowances. The variability in the mix of leasing transactions as to size of space, market, use and other factors may impact the magnitude of these changes, both positively and negatively. Leasing volume is anticipated to fluctuate due to the uncertainty in tenant fallouts related to bankruptcies and tenant non-renewals. Our expectation is that SPNOI growth will decline in 2020 compared to previous years.
New Development/Redevelopment
At June 30, 2020, we have two mixed-use projects in the Washington D. C. market and a 30-story, high-rise residential tower at our River Oaks Shopping Center in Houston that were in various stages of development and are partially or wholly owned. We have funded $415.9 million through June 30, 2020 on these projects, and we estimate our aggregate net investment upon completion to be $485.0 million. Due to the impact of COVID-19, we are currently unable to project a stabilization return for these projects.
We have 10 redevelopment projects in which we plan to invest approximately $55.1 million. Realization of the stabilized return may be longer than originally planned due to the impact of COVID-19.
32
We had approximately $41.1 million in land held for development at June 30, 2020 that may either be developed or sold. While we were experiencing some interest from retailers and other market participants in our land held for development, opportunities for economically viable developments remain limited. We intend to continue to pursue additional development and redevelopment opportunities in multiple markets; however, finding the right opportunities remains challenging.
Acquisitions
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. Market pricing of retail real estate assets is highly uncertain under current economic conditions. We intend to remain disciplined in approaching these opportunities, pursuing only those that 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, to repurchase our common shares and/or debt, dependent upon market prices, or to fund acquisitions and both new development and redevelopment projects.
Critical Accounting Policies and Estimates
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 using available information. We base our estimates on current economic conditions, 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.
Uncertainty in the current economic environment due to the recent outbreak of the COVID-19 has and may continue to significantly impact the judgments regarding estimates and assumptions utilized by management. In addition to the disclosure of our critical accounting policies and estimates which affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 in Management’s Discussion and Analysis of Financial Condition and Results of Operations, we are adding the following due to significant changes in judgements related to COVID-19.
Revenue Recognition and Accrued Rent, Accrued Customer Contract Receivables and Accounts Receivable
Individual leases and contracts are assessed for collectability and upon the determination that the collection of rents over the life lease or contract is not probable, rental revenue and customer contract revenue is then converted to the cash basis and accrued rent and accounts receivables are reduced as an adjustment to rental or other revenues, respectively. An additional assessment is made at the portfolio level to determine whether operating lease receivables are appropriately valued based upon an analysis of balances outstanding, historical bad debt levels and current economic trends. An allowance for the uncollectible portion of the portfolio is recorded as an adjustment to rental revenues.
33
We review current economic considerations each reporting period, including the effects of tenant bankruptcies. Additionally with the uncertainties regarding COVID-19, our assessment also considers the type of retailer and current discussions with the tenants, as well as recent rent collection experience. Determining whether a lease or contract, as well as any related receivables, are appropriately assessed and valued requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation. For the three and six months ended June 30, 2020, we reduced rental revenues by $19.3 million and $28.7 million, respectively, excluding the impact of any cash collections. The evaluations used in these analyses could result in incorrect estimates when determining values that could be material to our consolidated financial statements.
Results of Operations
Comparison of the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019
The following table is a summary of certain items in net income from our Condensed Consolidated Statements of Operations, which we believe represent items that significantly changed during the three months ended June 30, 2020 as compared to the same period in 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|||||||||
|
|
|
2020 |
|
2019 |
|
Change |
|
% Change |
|
|||
|
Revenues |
|
$ |
98,135 |
|
$ |
122,660 |
|
$ |
(24,525) |
|
(20.0) |
% |
|
Depreciation and amortization |
|
|
37,627 |
|
|
34,967 |
|
|
2,660 |
|
7.6 |
|
|
Operating expenses |
|
|
19,978 |
|
|
22,767 |
|
|
(2,789) |
|
(12.3) |
|
|
General and administrative expenses |
|
|
12,920 |
|
|
8,880 |
|
|
4,040 |
|
45.5 |
|
|
Interest expense, net |
|
|
15,776 |
|
|
14,953 |
|
|
823 |
|
5.5 |
|
|
Interest and other income, net |
|
|
5,293 |
|
|
1,921 |
|
|
3,372 |
|
175.5 |
|
|
Gain on sale of property |
|
|
7,898 |
|
|
52,061 |
|
|
(44,163) |
|
(84.8) |
|
|
Equity in earnings of real estate joint ventures and partnerships, net |
|
|
3,428 |
|
|
6,665 |
|
|
(3,237) |
|
(48.6) |
|
Revenues
The decrease in revenues of $24.5 million is attributable primarily to a decrease of $20.5 million for potentially uncollectible revenues associated primarily with the COVID-19 pandemic and the impact of $9.1 million related to dispositions. Partially offsetting this decrease is revenue from acquisitions of $5.1 million.
Depreciation and Amortization
The increase in depreciation and amortization of $2.7 million is attributable primarily to the $4.8 million impact of acquisitions and new developments and an increase of $.3 million from other capital activities at our existing portfolio and redevelopment centers, which is partially offset by dispositions of $2.4 million.
Operating Expenses
The decrease in operating expenses of $2.8 million is attributable primarily to a $.8 million reduction in expense associated deferred compensation (see General and Administrative Expenses below for additional information) and the impact of dispositions of $1.5 million.
General and Administrative Expenses
The increase in general and administrative expenses of $4.0 million is attributable primarily to a fair value increase of $4.5 million associated with assets held in a grantor trust related to deferred compensation, a reduction in primarily travel and convention related expenses due to the COVID-19 pandemic and a reduction in personnel. Effective the first quarter of 2020, the allocation of the fair value adjustments associated with the assets held in the grantor trust was changed to reflect the current expense classification of the employees in the deferred compensation plan; therefore, all changes to the liability will be recorded in general and administrative expense with no allocation to operating expense unless future employee expense classifications change.
34
Interest Expense, net
Net interest expense increased $.8 million or 5.5%. The components of net interest expense were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
||||
|
|
|
June 30, |
||||
|
|
|
2020 |
|
2019 |
||
|
Gross interest expense |
|
$ |
17,003 |
|
$ |
17,429 |
|
Amortization of debt deferred costs, net |
|
|
783 |
|
|
888 |
|
Over-market mortgage adjustment |
|
|
(100) |
|
|
(81) |
|
Capitalized interest |
|
|
(1,910) |
|
|
(3,283) |
|
Total |
|
$ |
15,776 |
|
$ |
14,953 |
The increase in net interest expense is attributable primarily to a reduction in capitalized interest, which is offset by a reduction in gross interest expense. The reduction of capitalized interest is primarily attributable to the near completion of two of the residential portions of our new developments. The decrease in gross interest expense is primarily attributable to a reduction in the weighted average interest rates due to the revolver between the respective periods, which is offset by an increase in the weighted average debt outstanding associated primarily with the activity of the revolver. For the three months ended June 30, 2020, the weighted average debt outstanding was $2.0 billion at a weighted average interest rate of 3.6% as compared to $1.8 billion outstanding at a weighted average interest rate of 4.1% in the same period of 2019.
Interest and Other Income, net
The increase of $3.4 million in interest and other income, net is attributable primarily to a fair value increase of $3.7 million associated with assets held in a grantor trust related to deferred compensation and a decrease in interest income of $.4 million associated with short-term and other investments.
Gain on Sale of Property
The decrease of $44.2 million in gain on sale of property is attributable to the disposition of one center and other property in the second quarter of 2020 as compared to five centers and other property in the same period of 2019.
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
The decrease of $3.2 million in equity in earnings of real estate joint ventures and partnerships, net is attributable primarily to a reduction in earnings of $1.6 million associated with depreciation of a mixed-use project and adjustments of $1.8 million for potentially uncollectible amounts associated primarily with the COVID-19 pandemic between the respective periods.
Comparison of the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019
The following table is a summary of certain items in net income from our Condensed Consolidated Statements of Operations, which we believe represent items that significantly changed during the six months ended June 30, 2020 as compared to the same period in 2019:
35
Revenues
The decrease in revenues of $36.3 million is attributable primarily to a decrease of $29.4 million for potentially uncollectible revenues associated primarily with the COVID-19 pandemic and the impact of $18.9 million related to dispositions. Partially offsetting this decrease is revenue from acquisitions of $9.6 million, as well as changes in rental rates and occupancy at our existing portfolio, new developments and redevelopments, which contributed $2.4 million.
Depreciation and Amortization
The increase in depreciation and amortization of $5.3 million is attributable primarily to the $8.8 million impact of acquisitions and new developments and an increase of $1.5 million from other capital activities at our existing portfolio and redevelopment centers, which is partially offset by dispositions of $5.0 million.
Operating Expenses
The decrease in operating expenses of $3.9 million is attributable primarily to a $2.8 million reduction in expense associated deferred compensation (see General and Administrative Expenses below for additional information) and the impact of dispositions of $2.8 million. Partially offsetting this decrease is an increase in expense of $2.1 million from acquisitions and mixed-use operations.
General and Administrative Expenses
The decrease in general and administrative expenses of $3.2 million is attributable primarily to a fair value reduction of $2.6 million associated with assets held in a grantor trust related to deferred compensation, (see General and Administrative Expenses above for additional information) a reduction in primarily travel and convention related expenses due to the COVID-19 pandemic and a reduction in personnel.
Interest Expense, net
Net interest expense increased $.1 million or .4%. The components of net interest expense were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
||||
|
|
|
June 30, |
||||
|
|
|
2020 |
|
2019 |
||
|
Gross interest expense |
|
$ |
33,559 |
|
$ |
34,819 |
|
Amortization of debt deferred costs, net |
|
|
1,579 |
|
|
1,790 |
|
Over-market mortgage adjustment |
|
|
(187) |
|
|
(163) |
|
Capitalized interest |
|
|
(4,573) |
|
|
(6,204) |
|
Total |
|
$ |
30,378 |
|
$ |
30,242 |
The increase in net interest expense is attributable primarily to a reduction in capitalized interest, which is offset by a reduction in gross interest expense. The reduction of capitalized interest is primarily attributable to the near completion of two of the residential portions of our new developments. The decrease in gross interest expense is primarily attributable to a reduction in the weighted average interest rates due to the revolver between the respective periods, which is offset by an increase in the weighted average debt outstanding associated primarily with the activity of the revolver. For the six months ended June 30, 2020, the weighted average debt outstanding was $1.9 billion at a weighted average interest rate of 3.7% as compared to $1.8 billion outstanding at a weighted average interest rate of 4.1% in the same period of 2019.
Interest and Other (Expense) Income, net
The increase of $6.8 million in net interest and other (expense) income is attributable primarily to a fair value reduction of $5.4 million associated with assets held in a grantor trust related to deferred compensation and a decrease in interest income of $1.4 million associated with short-term and other investments.
Gain on Sale of Property
The decrease of $48.4 million in gain on sale of property is attributable to the disposition of two centers and other property in the first six months of 2020 as compared to eight centers and other property in the same period of 2019.
36
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
The increase of $18.4 million in equity in earnings of real estate joint ventures and partnerships, net is attributable primarily to an increase in earnings of $22.4 million associated with disposition, mixed-used and acquisition activities between the respective periods. Partially offsetting this increase are adjustments totaling $2.1 million and $2.4 million for potentially uncollectible amounts associated primarily with the COVID-19 pandemic and depreciation of a mixed-use project, respectively.
Capital Resources and Liquidity
Our primary operating liquidity needs are paying our common share dividends, maintaining and operating our existing properties, paying our debt service costs, excluding debt maturities, and funding capital expenditures. Our anticipated cash flows from operating activities in 2020, as well as the availability of funds under our unsecured revolving credit facility are expected to meet these planned capital needs; however, no assurance can be given due to the evolving impact of the pandemic.
The primary sources of capital for funding any debt maturities, acquisitions, new developments and redevelopments are our excess cash flow generated by our operating properties; credit facilities; proceeds from both secured and unsecured debt issuances; proceeds from equity issuances; and cash generated from the sale of property or interests in real estate joint ventures and partnerships 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, equity, cash generated from the disposition of properties and cash flow generated by our operating properties.
As of June 30, 2020, we had available borrowing capacity of $486.1 million under our unsecured revolving credit facility, and our debt maturities for the remainder of 2020 total $2.9 million. As of June 30, 2020, we had cash and cash equivalents available of $14.2 million. Currently, we anticipate our operating, development and redevelopment activities will be met by these funds in 2020. Even with the current uncertainty in the capital markets, we believe other debt and equity alternatives are available to us based on recent market transactions within our industry sector.
During the six months ended June 30, 2020, our share of aggregate gross sales proceeds from dispositions of centers owned by us, either directly or through our interest in real estate joint ventures or partnerships, totaled $88.4 million. Operating cash flows from assets disposed are included in net cash from operating activities in our Condensed Consolidated Statements of Cash Flows, while proceeds from these disposals 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. At June 30, 2020, off-balance sheet mortgage debt for our unconsolidated real estate joint ventures and partnerships totaled $263.4 million, of which our pro rata ownership was $86.1 million. Scheduled principal mortgage payments on this debt, excluding deferred debt costs and non-cash related items totaling $(.5) million, at 100% are as follows (in millions):
|
|
|
|
|
|
2020 remaining |
|
$ |
1.6 |
|
2021 |
|
|
173.0 |
|
2022 |
|
|
2.1 |
|
2023 |
|
|
2.2 |
|
2024 |
|
|
2.3 |
|
Thereafter |
|
|
82.7 |
|
Total |
|
$ |
263.9 |
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 lender’s consent for assets held in special purpose entities.
37
Investing Activities
Acquisitions
During the six months ended June 30, 2020, we acquired one grocery-anchored center and other property with an aggregate gross purchase price totaling $43.0 million.
Dispositions
During the six months ended June 30, 2020, we sold six centers and other property, including real estate assets owned through our interest in unconsolidated real estate joint ventures and partnerships. Our share of aggregate gross sales proceeds from these transactions totaled $88.4 million and our share of the gains generated approximated $44.9 million.
New Development/Redevelopment
At June 30, 2020, we had two mixed-use projects and a 30-story, high-rise residential tower at our River Oaks Shopping Center under development with approximately .2 million of total square footage for retail and 962 residential units, that were partially or wholly owned. We have funded $415.9 million through June 30, 2020 on these projects. Upon completion, we expect our aggregate net investment in these multi-use projects to be $485.0 million; however, the timing of the realization of a stabilized return is currently unknown due to the uncertainties regarding the impact of COVID-19.
At June 30, 2020, we had 10 redevelopment projects in which we plan to invest approximately $55.1 million. Realization of the stabilized return may be longer than originally planned due to the impact of COVID-19. During the six months ended June 30, 2020, completed redevelopment projects added approximately 142,000 square feet to the portfolio with an incremental investment totaling $23.1 million.
Capital Expenditures
Capital expenditures for additions to the existing portfolio, acquisitions, tenant improvements, new development, redevelopment and our share of investments in unconsolidated real estate joint ventures and partnerships are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
||||
|
|
|
June 30, |
||||
|
|
|
2020 |
|
2019 |
||
|
Acquisitions |
|
$ |
25,506 |
|
$ |
52,659 |
|
New Development |
|
|
50,778 |
|
|
76,998 |
|
Redevelopment |
|
|
6,585 |
|
|
14,548 |
|
Tenant Improvements |
|
|
16,224 |
|
|
16,509 |
|
Capital Improvements |
|
|
7,338 |
|
|
8,822 |
|
Other |
|
|
1,724 |
|
|
3,373 |
|
Total |
|
$ |
108,155 |
|
$ |
172,909 |
The decrease in capital expenditures is attributable primarily to a reduction in acquisitions and new development and redevelopment activity.
For 2020, we anticipate our acquisitions will decline over the prior year. Our new development and redevelopment investment for 2020 is estimated to be consistent or lower than 2019 expenditures as we complete our current development projects. For 2020, capital and tenant improvements is generally expected to be consistent or lower than 2019 expenditures. No assurances can be provided that our planned activities will occur. Further, we have entered into commitments aggregating $61.3 million comprised principally of construction contracts, which are generally due in 12 to 36 months and anticipated to be funded with proceeds from the drawdown under our unsecured revolving credit facility.
38
Capital expenditures for additions described above relate to cash flows from investing activities as follows (in thousands):
Capitalized soft costs, including payroll and other general and administrative costs, interest, insurance and real estate taxes, totaled $9.5 million and $11.0 million for the six months ended June 30, 2020 and 2019, respectively.
Financing Activities
Debt
Total debt outstanding was $1.7 billion at June 30, 2020 and consisted of $12 million, which bears interest at variable rates, and $1.7 billion, which bears interest at fixed rates. Additionally, of our total debt, $279 million was secured by operating centers while the remaining $1.5 billion was unsecured.
At June 30, 2020, we have a $500 million unsecured revolving credit facility, which expires in March 2024 and provides borrowing rates that float at a margin over LIBOR plus a facility fee. At June 30, 2020, the borrowing margin and facility fee, which are priced off a grid that is tied to our senior unsecured credit ratings, were 82.5 and 15 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 $850 million. As of June 30, 2020, we had $12 million outstanding, and the available balance was $486 million, net of $1.9 million in outstanding letters of credit.
At June 30, 2020, we have a $10 million unsecured short-term facility that we maintain for cash management purposes. The facility, which matures in March 2021, provides for fixed interest rate loans at a 30-day LIBOR rate plus borrowing margin, facility fee and an unused facility fee of 125, 10, and 5 basis points, respectively. As of June 30, 2020, we had no amounts outstanding under this facility.
For the six months ended June 30, 2020, the maximum balance and weighted average balance outstanding under both facilities combined were $497 million and $146.5 million, respectively, at a weighted average interest rate of 1.0%.
Our five most restrictive covenants, composed from both our public debt and revolving credit facility, include debt to asset, secured debt to asset, fixed charge, unencumbered asset test and unencumbered interest coverage ratios. We are not aware of any non-compliance with our public debt and revolving credit facility covenants as of June 30, 2020.
Our most restrictive public debt covenant ratios, as defined in our indenture and supplemental indenture agreements, were as follows at June 30, 2020:
39
Equity
Our Board of Trust Managers has approved a reduced dividend payment for the third quarter of $.18 per share to maintain financial flexibility until we have better insight into the impact of the pandemic. Common share dividends paid totaled $74.0 million for the six months ended June 30, 2020. As disclosed in our Form 10-K for the year ended December 31, 2019, we had dividends designated for payment in 2020 of $121.2 million. In the event we do not pay dividends of this amount, the unpaid portion will be taxed at corporate income tax rates. Accordingly, we intend to pay an additional $47 million of dividends before the end of 2020. Further, it is likely that we may need to pay a special dividend near year-end to cover additional 2020 taxable income resulting from property sales. Our dividend payout ratio (as calculated as dividends paid on common shares divided by core funds from operations attributable to common shareholders - basic) for the six months ended June 30, 2020 approximated 73.7% (see Non-GAAP Financial Measures for additional information).
We have a $200 million share repurchase plan. Under this plan, we may repurchase common shares from time-to-time in open-market or in privately negotiated purchases. The timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors. The repurchase plan may be suspended or discontinued at any time, and we have no obligations to repurchase any amount of our common shares under the plan. During the six months ended June 30, 2020, we repurchased .8 million common shares at an average price of $21.47 per share. At June 30, 2020 and as of the date of this filing, $163.3 million of common shares remained available to be repurchased under this plan.
We have an effective universal shelf registration statement, which expires in September 2020, which we intend to replace prior to its expiration. 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 ground leases where a third party owns and has leased the underlying land to us to construct and/or operate a shopping center. The table below excludes obligations related to our new development projects because such amounts are not fixed or determinable, and commitments aggregating $61.3 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 June 30, 2020 (in thousands):
| (1) | Includes our finance lease obligation and principal and interest with interest on variable-rate debt calculated using rates at June 30, 2020. Also, excludes a $57.4 million debt service guaranty liability. See Note 5 for additional information. |
| (2) | Other obligations include income and real estate tax payments, commitments associated with our secured debt and other employee payments. Contributions to our retirement plan were fully funded for 2020, and therefore are excluded from the above table. See Note 11 for additional information. |
40
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 issued Series A bonds used for an urban renewal project, of which $57.4 million remain outstanding at June 30, 2020. 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 condensed consolidated financial statements as of June 30, 2020.
Off Balance Sheet Arrangements
As of June 30, 2020, 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 $6.9 million were outstanding at June 30, 2020.
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. 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 continue 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 June 30, 2020, 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 $34 million at June 30, 2020. Also at June 30, 2020, another joint venture arrangement for the future development of a mixed-use project was determined to be a VIE. We are not the primary beneficiary as the substantive participating rights associated with the entity are shared, and we do not have the power to direct the significant activities of the entity. We anticipate future funding of approximately $4.7 million associated with the mixed-use project through 2020.
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 Attributable to Common Shareholders
Effective January 1, 2019, the National Association of Real Estate Investment Trusts ("NAREIT") defines NAREIT FFO as net income (loss) attributable to common shareholders computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets (including: depreciable real estate with land, land development property and securities), change in control of real estate equity investments, and interests in real estate equity investments and their applicable taxes, plus depreciation and amortization related to real estate and impairment of certain real estate assets and in substance real estate equity investments, including our share of unconsolidated real estate joint ventures and partnerships. We calculate NAREIT FFO in a manner consistent with the NAREIT definition.
41
Management believes NAREIT 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 NAREIT 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 NAREIT FFO presented by us is comparable to similarly titled measures of other REITs.
We also present Core FFO as an additional supplemental measure as it is more reflective of the core operating performance of our portfolio of properties. Core FFO is defined as NAREIT FFO excluding charges and gains related to non-cash, non-operating assets and other transactions or events that hinder the comparability of operating results. Specific examples of items excluded from Core FFO include, but are not limited to, gains or losses associated with the extinguishment of debt or other liabilities and transactional costs associated with unsuccessful development activities.
NAREIT FFO and Core FFO should not be considered as alternatives to net income or other measurements under GAAP as indicators of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. NAREIT FFO and Core FFO do not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.
42
NAREIT FFO and Core FFO is calculated as follows (in thousands):
| (1) | The applicable taxes related to gains and impairments of operating and non-operating real estate assets. |
| (2) | Related to gains, impairments and depreciation on operating properties and unconsolidated real estate joint ventures, where applicable. |
Same Property Net Operating Income
We consider SPNOI an important additional financial measure because it reflects only those income and expense items that are incurred at the property level, and when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates and operating costs. We calculate this most useful measurement by determining 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. Additionally, we do not control these unconsolidated joint ventures and partnerships, and the assets, liabilities, revenues or expenses of these joint ventures and partnerships, as presented, do not represent our legal claim to such items.
43
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 that have been sold. 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:
We calculate SPNOI using net income attributable to common shareholders and adjusted for net income attributable to noncontrolling interests, other income (expense), income taxes and equity in earnings of real estate joint ventures and partnerships. Additionally to reconcile to SPNOI, we exclude the effects of 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 and amortization, impairment losses, general and administrative expenses and other items such as lease cancellation income, environmental abatement costs, demolition expenses, and lease termination fees. 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 net income attributable to common shareholders to SPNOI is as follows (in thousands):
| (1) | Other includes items such as environmental abatement costs, demolition expenses and lease termination fees. |
| (2) | Revenue adjustments consist primarily of straight-line rentals, lease cancellation income and fee income primarily from real estate joint ventures and partnerships. |
44
Newly Issued Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements in Item 1 for additional information related to recent accounting pronouncements.
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 may be 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 June 30, 2020, we had fixed-rate debt of $1.7 billion, and variable-rate debt of $12 million. 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 $.1 million associated with our variable-rate debt. The effect of the 100 basis points increase would decrease the fair value of our variable-rate and fixed-rate debt by approximately $.4 million and $69.3 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 June 30, 2020. Based on that evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures were effective as of June 30, 2020.
There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal control over financial reporting to date as a result of most of our employees working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact to their design and operating effectiveness.
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 condensed consolidated financial statements.
ITEM 1A. Risk Factors
The outbreak of the COVID-19 pandemic and related government, private sector and individual consumer responses, and recent fluctuations in energy prices, has affected and may continue to adversely affect our business operations, employee availability, financial performance, liquidity and cash flow for an unknown period of time.
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The outbreak of COVID-19 has been declared a pandemic by the World Health Organization and has spread throughout the world, including the United States. Related government and private sector responsive actions may adversely affect our operations and have adversely affected the operations of our tenants. It is impossible to predict the effect and ultimate impact of this pandemic, as the situation is rapidly evolving. The COVID-19 pandemic has disrupted our tenants’ operations primarily due to mandated non-essential business shut downs and consumer/employee stay-at-home provisions. Retailers continue to seek ways to engage the customer by utilizing on-line ordering and curbside pick-up or delivery. Current and continued disruptions to our tenants’ operations have had and may continue to have a material adverse impact on our financial performance, liquidity and cash flows if tenants do not make their rental payments when due for a lengthy period of time.
There has also been great fluctuations in the price of oil and natural gas recently. This primarily has been due of late to the collapse in the global demand for oil from the COVID-19 induced closure of non-essential businesses, consumer/employee stay-at-home provisions and the near-elimination of airline and other non-essential travel worldwide, and related supply glut. A prolonged collapse in energy prices increases the levels and unpredictability of losses of employment and general business activity, which could further negatively impact the operations of our tenants located throughout Texas, including the city of Houston, where we have a concentration of properties.
The COVID-19 pandemic and related recession may adversely affect lease extensions or renewals, as well as, has and may continue to increase the levels of store closings and tenant bankruptcies, which could also have a material adverse impact on our financial performance, liquidity and cash flows.
As a result of COVID-19, most of our personnel are currently working remotely, and it is possible this could have a negative impact on the execution of our business plans and operations. If a natural disaster, power outage, connectivity issues or other events occur that impact our employees’ ability to work remotely, it may be difficult for us to continue our business for a substantial period of time. The increase in remote working may also result in consumer privacy, IT security and fraud concerns.
Further as a result of COVID-19, our development and redevelopment plans over the next few years could be delayed or more costly for both labor and material costs. Our ability to acquire new centers or dispose of centers could also be impacted due the markets and liquidity issues. These disruptions to our growth and liquidity plans may negatively impact our financial performance and slow future growth.
The uncertainty around the duration of the business disruptions and the extent of the spread of the virus will likely continue to adversely impact the national economy and negatively impact consumer spending. Any of these outcomes could have a material adverse impact on our business, financial condition, operating results and ability to execute and capitalize on our strategies. The full extent of the impact on our operations and financial performance of the COVID-19 pandemic and energy prices depends on future developments that are uncertain and unpredictable, including, among others, their duration and impacts on employment and capital and financial markets, federal and state actions on businesses, taxes and consumers, the reactions to new information that may emerge concerning the virus and actions to contain it, and any negative impact on consumer demand for the goods and services of our tenants. Management’s estimates of the impact on our business are sensitive to change, and it is reasonably possible those estimates will change in the near term as a result of one or more future confirming events.
We have no further material changes to the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2019.
46
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
We have a $200 million share repurchase plan. Under this plan, we may repurchase common shares from time-to-time in open-market or in privately negotiated purchases. The timing and amount of any shares repurchased will be determined by management based on its evaluation of market conditions and other factors. The repurchase plan may be suspended or discontinued at any time, and we have no obligations to repurchase any amount of our common shares under the plan. As of the date of this filing, $163.3 million of common shares remained available to be repurchased under the plan.
Repurchases of our common shares for the quarter ended June 30, 2020 are as follows (in thousands, except per share amounts):
| (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 in the Exhibit Index attached hereto.
47
EXHIBIT INDEX
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(a) |
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Exhibits: |
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10.1† * |
— |
Restatement of Weingarten Realty Retirement Plan dated July 1, 2020. |
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31.1* |
— |
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31.2* |
— |
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32.1** |
— |
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32.2** |
— |
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101.INS** |
— |
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document |
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101.SCH** |
— |
XBRL Taxonomy Extension Schema Document |
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101.CAL** |
— |
XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF** |
— |
XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB** |
— |
XBRL Taxonomy Extension Labels Linkbase Document |
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101.PRE** |
— |
XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
— |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Filed with this report.
** Furnished with this report.
† Management contract or compensation plan or arrangement.
48
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.
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WEINGARTEN REALTY INVESTORS |
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(Registrant) |
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By: |
/s/ Andrew M. Alexander |
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Andrew M. Alexander |
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Chairman/President/Chief Executive Officer |
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By: |
/s/ Joe D. Shafer |
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Joe D. Shafer |
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Senior Vice President/Chief Accounting Officer |
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(Principal Accounting Officer) |
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DATE: August 5, 2020 |
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49
Exhibit 10.1
WEINGARTEN REALTY RETIREMENT PLAN
Restatement of the Plan Generally Effective January 1, 2020
Table of Contents
Page
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ARTICLE I DEFINITIONS |
2 |
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1.1 Plan Definitions |
2 |
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1.2 Construction |
12 |
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ARTICLE II HOURS OF SERVICE |
13 |
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2.1 Crediting of Hours of Service |
13 |
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2.2 Hours of Service Equivalencies |
14 |
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2.3 Determination of Non-Duty Hours of Service |
15 |
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2.4 Allocation of Hours of Service to Service Computation Periods |
16 |
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2.5 Department of Labor Rules |
16 |
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ARTICLE III SERVICE & CREDITED SERVICE |
17 |
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3.1 Service and Credited Service Prior to January 1, 2002 |
17 |
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3.2 Service and Credited Service On or After January 1, 2002 |
17 |
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3.3 Transfers |
17 |
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3.4 Retirement or Termination and Reemployment |
18 |
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3.5 Finality of Determinations |
18 |
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ARTICLE IV ELIGIBILITY FOR PARTICIPATION |
19 |
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4.1 Participation |
19 |
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4.2 Termination of Participation |
19 |
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4.3 Participation Upon Reemployment |
19 |
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4.4 Finality of Determinations |
19 |
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ARTICLE V NORMAL RETIREMENT |
20 |
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5.1 Eligibility |
20 |
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5.2 Regular Benefit Amount |
20 |
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5.3 Minimum Benefit Amount |
22 |
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5.4 401(a)(l7) Fresh Start Adjustments |
22 |
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5.5 Delayed Retirement |
22 |
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5.6 Opening Balance |
23 |
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5.7 Interest Credits |
23 |
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5.8 Service Credits |
24 |
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ARTICLE VI EARLY RETIREMENT |
25 |
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6.1 Eligibility |
25 |
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6.2 Amount |
25 |
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6.3 Payment |
25 |
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ARTICLE VII VESTED RIGHTS |
26 |
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7.1 Vesting |
26 |
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7.2 Eligibility for Deferred Vested Retirement Benefit |
26 |
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7.3 Amount of Deferred Vested Retirement Benefit |
27 |
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7.4 Payment |
27 |
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7.5 Immediate Commencement Option for Small Benefits |
27 |
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7.6 Election of Former Vesting Schedule |
28 |
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ARTICLE VIII DISABILITY RETIREMENT BENEFIT |
29 |
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8.1 Eligibility |
29 |
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8.2 Amount |
29 |
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8.3 Special Rules for Calculating Disability Retirement Benefit |
29 |
i
Table of Contents
(continued)
Page
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8.4 Payment |
29 |
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ARTICLE IX FORMS OF PAYMENT |
30 |
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9.1 Normal Form of Payment |
30 |
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9.2 Optional Forms of Payment |
31 |
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9.3 Designation of Beneficiary and Beneficiary in Absence of Designated Beneficiary |
34 |
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9.4 Notice Regarding Forms of Payment |
34 |
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9.5 Election Period |
35 |
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9.6 Spousal Consent Requirements |
36 |
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9.7 Death Prior to Annuity Starting Date |
36 |
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9.8 Effect of Reemployment on Form of Payment |
36 |
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ARTICLE X SURVIVOR BENEFITS |
37 |
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10.1 Eligibility for Qualified Preretirement Survivor Annuity |
37 |
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10.2 Amount of Qualified Preretirement Survivor Annuity |
37 |
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10.3 Enhanced Qualified Preretirement Survivor Annuity |
37 |
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10.4 Payment of Qualified Preretirement Survivor Annuity |
38 |
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10.5 Non-Spouse Survivor Annuity |
38 |
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ARTICLE XI GENERAL PROVISIONS & LIMITATIONS REGARDING BENEFITS |
39 |
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11.1 Suspension of Benefits |
39 |
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11.2 Non-Alienation of Retirement Rights or Benefits |
39 |
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11.3 Payment of Benefits to Others |
39 |
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11.4 Payment of Small Benefits; Deemed Cash out |
39 |
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11.5 Direct Rollovers |
40 |
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11.6 Limitations on Commencement |
41 |
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ARTICLE XII MAXIMUM RETIREMENT BENEFITS |
42 |
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12.1 Applicability |
42 |
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12.2 Definitions |
42 |
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12.3 Maximum Limitation on Annual Benefits |
49 |
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12.4 Exceptions |
50 |
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12.5 Manner of Reduction |
50 |
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ARTICLE XIII PENSION FUND |
51 |
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13.1 Pension Fund |
51 |
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13.2 Contributions by the Employers |
51 |
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13.3 Expenses of the Plan |
51 |
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13.4 No Reversion |
51 |
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13.5 Forfeitures Not to Increase Benefits |
52 |
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13.6 Change of Funding Medium |
52 |
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ARTICLE XIV ADMINISTRATION |
53 |
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14.1 Authority of the Sponsor |
53 |
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14.2 Action of the Sponsor |
53 |
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14.3 Claims Review Procedure |
53 |
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14.4 Qualified Domestic Relations Orders |
54 |
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14.5 Indemnification |
54 |
ii
Table of Contents
(continued)
Page
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14.6 Actions Binding |
55 |
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ARTICLE XV ADOPTION BY OTHER ENTITIES |
56 |
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15.1 Adoption by Affiliated Companies |
56 |
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15.2 Effective Plan Provisions |
56 |
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ARTICLE XVI AMENDMENT & TERMINATION OF PLAN |
57 |
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16.1 Sponsor's Right of Amendment |
57 |
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16.2 Termination of the Plan |
57 |
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16.3 Adjustment of Allocation |
58 |
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16.4 Assets Insufficient for Allocation |
58 |
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16.5 Assets Insufficient for Allocation Under Paragraph (c) of Section 16.2 |
59 |
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16.6 Allocations Resulting in Discrimination |
59 |
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16.7 Residual Assets |
59 |
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16.8 Meanings of Terms |
59 |
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16.9 Payments by the Funding Agent |
60 |
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16.10 Residual Assets Distributable to the Employers |
60 |
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16.11 Withdrawal of an Employer |
60 |
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ARTICLE XVII MISCELLANEOUS |
61 |
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17.1 No Commitment as to Employment |
61 |
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17.2 Claims of Other Persons |
61 |
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17.3 Governing Law |
61 |
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17.4 Nonforfeitability of Benefits Upon Termination or Partial Termination |
61 |
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17.5 Merger, Consolidation, or Transfer of Plan Assets |
61 |
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17.6 Funding Agreement |
62 |
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17.7 Benefit Offsets for Overpayments |
62 |
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17.8 Internal Revenue Requirements |
62 |
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17.9 Overall Permitted Disparity Limits |
63 |
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17.10 Veterans Reemployment Rights |
63 |
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ARTICLE XVIII TOP-HEAVY PROVISIONS |
64 |
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18.1 Top-Heavy Plan Definitions |
64 |
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18.2 Applicability of Top-Heavy Plan Provisions |
66 |
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18.3 Top-Heavy Vesting |
66 |
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18.4 Minimum Top-Heavy Benefit |
66 |
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ARTICLE XIX FUNDING-BASED LIMITS |
68 |
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19.1 Effective Date and Application |
68 |
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19.2 Funding Based Limitation on Shutdown Benefits and Other Unpredictable Contingent Event Benefits |
68 |
|
|
19.3 Limitations on Plan Amendments Increasing Liability for Benefits |
68 |
|
|
19.4 Limitations on Accelerated Benefit Distributions |
69 |
|
|
19.5 Limitation on Benefit Accruals for Plans with Severe Funding Shortfalls |
72 |
|
|
19.6 Methods to Avoid or Terminate Benefit Limitations |
73 |
|
|
19.7 Special Rules |
73 |
|
|
19.8 Treatment of Plan as of Close of Prohibited or Cessation Period |
76 |
|
|
19.9 Definitions |
78 |
iii
Table of Contents
(continued)
Page
|
ARTICLE XX HEROES EARNINGS ASSISTANCE AND RELIEF TAX ACT PROVISIONS |
79 |
|
|
|
20.1 Death benefits |
79 |
|
|
20.2 Differential wage payments |
79 |
iv
PREAMBLE
Weingarten Realty Investors, a Texas real estate investment trust, previously established and currently maintains the Weingarten Realty Retirement Plan for the exclusive benefit of its eligible employees and their beneficiaries. The Plan was most recently restated effective January 1, 2013, to reflect the applicable requirements of the Pension Protection Act of 2006, as well as subsequent changes in applicable law and Regulations, and to incorporate amendments made to the Plan following the prior Plan restatement.
The Plan is hereby amended and restated to incorporate all amendments made to the Plan following the restatement of the Plan described above and to incorporate changes in applicable law and Regulations. The Plan as restated is intended to continue to qualify as a defined benefit pension plan under Internal Revenue Code Section 401(a).
Except as otherwise specifically provided herein, this amended and restated Plan shall be effective as of January 1, 2020, and the rights of any person who does not have at least one Hour of Service under the Plan on or after January 1, 2020, shall generally be determined in accordance with the terms of the Plan as in effect on the date for which he is last credited with an Hour of Service. In no event shall a Participant who retired or otherwise terminated employment during the period beginning January 2, 2002 and ending close of business March 31, 2002 (the "Freeze Period") accrue benefits under the Plan for employment during the Freeze Period.
Notwithstanding any other provision of the Plan to the contrary, a Participant's vested interest in his Accrued Benefit under the Plan on and after the effective date of this amendment and restatement shall be not less than his vested interest in his Accrued Benefit on the day immediately preceding the effective date.
1
| 1.1 | Plan Definitions |
As used herein, the following words and phrases, when they appear with initial letters capitalized as indicated below, have the meanings hereinafter set forth:
| (a) | An "Active Participant" means a Participant who is accruing Credited Service under the Plan in accordance with the provisions of Article III. |
| (b) | A Participant's "Accrued Benefit" as of any date means the following: |
For Plan Years beginning on and after January 1, 2008, solely for purposes of determining the present value of a benefit payment that is subject to Code Section 417(e), the applicable interest rate shall be the adjusted first, second, and third
2
segment rates applied under the rules similar to the rules of Code Section 430(h)(2)(C) for the second calendar month preceding the Plan Year in which the distribution is made. For this purpose, the first, second, and third segment rates are the first, second, and third segment rates that would be determined under Code Section 430(h)(2)(C) if:
For purposes of determining the present value of a Cash Balance Participant's Frozen Accrued Benefit or a Grandfathered Participant's Accrued Benefit, present value for a Participant who has reached Normal Retirement Date shall be calculated based on the immediate annuity payable to the Participant as of his Annuity Starting Date. For a Participant who has not yet reached Normal Retirement Date at the time such present value is being determined, the present value shall be calculated based on a deferred annuity payable commencing at Normal Retirement Date. For purposes of this paragraph, immediate and deferred annuities will be in the normal form applicable to unmarried Participants under Section 9.1 of the Plan.
| (e) | The "Administrator" means the Sponsor unless the Sponsor designates another person or persons to act as such. |
| (f) | An "Affiliated Company" means any corporation or business, other than an Employer, which would be aggregated with an Employer for a relevant purpose under Code Section 414. |
If a Participant whose Annuity Starting Date has occurred is reemployed by an Employer or an Affiliated Company resulting in a suspension of benefits in accordance with the provisions of Section 11.1, for purposes of determining the form of payment of such Participant's benefit upon his subsequent retirement, such prior Annuity Starting Date shall apply to benefits accrued prior to the Participant's
3
reemployment. Such prior Annuity Starting Date shall also apply to benefits accrued following the Participant's reemployment if such prior Annuity Starting Date occurred on or after the Participant's Normal Retirement Date. Such prior Annuity Starting Date shall not apply to benefits accrued following the Participant's reemployment if such prior Annuity Starting Date occurred prior to the Participant's Normal Retirement Date.
If a Grandfathered Participant is credited with less than a full year of Credited Service for any Earnings Computation Period, his Earnings for such Earnings Computation Period shall be annualized for purposes of determining his Average Annual Earnings by multiplying his actual Earnings for such Earnings Computation Period by the ratio that 2080 bears to the number of Hours of Service credited to the Grandfathered Participant for the Earnings Computation Period.
The Average Annual Earnings of a Grandfathered Participant who becomes Disabled shall be determined assuming the Grandfathered Participant continues to receive Earnings during the period he is Disabled, but has not commenced retirement benefit payments under the Plan, at the rate in effect for such Grandfathered Participant immediately prior to the date he became Disabled, adjusted as provided in the preceding paragraph to reflect full-time employment.
| (i) | A Participant's "Beneficiary" means any beneficiary who is entitled to receive a benefit under the Plan upon the death of the Participant. |
| (l) | A "Cash Balance Participant" means a Participant who is an Active Participant on or after April 1, 2002 and who is not a Grandfathered Participant. |
| (m) | The "Code" means the Internal Revenue Code of 1986, as amended from time to time. Reference to a Code section shall include (i) such section and any comparable |
4
| section or sections of any future legislation that amends, supplements, or supersedes such section and (ii) all rulings, regulations, notices, announcements, and other pronouncements issued by the U.S. Treasury Department, the Internal Revenue Service, and any court of competent jurisdiction that relate to such section. |
In addition to the foregoing, Earnings include any amount that would have been included in the foregoing description but for the Participant’s election to defer payment of such amount under Code Sections 402(e)(3) (certain pre-tax elective deferrals), 402(h)(1) (certain pre-tax deferrals to a simplified employee pension plan), 403(b) (certain employee deferrals under a tax-deferred annuity plan or contract), 408(p)(2)(A)(i) (simple retirement account), 125 (cafeteria plan
5
deductions), 132(f)(4) (qualified transportation fringe benefits), or 457 (certain deferred compensation plans).
In no event, however, shall the Earnings of a Participant taken into account under the Plan for any Earnings Computation Period exceed (1) $200,000 for Earnings Computation Periods beginning before January 1, 1994, or (2) $150,000 for Earnings Computation Periods beginning on or after January 1, 1994. The limitations set forth in the preceding sentence shall be subject to adjustment annually as provided in Code Section 401(a)(17)(B) and Code Section 415(d); provided, however, that the dollar increase in effect on January 1 of any calendar year, if any, is effective for Earnings Computation Periods beginning in such calendar year.
Notwithstanding the provisions of the preceding paragraph, effective for Plan Years beginning on and after January 1, 2002, the annual Earnings of each Participant, who is credited with an hour of service on or after January 1, 2002, to be taken into account in determining benefit accruals shall be subject to the following limits (rather than the limits described above):
Earnings received by a Participant during the Freeze Period shall be included in his Earnings for the 2002 Earnings Computation Period only if such Participant was actively employed as an Employee on April 1, 2002.
| (q) | An "Earnings Computation Period" means each calendar year. |
| (s) | Effective through December 31, 2004, an "Employee" means any employee of an Employer. Notwithstanding the foregoing, the term "Employee" shall not include the following: |
6
Any "leased employee," other than an excludable leased employee, shall be treated as an employee of an Employer or any other Affiliated Company for all purposes of the Plan, including benefit accrual; provided, however, that contributions to a qualified plan made on behalf of a leased employee by the leasing organization that are attributable to services for the Employer shall be treated as having been made by the Employer and there shall be no duplication of benefits under this Plan.
A “leased employee" means any person who performs services for an Employer or an Affiliated Company (the "recipient") (other than an employee of the recipient) pursuant to an agreement between tile recipient and any other person (the "leasing organization") on a substantially full-time basis for a period of at least one year, provided that such services are performed under the primary direction or control of the recipient. An "excludable leased employee" means any leased employee of the recipient who is covered by a money purchase pension plan maintained by the leasing organization which provides for (i) a nonintegrated employer contribution on behalf of each participant in the plan equal to at least ten percent of compensation, (ii) full and immediate vesting, and (iii) immediate participation by employees of the leasing organization (other than employees who perform substantially all of their services for the leasing organization or whose compensation from the leasing organization in each plan year during the four-year period ending with the plan year is less than $1,000); provided, however, that leased employees do not constitute more than 20 percent of the recipient's non-highly compensated work force. For purposes of this Section, contributions or benefits provided to a leased employee by the leasing organization that are attributable to services performed for the recipient shall be treated as provided by the recipient.
Effective on and after January 1, 2005, an “Employee” means any employee of an Employer. Notwithstanding the foregoing, the term “Employee” shall not include the following:
7
| (t) | An "Employer" means the Sponsor and any entity which has adopted the Plan as may be provided under Article XV. |
| (u) | An "Entry Date" means each day of the Plan Year. |
| (w) | The "Freeze Period" means the period beginning January 2, 2002 and ending on the close of business March 31, 2002. |
| (x) | A Cash Balance Participant's "Frozen Accrued Benefit" means his benefit accrued as of January 1, 2002 under the terms of the Plan in effect on that date. |
| (aa) | A "Grandfathered Participant" means any Participant who was born prior to January 1, 1952, was hired by an Employer prior to January 1, 1997, and was an active Employee on April 1, 2002. |
8
| (bb) | A "Highly Compensated Employee" means any Employee or former Employee who is a highly compensated active employee or a highly compensated former employee as defined hereunder. |
A "highly compensated active employee" includes any Employee who performs services for an Employer or any Affiliated Company during the Plan Year and who (i) was a five percent owner at any time during the Plan Year or the look back year or (ii) received compensation from the Employers and Affiliated Companies during the look back year in excess of $80,000 (subject to adjustment annually at the same time and in the same manner as under Code Section 415(d)). The dollar amount in (ii) shall be pro-rated for any Plan Year of fewer than 12 months.
A "highly compensated former employee" includes any Employee who (i) separated from service from an Employer and all Affiliated Companies (or is deemed to have separated from service from an Employer and all Affiliated Companies) prior to the Plan Year, (ii) performed no services for an Employer or any Affiliated Company during the Plan Year, and (iii) for either the separation year or any Plan Year ending on or after the date the Employee attains age 55, was a highly compensated active employee, as determined under the rules in effect under Code Section 414(q) for such year.
The determination of who is a Highly Compensated Employee hereunder shall be made in accordance with the provisions of Code Section 414(q) and regulations issued thereunder.
For purposes of this definition, the following terms have the following meanings:
| (cc) | An "Hour of Service" with respect to any Employee means an hour which is determined and credited as such in accordance with the provisions of Article II. |
| (dd) | An "Interest Credit" means the amount credited to a Cash Balance Participant's Cash Balance Account each Plan Year as provided in Section 5.8 of the Plan. |
| (ff) | A Cash Balance Participant's "Opening Balance” means the initial amount, if any, credited to his Cash Balance Account upon the conversion of the Plan to a cash balance plan as of April 1, 2002. |
9
| (hh) | The "Pension Fund" means the fund or funds maintained under the Funding Agreement for purposes of accumulating contributions made by the Employers and paying benefits under the Plan. |
| (kk) | A “Project Employee” means an Employee employed for short-term assignments, generally of six months’ duration or less. |
| (mm) | A "Qualified Preretirement Survivor Annuity" is an annuity payable to the surviving Spouse of a Participant for such Spouse's life as provided in Article X. |
| (oo) | A Participant's "Service" means his period of service for purposes of determining his eligibility for a benefit under the Plan, as computed in accordance with the provisions of Article III. |
| (pp) | A "Service Computation Period" means the 12-month period used for determining an Employee's years of Service and years of Credited Service. |
10
The Service Computation Period for determining an Employee's years of Service and years of Credited Service is the Plan Year.
Effective January 1, 2005, notwithstanding the foregoing, solely for purposes of determining the eligibility of Project Employees, the initial Service Computation Period shall be the twelve (12) consecutive month period commencing with the Employee’s employment commencement date. The eligibility computation period for each such Employee shall shift to the Plan Year which includes the anniversary date of the Employee’s employment commencement date without regard to whether the Employee is entitled to be credited with one thousand (1,000) Hours of Service during the period, provided that an Employee who is credited with one thousand (1,000) Hours of Service in both the initial eligibility computation period and the Plan Year which includes the first anniversary of the Employee’s employment commencement date shall be credited with two (2) years of eligibility service.
| (ss) | The "Sponsor" means Weingarten Realty Investors, and any successor thereto. |
| (tt) | A Participant's "Spouse" means the person who is the Participant's lawful spouse. A Spouse may be an individual of the same sex if the individual and the Participant |
11
| were lawfully married under state law, regardless of where the couple subsequently is domiciled. |
| 1.2 | Construction |
Where required by the context, the noun, verb, adjective, and adverb forms of each defined term shall include any of its other forms. Wherever used herein, the masculine pronoun shall include the feminine, the singular shall include the plural, and the plural shall include the singular.
12
| 2.1 | Crediting of Hours of Service |
An Employee shall be credited with an Hour of Service under the Plan for:
13
Notwithstanding anything to the contrary contained in this Section, no more than one Hour of Service shall be credited to an Employee for any one hour of his employment or absence from employment.
| 2.2 | Hours of Service Equivalencies |
Notwithstanding any other provision of the Plan to the contrary, an Employer may elect to credit Hours of Service to its Employees in accordance with one or more of the following equivalencies, and if an Employer does not maintain records that accurately reflect actual hours of service, such Employer shall credit Hours of Service to its Employee in accordance with one or more of the following equivalencies:
| (a) | If the Employer maintains its records on the basis of days worked, an Employee shall be credited with ten Hours of Service for each day on which he performs an Hour of Service. |
| (b) | If the Employer maintains its records on the basis of weeks worked, an Employee shall be credited with 45 Hours of Service for each week in which he performs an Hour of Service. |
14
| (d) | If the Employer maintains its records on the basis of months worked, an Employee shall be credited with 190 Hours of Service for each month in which he performs an Hour of Service. |
| 2.3 | Determination of Non-Duty Hours of Service |
In the case of a payment which is made or due from an Employer on account of a period during which an Employee performs no duties, and which results in the crediting of Hours of Service, or in the case of an award or agreement for back pay, to the extent that such award or agreement is made with respect to a period during which an Employee performs no duties, the number of Hours of Service to be credited shall be determined as follows:
For the purpose of crediting Hours of Service for a period during which an Employee performs no duties, a payment shall be deemed to be made by or due from an Employer (i) regardless of whether such payment is made by or due from an Employer directly, or indirectly through (among others) a trust fund or insurer to which the Employer contributes or pays premiums, and (ii) regardless of whether contributions made or due to such trust fund insurer, or other entity are for the benefit of particular persons or are on behalf of a group of persons in the aggregate.
15
| 2.4 | Allocation of Hours of Service to Service Computation Periods |
Hours of Service credited under Section 2.1 shall be allocated to the appropriate Service Computation Period as follows:
| (a) | Hours of Service described in paragraph (a) of Section 2.1 shall be allocated to the Service Computation Period in which the duties are performed. |
| (b) | Hours of Service credited to an Employee for a period during which an Employee performs no duties shall be allocated as follows: |
| 2.5 | Department of Labor Rules |
The rules set forth in paragraphs (b) and (c) of Department of Labor Regulation Section 2530.200b-2, which relate to determining Hours of Service attributable to reasons other than the performance of duties and crediting Hours of Service to Service Computation Periods, are hereby incorporated into the Plan by reference.
16
| 3.1 | Service and Credited Service Prior to January 1, 2002 |
Each person who is an Employee on or after April 1, 2002, shall be credited with Service and Credited Service for purposes of the Plan for periods prior to January 1, 2002 equal to the Service and Credited Service with which he had been credited in accordance with the Plan provisions in effect immediately prior to such date.
| 3.2 | Service and Credited Service On or After January 1, 2002 |
Each person who is an Employee on or after April 1, 2002, shall be credited with Service and Credited Service with respect to periods of employment on or after January 1, 2002, for purposes of the Plan as follows:
| (a) | He shall be credited with a year of Service for each Service Computation Period for which he is credited with at least 1,000 Hours of Service. |
| (c) | Notwithstanding the foregoing, no Credited Service shall be credited to an Employee for the following periods: |
| 3.3 | Transfers |
Notwithstanding the foregoing, Service and Credited Service credited to a person shall be subject to the following:
17
| or otherwise terminate his employment as an Employee until such time as he is no longer in the employment of an Employer or any other Affiliated Company, at which time he shall become entitled to benefits if he is otherwise eligible therefore under the provisions of the Plan; provided, however, that up to such time he shall receive credit only for Service, but not for Credited Service, for such other employment as if such other employment were employment with an Employer as an Employee. |
| 3.4 | Retirement or Termination and Reemployment |
If an Employee retires or otherwise terminates employment with the Employers and all Affiliated Companies, his eligibility for and the amount of any benefit to which he may be entitled under the Plan shall be determined based upon the Service and Credited Service with which he is credited at the time of such retirement or other termination of employment. If such retired or former Employee is reemployed by an Employer or any Affiliated Company, the Service and Credited Service with which he was credited at the time of such prior retirement or other termination of employment shall be aggregated with the Service and Credited Service with which he is credited following his reemployment for purposes of determining his eligibility for and the amount of any benefit to which he may be entitled under the Plan upon his subsequent retirement or other termination of employment if:
| (a) | he was eligible for any retirement benefit at the time of his previous retirement or other termination of employment; or |
Notwithstanding any other provision of this Section, if a retired or former Employee returns to employment in a capacity other than as an Employee, his period of employment shall be treated for the purposes of the Plan solely in accordance with the transfer provisions of this Article III.
| 3.5 | Finality of Determinations |
All determinations with respect to the crediting of Service and Credited Service under the Plan shall be made on the basis of the records of the Employers, and all determinations so made shall be final and conclusive upon Employees, former Employees, and all other persons claiming a benefit interest under the Plan. Notwithstanding anything to the contrary contained in this Article, there shall be no duplication of Service and Credited Service.
18
| 4.1 | Participation |
Effective January 1, 2005, each person other than a Project Employee shall become an Active Participant as of the Entry Date coinciding with or immediately following the date he becomes an Employee. With respect to Project Employees, any Project Employee who is credited with at least 1,000 Hours of Service in his initial Service Computation Period (or in any subsequent Service Computation Period) shall become a Participant on the first day of the month occurring on or following the completion of such requirement in such Computation Period. Active Participants immediately prior to January 1, 2020, shall continue Active Participation uninterrupted as of January 1, 2020.
| 4.2 | Termination of Participation |
A Participant shall remain an Active Participant as long as he continues in employment as an Employee. A person shall remain a Participant as long as he retains an Accrued Benefit under the Plan.
| 4.3 | Participation Upon Reemployment |
If a former Employee who was a Participant hereunder is reemployed as an Employee, he shall again become an Active Participant hereunder as of his reemployment date. If a former Employee who was not a Participant hereunder is reemployed as an Employee, he shall become an Active Participant hereunder as of the later of (a) the Entry Date as of which he would have become an Active Participant if he had continued employment as an Employee or (b) his reemployment date.
| 4.4 | Finality of Determinations |
All determinations with respect to the eligibility of an Employee to become a Participant under the Plan shall be made on the basis of the records of the Employers, and all determinations so made shall be final and conclusive for all Plan purposes. Each Employee who becomes a Participant shall be entitled to the benefits, and be bound by all the terms, provisions, and conditions of the Plan and the Funding Agreement.
19
| 5.1 | Eligibility |
Each Participant who retires from employment with his Employer and all Affiliated Companies on his Normal Retirement Date shall be eligible for a normal retirement benefit. In addition, a Participant who continues in employment with his Employer or an Affiliated Company after his Normal Retirement Date shall be eligible for a normal retirement benefit commencing on his Normal Retirement Date.
| 5.2 | Regular Benefit Amount |
| (a) | For periods on and after the Effective Date and prior to October 1, 2003, an eligible Grandfathered Participant's monthly normal retirement benefit shall be equal to 1/12th of the following: |
For periods on and after October 1, 2003, an eligible Grandfathered Participant's monthly normal retirement benefit shall be equal to 1/12th of the following:
A Grandfathered Participant's "adjusted Credited Service" means the following:
20
In calculating the retirement benefit of a Grandfathered Participant whose employment as an Employee has not continued to Normal Retirement Date, the amount determined under paragraph (1) and (2) above shall be separately multiplied by a fraction, not to exceed one, the numerator of which is the Grandfathered Participant's actual years of Credited Service and the denominator of which is the number of years of Credited Service the Grandfathered Participant would have at Normal Retirement Date if he continued employment as an Employee to Normal Retirement Date, excluding years of Credited Service in excess of the limit specified in paragraph (1) or (2), as applicable, and excluding for purposes of paragraph (2), years of Credited Service credited to the Participant prior to July 1, 1976.
In no event will a reduction in a Grandfathered Participant's Average Annual Earnings or an increase in his Social Security Benefit reduce the normal retirement benefit payable to him below the amount that would have been payable to him under the same form of payment had he retired prior to his Normal Retirement Date when eligible for an early retirement benefit.
| (b) | An eligible Cash Balance Participant's normal retirement benefit shall be equal 1/12th of the greater of (1) or (2) below, subject to (3) below: |
21
| 5.3 | Minimum Benefit Amount |
Notwithstanding any other provision of the Plan to the contrary, in no event will the monthly normal retirement benefit payable to a Grandfathered Participant be less than 1/12th of the product of:
| (a) | two percent of his average annual Earnings during his five consecutive highest paid years of Service multiplied by |
| (b) | his years of Credited Service at retirement not in excess of ten years. |
| 5.4 | 401(a)(l7) Fresh Start Adjustments |
The monthly normal retirement benefit of a Grandfathered Participant whose Earnings exceeded the $200,000 or $150,000 Earnings limitations described in Article I for Earnings Computation Periods ending before the Earnings Computation Periods in which the limitations were effective shall be the greatest of (a), (b), (c) or (d) below:
| (b) | the Grandfathered Participant's Accrued Benefit determined under the Plan formula in effect after the 1993 Earnings Computation Period applying the $150,000 Earnings limitation; or |
| (d) | the Grandfathered Participant's Accrued Benefit determined under the Plan formula in effect on December 31, 2001, applying the $200,000 Earnings limitation. |
| 5.5 | Delayed Retirement |
Subject to the required minimum distribution requirements of Code Section 401(a)(9) and Appendix A hereof, a Participant may elect to defer benefit commencement beyond Normal Retirement Date.
For a Grandfathered Participant, at the Participant’s actual retirement date, the Participant’s late retirement benefit shall be equal to the greater of (i) the Actuarial Equivalent of the Participant’s
22
Accrued Benefit at the Participant’s Normal Retirement Date, or (ii) the Participant’s Accrued Benefit as of the actual date of retirement.
For a Cash Balance Participant, at the Participant’s actual retirement date, the Participant’s late retirement benefit shall be equal to the greater of the amount described in (i) or (ii) below:
|
(i) |
The Actuarial Equivalent of the Participant’s normal retirement benefit as determined under Section 5.2(b)(1) at the Participant’s Normal Retirement Date; or |
|
(ii) |
The greater of (a) or (b), as follows: (a) the Actuarial Equivalent of the monthly retirement benefit payable in a single life annuity at the Participant’s Normal Retirement Date; or (b) the monthly retirement benefit payable in a single life annuity that is the Actuarial Equivalent of the Participant’s Cash Balance Account at the Participant’s actual retirement date. |
| 5.6 | Opening Balance |
The Opening Balance of a Cash Balance Participant who was an Active Participant in the Plan on January 1, 2002 and was an active Employee on April 1, 2002 is the Actuarially Equivalent present value of his Frozen Accrued Benefit determined as of January 1, 2002. For purposes of determining such present value, the following factors shall be used: (a) the 1983 Group Annuity Mortality Table adjusted for 50 percent male content and 50 percent female content and (b) an interest rate of six percent and the calculation shall be based on a deferred annuity payable at Normal Retirement Date.
The Opening Balance of any other Cash Balance Participant is zero.
| 5.7 | Interest Credits |
On the last day of each Plan Year beginning on or after January 1, 2002, an Interest Credit shall be credited to the Cash Balance Account of a Participant whose Annuity Starting Date has not occurred. The Interest Credit rate shall be equal to the annual rate of interest on ten-year U.S. Treasury Bill Constant Maturities in effect for the third calendar month immediately preceding the Plan Year; provided, however, that if such rate is less than 2.05 percent, the rate used hereunder shall be 2.05 percent. Effective on and after January 1, 2011, the Interest Credit rate shall be a 4.5 percent annual rate; provided, however, that the value of a Participant’s Cash Balance Account as of any date after December 31, 2010 shall not be less than the value of the Participant’s Cash Balance Account as of December 31, 2010, credited as provided in this Section 5.7 with an Interest Credit Rate equal to the annual rate of interest on ten-year U.S. Treasury Bill Constant Maturities, but no less than 2.05 percent, excluding any Service Credits credited to such Account after December 31, 2010. An Interest Credit of less than zero shall in no event result in the Cash Balance Account being less than the aggregate amount of Service Credits credited to the Account. The Interest Credit shall be based on the value of a Participant's Cash Balance Account on the first day of the Plan Year. The Interest Credit for the Plan Year in which a Participant's Annuity Starting Date occurs shall be credited to the Participant's Cash Balance Account as of the last day of the calendar month preceding the month in which the Participant's Annuity Starting Date occurs and
23
shall accrue only through such day. No further Interest Credits shall be credited to a Participant's Cash Balance Account following his Annuity Starting Date.
The Interest Credit on a Cash Balance Participant's Cash Balance Account for the 2002 Plan Year shall be based on the Participant's Opening Balance and interest on that balance for the full calendar year, including the Freeze Period.
Special Rule Relating To Termination of the Plan. Effective January 1, 2008, upon the termination of the Plan:
| 5.8 | Service Credits |
For each Plan Year beginning on or after January 1, 2002, a Service Credit shall be credited to the Cash Balance Account of any Cash Balance Participant who is an Active Participant at any time during such Plan Year. The amount of such Service Credit shall be a percentage of the Cash Balance Participant's Earnings for the Plan Year determined from the following chart based on the Cash Balance Participant's years of Credited Service on the last day of the immediately preceding Plan Year:
|
Years of Credited Service |
Percentage of Earnings |
|
0 through 9.99 |
3% |
|
10 through 19.99 |
4% |
|
20 or more |
5% |
24
| 6.1 | Eligibility |
Each Participant who retires from employment with his Employer and all Affiliated Companies at or after age 55, but prior to his Normal Retirement Date and who has at least 15 years of Service and who is not eligible for a disability retirement benefit under the provisions of Article VIII shall be eligible for an early retirement benefit.
| 6.2 | Amount |
An eligible Grandfathered Participant's monthly early retirement benefit shall be equal to his Accrued Benefit on the date of his early retirement; provided, however, that the amount of such benefit shall be reduced by 1/15th for each of the first five years and 1/30th for each of the next five years by which his Annuity Starting Date precedes his Normal Retirement Date.
An eligible Cash Balance Participant's monthly early retirement benefit shall be equal to the greater of (1) his monthly Frozen Accrued Benefit reduced by 1/15th for each of the first five years and 1/30th for each of the next five years and reduced actuarially for each additional month by which his Annuity Starting Date precedes his Normal Retirement Date or (2) the monthly retirement benefit payable as of his Annuity Starting Date in a single life annuity, as described in Section 9.1(a), that is the Actuarial Equivalent of his Cash Balance Account.
| 6.3 | Payment |
A monthly early retirement benefit shall be paid to an eligible Participant commencing as of the first day of the month following the later of the month in which he retires or the month in which be makes written application for the benefit, but not later than his Normal Retirement Date.
25
| 7.1 | Vesting |
| (a) | A Grandfathered Participant's vested interest in his Accrued Benefit shall be at all times 100 percent. |
|
Years of Service |
Vested Interest |
|
less than 2 |
0% |
|
2, but less than 3 |
20% |
|
3, but less than 4 |
40% |
|
4, but less than 5 |
60% |
|
5 or more |
100% |
|
Years of Service |
Vested Interest |
|
less than 5 |
0% |
|
5 or more |
100% |
|
Years of Service |
Vested Interest |
|
less than 3 |
0% |
|
3 or more |
100% |
Notwithstanding any other provision of the Plan to the contrary, a Cash Balance Participant's vested interest in his Accrued Benefit shall be 100 percent if he is employed by an Employer or an Affiliated Company on his Normal Retirement Date, regardless of whether he has completed the number of years of Service required under the above schedule for 100 percent vesting.
| 7.2 | Eligibility for Deferred Vested Retirement Benefit |
Each Participant who terminates employment with his Employer and all Affiliated Companies, who has a vested interest in his Accrued Benefit, and who is not eligible for a normal, early, or disability retirement benefit under the Plan shall be eligible for a deferred vested retirement benefit.
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| 7.3 | Amount of Deferred Vested Retirement Benefit |
An eligible Grandfathered Participant's monthly deferred vested retirement benefit shall be equal to his vested Accrued Benefit on the date of his termination of employment; provided, however, that if the Participant is eligible to elect to begin benefit payments before his Normal Retirement Date as provided in Section 7.4, the amount of such benefit shall be reduced for early commencement in the same way as provided in Section 6.2 with respect to an early retirement benefit.
An eligible Cash Balance Participant's monthly deferred vested retirement benefit shall be equal to the greater of (1) his monthly Frozen Accrued Benefit reduced by 1/15th for each of the first five years and 1/30th for each of the next five years and reduced actuarially for each additional month by which his Annuity Starting Date precedes his Normal Retirement Date or (2) the monthly retirement benefit payable as of his Annuity Starting Date in a single life annuity, as described in Section 9.1(a), that is the Actuarial Equivalent of his Cash Balance Account.
| 7.4 | Payment |
A monthly deferred vested retirement benefit shall be payable to an eligible participant commencing as of his Normal Retirement Date; provided, however, that a Participant who has 15 years of Service may elect to begin benefit payments as of the first day of any month following the month in which he attains age 55.
| 7.5 | Immediate Commencement Option for Small Benefits |
Effective with respect to distributions occurring on and after June 1, 2020, notwithstanding any other provision of the Plan to the contrary, if the Actuarially Equivalent present value of a Participant’s Accrued Benefit exceeds $1,000 but is not greater than $5,000, the Participant may elect to begin benefit payments as soon as reasonably practicable following his termination of employment in one single lump sum payment and consent of the Participant’s Spouse to such distribution shall not be required; in such a case, the annuity forms of distribution described in Sections 9.1 and 9.2 shall not be available. If the Participant’s Accrued Benefit exceeds $5,000 but is not greater than $50,000, the Participant may elect to begin benefit payments as soon as reasonably practicable following his termination of employment in the normal form of payment provided in Section 9.1. A married Participant may waive the normal 50 percent Qualified Joint and Survivor Annuity described in paragraph (b) or (c), as applicable, of Section 9.1 and elect the single life annuity described in paragraph (a) of Section 9.1. In lieu of receiving payment in one of the normal forms, a Participant may elect to receive a single sum payment of the full Actuarially Equivalent present value of his Accrued Benefit. A Participant's election of a form of payment hereunder other than the normal form applicable to him shall be subject to the requirements of Sections 9.4, 9.5, and 9.6. Effective with respect to distributions occurring on and after January 1, 2008, and prior to June 1, 2020, such an election may be made if the Actuarially Equivalent present value of a Participant's Accrued Benefit is greater than $1,000, but not greater than $50,000. Effective with respect to distributions occurring on and after the Effective Date and prior to January 1, 2008, such an election may be made if the Actuarially Equivalent present value of the Participant's Accrued Benefit is greater than $5,000, but not greater than $50,000.
27
| 7.6 | Election of Former Vesting Schedule |
In the event the Sponsor adopts an amendment to the Plan that changes the vesting schedule under the Plan, including any amendment which directly or indirectly affects the computation of the nonforfeitable interest of Participants' rights to Accrued Benefits, any Participant with three or more years of Service shall have a right to have his nonforfeitable interest in his Accrued Benefit continue to be determined under the vesting schedule in effect prior to such amendment rather than under the new vesting schedule, unless the nonforfeitable interest of such Participant in his Accrued Benefit under the Plan, as amended, at any time is not less than such interest determined without regard to such amendment. Such Participant shall exercise such right by giving written notice of his exercise thereof to the Administrator within 60 days after the latest of (i) the date he receives notice of such amendment from the Administrator, (ii) the effective date of the amendment, or (iii) the date the amendment is adopted. Notwithstanding the foregoing provisions of this Section, the vested interest of each Participant on the effective date of such amendment shall not be less than his vested interest under the Plan as in effect immediately prior to the effective date thereof.
28
| 8.1 | Eligibility |
Each Grandfathered Participant who retires from employment with his Employer and all Affiliated Companies prior to his Normal Retirement Date due to Disability shall be eligible for a disability retirement benefit.
| 8.2 | Amount |
An eligible Grandfathered Participant's monthly disability retirement benefit shall be equal to his Accrued Benefit determined as of his Annuity Starting Date; provided, however, that if the Grandfathered Participant is eligible to elect to begin benefit payments before his Normal Retirement Date the amount of such benefit shall be reduced for early commencement in the same way as provided in Section 6.2 with respect to an early retirement benefit.
| 8.3 | Special Rules for Calculating Disability Retirement Benefit |
A Disabled Grandfathered Participant shall be credited with Service and Credited Service while he is Disabled based on his Hours of Service credited in accordance with the provisions of Section 2.1(d). Such Grandfathered Participant's Average Annual Earnings shall be determined assuming Earnings continued while he is Disabled as provided in Section 1.1(h). A Disabled Grandfathered Participant's Accrued Benefit shall be determined under the provisions of the Plan in effect on the date the Disabled Grandfathered Participant ceases to be credited with Hours of Service under Section 2.1.
| 8.4 | Payment |
A monthly disability retirement benefit shall be paid to an eligible Grandfathered Participant commencing as of his Normal Retirement Date; provided, however, that a Grandfathered Participant who has 15 years of Service may elect to begin benefit payments as of the first day of any month following the month in which he attains age 55.
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| 9.1 | Normal Form of Payment |
A Participant who is eligible to receive any retirement benefit under Section 5.1, 5.5, 6.1, 7.2, or 8.1 of the Plan shall receive payment of such benefits in accordance with one of the following normal forms of payment:
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| Participant's lifetime, the last payment being for the month in which the Spouse's death occurs. |
The reduced monthly payments to be made to the Participant under this paragraph shall be in an amount which, on the date of commencement thereof, is the Actuarial Equivalent of the monthly benefit otherwise payable to the Participant under the form of payment described in paragraph (a).
To receive a benefit under the Qualified Joint and Survivor Annuity form of payment described in paragraph (b) or (c) above, a Participant's Spouse must be the same Spouse to whom the Participant was married on his Annuity Starting Date. Once a Participant's Annuity Starting Date occurs and retirement benefit payments commence under one of the normal forms of payment, the form of payment will not change even if the Participant's marital status changes; provided, however, that if the Participant is reemployed by an Employer or an Affiliated Company, any benefits he accrues under the Plan following such reemployment with respect to which a separate Annuity Starting Date occurs shall be payable in the form elected by the Participant as of such separate Annuity Starting Date.
Subject to the requirements of Section 9.6, a Participant may waive the normal form of payment applicable to him and elect to receive payment of his benefit in one of the optional forms of payment provided in Section 9.2.
| 9.2 | Optional Forms of Payment |
Within the election period described in Section 9.5, a Participant who is eligible to receive a normal, early, late, deferred vested, or disability retirement benefit may elect to receive payment of such benefit in accordance with any one of the following options. If the Participant is married on his Annuity Starting Date, any such election must satisfy the requirements of Section 9.6.
If the Participant's Beneficiary under an optional form of payment dies prior to the Participant's Annuity Starting Date, the election shall become inoperative and ineffective, and benefit payments, if any, shall be made under the normal form of payment provided in Section 9.1, unless the Participant elects another optional form of payment provided under the Plan prior to his Annuity Starting Date. Once a Participant's Annuity Starting Date occurs, however, the optional form of payment elected by the Participant will not change even if the Participant's marital status changes or his Beneficiary predeceases him; provided, however, that if the Participant is reemployed by an Employer or an Affiliated Company, any benefits he accrues under the Plan following his reemployment with respect to which a separate Annuity Starting Date occurs shall be payable in the form elected by the Participant as of such separate Annuity Starting Date.
The monthly payments made under any optional form of payment hereunder shall be the Actuarial Equivalent of the monthly benefit otherwise payable to the Participant in the single life annuity form described in paragraph (a) or, if the Participant is married and is entitled to the subsidized 50 percent Qualified Joint and Survivor Annuity, paragraph (b) of Section 9.1.
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| (a) | Single Life Annuity. The Participant shall receive a monthly retirement benefit payable for his lifetime, the last monthly payment being for the month in which his death occurs. |
32
| the end of the five-year period commencing with his Annuity Starting Date, his Beneficiary shall receive a continued monthly benefit equal to such reduced amount for the remainder of such five-year period. If the Participant's Beneficiary dies after becoming eligible to receive a benefit hereunder, but prior to the end of the five-year period, the unpaid monthly benefit shall be paid to the Beneficiary designated by the Participant to receive payment in such event or, if none, in accordance with the provisions of Section 9.3. In lieu of receiving continued monthly payments, a Participant's Beneficiary may elect to receive the Actuarially Equivalent present value of such payments in a single sum. |
|
(1) |
For a Grandfathered Participant, the Actuarially Equivalent present value of his vested Accrued Benefit, or late retirement benefit under Section 5.5, if applicable. |
|
(2) |
For a Cash Balance Participant, the greater of (i) or (ii) below, subject to (iii) below, as follows: |
|
(i) |
the vested balance in the Participant’s Cash Balance Account plus, if the Participant has passed his Normal Retirement Date, the Actuarial Equivalent lump sum amount of the excess, if any, of the Participant’s monthly retirement benefit payable as of his Annuity Starting Date in a single life annuity, determined under Section 5.5 less the monthly retirement benefit payable as of his Annuity Starting Date in a single life annuity that is the Actuarial Equivalent of his Cash Balance Account; or |
|
(ii) |
the Actuarially Equivalent present value of the Participant’s Frozen Accrued Benefit. |
|
(iii) |
This paragraph (iii) is effective with respect to Cash Balance Participants in the Plan as of December 31, 2016. Prior to January 1, 2017, the amount described in paragraph (i) is the greater of the Participant’s vested Cash Balance Account balance or an amount equal to the present value of the Actuarial Equivalent of his Accrued Benefit, with present value determined using the "applicable interest rate" and the "applicable mortality table," as provided under Code Section 417(e) and related guidance. On and after January 1, 2017, if the present value of the Actuarial Equivalent of the Participant’s Accrued Benefit as of December 31, 2016 (with present value determined using the “applicable interest rate” and the “applicable mortality table,” as provided under Code Section 417(e) and related guidance) is greater than the amount described in paragraph (i), the |
33
greater amount shall be substituted for the amount described in paragraph (i).
A Participant may only elect this form of payment if the amount of the single sum payment, as determined above, does not exceed $50,000.
Notwithstanding any other provision of the Plan to the contrary, distribution under an optional form of payment shall be made in accordance with Code Section 401(a)(9), Regulations issued thereunder, including the minimum distribution incidental benefit requirement, and the provisions of Addendum A hereto. If a Participant designates a person other than his Spouse as his Beneficiary under an optional form of payment, and if payments under the optional form elected would not meet the minimum distribution incidental benefit requirement, the election shall be ineffective and benefit payments, if any, shall be made under the normal form of payment provided in Section 9.1, unless the Participant elects another optional form of payment provided under the Plan prior to his Annuity Starting Date.
| 9.3 | Designation of Beneficiary and Beneficiary in Absence of Designated Beneficiary |
A Participant's Beneficiary may be any individual or, in the case of a Beneficiary to receive payments for the remainder of a period-certain under the form of payment elected by the Participant, any individuals, trust, or estate, selected by the Participant. A Participant's designation of a Beneficiary is subject to the spousal consent requirements of Section 9.6.
If payment is to be made to a Participant's surviving Beneficiary for the remainder of a period certain under the form of payment elected by the Participant and no Beneficiary survives or the Participant has not designated a Beneficiary, the Participant's Beneficiary shall be the Participant's estate. If any payments are to be made to a trust or to the estate of a Participant as Beneficiary hereunder, such payments shall be made in an Actuarially Equivalent single sum payment.
| 9.4 | Notice Regarding Forms of Payment |
The Administrator shall provide a Participant with a written description of (i) the terms and conditions of the normal forms of payment provided in Section 9.1, (ii) the optional forms of payment provided in Section 9.2, (iii) the Participant's right to waive the normal form of payment provided in Section 9.1 and to elect an optional form of payment and the effect thereof, (iv) the rights of the Participant's Spouse with respect to the Qualified Joint and Survivor Annuity form of payment, and (v) the Participant's right to revoke a waiver of the normal form of payment or to change his election of an option and the effect thereof. The explanation shall notify the Participant of his right to defer payment of his retirement benefit under the Plan until his Normal Retirement Date, or such later date as may be provided under the Plan. The Administrator shall provide such explanation no fewer than 30 days and no more than 90 days before a Participant's Annuity Starting Date. Effective for distribution notices issued on and after January 1, 2007, such explanation may be provided no fewer than 30 days and no more than 180 days before a Participant’s Annuity Starting Date.
Notices to Participants shall include the relative values of the various optional forms of benefit under the Plan as provided in Treasury Regulation Section 1.417(a)-3. This provision is effective as follows: to qualified pre-retirement survivor annuity explanations provided on or after July 1,
34
2004; to qualified joint and survivor annuity explanations with respect to any distribution with an annuity starting date that is on or after February 1, 2006; and with respect to any optional form of benefit that is subject to the requirements of Code Section 417(e)(3) if the actuarial present value of that optional form is less than the actuarial present value as determined under Code Section 417(e)(3) on or after October 1, 2004.
Notwithstanding the foregoing, a Participant's Annuity Starting Date may occur fewer than 30 days after receipt of such explanation if the Administrator clearly informs the Participant:
| (a) | of his right to consider his form of payment election for a period of at least 30 days following his receipt of the explanation; |
| (b) | the Participant, after receiving the explanation, affirmatively elects an early Annuity Starting Date, with his Spouse's written consent, if necessary; |
| (c) | the Participant's Annuity Starting Date occurs after the date the explanation is provided to him; |
| (e) | actual payment of the Participant's retirement benefit does not begin to the Participant before such revocation period ends. |
| 9.5 | Election Period |
A Participant may waive or revoke a waiver of the normal form of payment provided in Section 9.1 and elect, modify, or change an election of an optional form of payment provided in Section 9.2 by written notice delivered to the Administrator at any time during the election period; provided, however, that no waiver of the normal form of payment and election of an optional form of payment shall be valid unless the Participant has received the written explanation described in Section 9.4. Subject to the provisions of Section 9.4 extending a Participant's election period under certain circumstances, a Participant's "election period" means the 90-day period ending on his Annuity Starting Date. Effective for distribution notices issued on and after January 1, 2007, “election period” means the 180-day period ending on the Participant’s Annuity Starting Date.
The form in which a Participant shall receive payment of his retirement benefit shall be determined upon the later of his Annuity Starting Date or the date his election period ends, based upon any waiver and election in effect on such date. Except as otherwise specifically provided in the Plan, in no event shall the form in which a Participant's retirement benefit is paid be changed on or after such date.
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| 9.6 | Spousal Consent Requirements |
A married Participant's waiver of the normal Qualified Joint and Survivor Annuity form of payment and his election, modification, or change of an election of an optional form of payment must include the written consent of the Participant's Spouse, if any. A Participant's Spouse shall be deemed to have given written consent to the Participant's waiver and election if the Participant establishes to the satisfaction of a Plan representative that such consent cannot be obtained because of any of the following circumstances:
| (a) | the Spouse cannot be located, |
| (b) | the Participant is legally separated or has been abandoned within the meaning of local law, and the Participant has a court order to that effect, or |
| (c) | other circumstances set forth in Code Section 401(a)(11) and regulations issued thereunder. |
Notwithstanding the foregoing, written spousal consent shall not be required if the Participant elects an optional form of payment that is a Qualified Joint and Survivor Annuity.
Any written spousal consent given pursuant to this Section shall acknowledge the effect of the waiver of the Qualified Joint and Survivor Annuity form of payment and of the election of an optional form of payment, shall specify the optional form of payment selected by the Participant and that such form may not be changed (except to a Qualified Joint and Survivor Annuity) without written spousal consent, shall specify any Beneficiary designated by the Participant and that such Beneficiary may not be changed without written spousal consent, and shall be witnessed by a Plan representative or a notary public. Any written consent given or deemed to be given by a Participant's Spouse shall be irrevocable and shall be effective only with respect to such Spouse and not with respect to any subsequent Spouse.
| 9.7 | Death Prior to Annuity Starting Date |
Notwithstanding any other provision of the Plan to the contrary, should a Participant die prior to his Annuity Starting Date neither he nor any person claiming under or through him shall be entitled to any retirement benefit under the Plan; and no benefit shall be paid under the Plan with respect to such Participant except any survivor benefit payable under the provisions of Article X.
| 9.8 | Effect of Reemployment on Form of Payment |
Notwithstanding any other provision of the Plan, if a former Employee is reemployed, his prior election of a form of payment hereunder shall become ineffective, except to the extent that the Participant's Annuity Starting Date occurred prior to such reemployment and such prior Annuity Starting Date is preserved with respect to a portion or all of the Participant's retirement benefit.
36
| 10.1 | Eligibility for Qualified Preretirement Survivor Annuity |
If a Participant dies before his Annuity Starting Date, his surviving Spouse shall be eligible for a Qualified Preretirement Survivor Annuity if all of the following requirements are met on the Participant's date of death:
| (a) | The Participant has a Spouse as defined in Section 1.1. |
| (b) | Such Spouse has been married to the Participant throughout the one-year period immediately preceding his date of death. |
| (c) | The Participant has a vested Accrued Benefit. |
| 10.2 | Amount of Qualified Preretirement Survivor Annuity |
The monthly amount of the Qualified Preretirement Survivor Annuity payable to a surviving Spouse shall be equal to the survivor benefit that would have been payable to the Spouse if the Participant had:
| (a) | separated from service on the earlier of his actual separation from service date or his date of death; |
| (b) | survived to the date as of which payment of the Qualified Preretirement Survivor Annuity to his surviving Spouse commences; |
| (d) | died on his Annuity Starting Date. |
Notwithstanding the foregoing, if prior to a Participant's death the Participant elected an optional form of payment in accordance with the provisions of Article IX that is a Qualified Joint and Survivor Annuity, for purposes of determining the amount of the Qualified Preretirement Survivor Annuity, the optional form of payment elected by the Participant shall be substituted for the 50 percent Qualified Joint and Survivor Annuity in paragraph (c) above.
| 10.3 | Enhanced Qualified Preretirement Survivor Annuity |
If a Grandfathered Participant dies while employed by an Employer or an Affiliated Company after becoming eligible for a retirement benefit in accordance with the provisions of Section 5.1 or 6.1 or if a Disabled Grandfathered Participant dies, the monthly amount of the Qualified Preretirement Survivor Annuity payable to his surviving Spouse shall be the greater of the amount determined in Section 10.2 or 50 percent of the Grandfathered Participant's Accrued Benefit on his date of death, without reduction for early commencement; provided, however, that if the
37
Grandfathered Participant's surviving Spouse is more than five years younger than the Participant, the percentage of the Grandfathered Participant's Accrued Benefit payable to the Spouse as a Qualified Preretirement Survivor Annuity hereunder shall be reduced so that the benefit payable to the surviving Spouse is the Actuarial Equivalent of the benefit that would be payable if the Spouse were exactly five years younger than the Grandfathered Participant.
| 10.4 | Payment of Qualified Preretirement Survivor Annuity |
Payment of a Qualified Preretirement Survivor Annuity to a Participant's surviving Spouse shall commence as of the first day of the month following the later of (i) the month in which the Participant dies or (ii) the month in which the Participant would have attained earliest retirement age (as defined herein) under the Plan; provided, however, that the surviving Spouse of a Grandfathered Participant who is entitled to the enhanced Qualified Preretirement Survivor Annuity described in Section 10.3 may elect to commence payment as of the first day of the month following the month in which the Grandfathered Participant dies. Notwithstanding the foregoing, a Participant's surviving Spouse may elect to defer commencement of payment of the Qualified Preretirement Survivor Annuity to a date no later than the Participant's Normal Retirement Date. If a Participant's surviving Spouse dies before the date as of which payment of the Qualified Preretirement Survivor Annuity is to commence to such Spouse, no Qualified Preretirement Survivor Annuity shall be payable hereunder.
Payment of a Qualified Preretirement Survivor Annuity shall continue to a Participant's surviving Spouse for such Spouse's lifetime, the last monthly payment being for the month in which the Spouse's death occurs.
For purposes of this Article, a Participant's “earliest retirement age” means the earliest age at which the Participant could have elected to commence retirement benefits under the Plan if he had survived, but based on his years of Service on his date of death.
| 10.5 | Non-Spouse Survivor Annuity |
A Grandfathered Participant, who has a vested Accrued Benefit, and who does not have a Spouse who is entitled to a Qualified Preretirement Survivor Annuity hereunder may designate a non-Spouse Beneficiary to receive a non-Spouse survivor annuity hereunder in the event the Grandfathered Participant dies while employed by an Employer or an Affiliated Company after becoming eligible for a retirement benefit in accordance with the provisions of Section 5.1 or 6.1 or after becoming Disabled. Such non-Spouse Beneficiary shall have the same survivor rights as a surviving Spouse under Sections 10.3 and 10.4; provided, however, that payment of the non-Spouse survivor annuity shall commence to such non-Spouse Beneficiary within one year of the Grandfathered Participant's date of death. Without the consent of his designated non-Spouse Beneficiary, such Grandfathered Participant may revoke or change his designation at any time prior to his Annuity Starting Date. If the Grandfathered Participant's designated non-Spouse Beneficiary should die prior to the commencement of a non-Spouse survivor annuity under this Section, no benefit shall be payable pursuant to the provisions of this Article with respect to the deceased Grandfathered Participant.
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| 11.1 | Suspension of Benefits |
If a retired or former Employee is reemployed by an Employer or an Affiliated Company prior to his Normal Retirement Date, any benefits payable to such retired or former Employee under the Plan shall be suspended during the period of such reemployment, unless such retired or former Employee is entitled to receive a normal retirement benefit as provided in Section 5.1.
| 11.2 | Non-Alienation of Retirement Rights or Benefits |
Except as provided in Code Section 401(a)(13)(B) (relating to qualified domestic relations orders), Code Sections 401(a)(13)(C) and (D) (relating to offsets ordered or required under a criminal conviction involving the Plan, a civil judgment in connection with a violation or alleged violation of fiduciary responsibilities under ERISA, or a settlement agreement between the Participant and the Department of Labor in connection with a violation or alleged violation of fiduciary responsibilities under ERISA), Section 1.401(a)-13(b)(2) of the Treasury Regulations (relating to Federal tax levies), or as otherwise required by law, no benefit under the Plan at any time shall be subject in any manner to anticipation, alienation, assignment (either at law or in equity), encumbrance, garnishment, levy, execution, or other legal or equitable process; and no person shall have the power in any manner to anticipate, transfer, assign (either at law or in equity), alienate or subject to attachment, garnishment, levy, execution, or other legal or equitable process, or in any way encumber his benefits under the Plan, or any part thereof, and any attempt to do so shall be void.
| 11.3 | Payment of Benefits to Others |
If any person to whom a retirement benefit is payable is unable to care for his affairs because of illness or accident, any payment due (unless prior claim therefore shall have been made by a duly qualified guardian or other legal representative) may be paid to the Spouse, parent, brother or sister, or any other individual deemed by the Administrator to be maintaining or responsible for the maintenance of such person. The monthly payment of a retirement benefit to a person for the month in which he dies shall, if not paid to such person prior to his death, be paid to his Spouse, parent, brother, sister, or estate as the Administrator shall determine. Any payment made in accordance with the provisions of this Section shall be a complete discharge of any liability of the Plan with respect to the benefit so paid.
| 11.4 | Payment of Small Benefits; Deemed Cash out |
With respect to distributions made on and after March 28, 2005, if the Actuarially Equivalent present value of any retirement benefit payable under Section 5.1, 6.1, 7.2, or 8.1 or any survivor benefit is $1,000 or less, such Actuarially Equivalent present value shall be paid to the Participant, or his Beneficiary, if applicable, in a single sum payment, in lieu of all other benefits under the Plan, as soon as practicable following the date of the Participant's retirement, death, or other termination of employment and he shall cease to be a Participant under the Plan as of the date of such payment. With respect to distributions made on and after the Effective Date but prior to March 28, 2005, the limit in the immediately preceding sentence was $5,000. For distributions made prior
39
to March 22, 1999, the Actuarially Equivalent present value of a benefit shall be deemed to exceed $5,000 if the Actuarially Equivalent present value of the benefit exceeded such amount at the time of any prior distribution.
If a former Participant is reemployed, any retirement benefit to which he may become entitled because of his subsequent retirement or termination of employment shall be reduced to its Actuarial Equivalent to reflect the value of any single sum payment made to him hereunder or under the provisions of Section 7.5 or 9.2.
If the nonforfeitable Accrued Benefit of a Participant is zero, such Participant shall be deemed to have received distribution of his entire vested Accrued Benefit under the Plan, in lieu of all other benefits under the Plan, as of the date of his termination of employment with his Employer and all Affiliated Companies and he shall cease to be a Participant under the Plan as of such date.
A distribution hereunder is deemed to be made because of a Participant's retirement or termination of employment if it is made before the end of the second Plan Year following the Plan Year in which such retirement or termination occurred.
| 11.5 | Direct Rollovers |
Notwithstanding any other provision of the Plan to the contrary, in lieu of receiving a single sum payment as provided in Section 9.2 or Section 11.5, a "qualified distributee" may elect in writing, in accordance with rules prescribed by the Sponsor, to have any portion or all of such payment that is an "eligible rollover distribution" paid directly by the Plan to the "eligible retirement plan" designated by the "qualified distributee"; provided, however, that this provision shall not apply if the total distribution is less than $200 and that a "qualified distribute” may not elect this provisions with respect to any partial distribution that is less than $500. Any such payment by the Plan to another "eligible retirement plan" shall be a direct rollover. For purposes of this Section, the following terms have the following meanings:
40
| expectancy of the qualified distributee or the joint lives or joint life expectancies of the qualified distributee and the qualified distributee's designated beneficiary, or for a specified period of ten years or more; and any distribution to the extent such distribution is required under Code Section 401(a)(9). |
| 11.6 | Limitations on Commencement |
Notwithstanding any other provision of the Plan to the contrary, payment of a Participant's retirement benefit shall commence not later than the earlier of:
| (b) | his Required Beginning Date. |
Distributions required to commence under this Section shall be made in accordance with Code Section 401(a)(9), Regulations issued thereunder, and the provisions of Addendum A hereto. If payment of a Participant's retirement benefit does not commence until his Required Beginning Date, his Required Beginning Date shall be considered his Annuity Starting Date for all purposes of the Plan.
Subject to the requirements of Code Sections 401(a)(9) and 411(d)(6), no benefit payments shall commence under the Plan until the Participant, or his surviving Spouse, if applicable, makes written application therefore on a form satisfactory to the Administrator. If the amount of a monthly retirement benefit payable to a Participant cannot be determined for any reason (including lack of information as to whether the Participant is still living or his marital status) on the date payment of such benefit is to commence under this Section, payment shall be made retroactively to such date no later than 60 days after the date on which the amount of such monthly retirement benefit can be determined.
41
| 12.1 | Applicability |
The provisions of this Article XII are effective for limitation years ending after December 31, 2001, but with respect only to Participants who have an Hour of Service on or after the first day of the first limitation year ending after December 31, 2001. The provisions of this Article XII shall, in all events, comply with the provisions of Code Section 415 and Treasury Regulations published pursuant to such Code Section on April 5, 2007, the provisions of which are specifically incorporated herein by reference; to the extent any portion of this Article XII conflicts with such Regulations, the provisions of the Regulations shall govern, effective January 1, 2008.
| 12.2 | Definitions |
For purposes of this Article, the following terms have the following meanings.
No actuarial adjustment to the benefit shall be made for (a) survivor benefits payable to a surviving spouse under a qualified joint and survivor annuity to the extent such benefits would not be payable if the Participant’s benefit were paid in another form; (b) benefits that are not directly related to retirement benefits (such as a qualified disability benefit, preretirement incidental death benefits, and postretirement medical benefits); or (c) the inclusion in the form of benefit of an automatic benefit increase feature, provided the form of benefit is not subject to Code Section 417(e)(3) and would otherwise satisfy the limitations of this Article, and the Plan provides that the amount payable under the form of benefit in any "Limitation Year" shall not exceed the limits of this Article applicable at the Annuity Starting Date, as increased in subsequent years pursuant to Code Section 415(d). For this purpose, an automatic benefit increase feature is included in a form
42
of benefit if the form of benefit provides for automatic, periodic increases to the benefits paid in that form.
The determination of the "Annual Benefit" shall take into account Social Security supplements described in Code Section 411(a)(9) and benefits transferred from another defined benefit plan, other than transfers of distributable benefits pursuant Regulations Section 1.411(d)-4, Q&A-3(c), but shall disregard benefits attributable to Employee contributions or rollover contributions.
Effective for distributions in Plan Years beginning after December 31, 2003, the determination of actuarial equivalence of forms of benefit other than a "Straight Life Annuity" shall be made in accordance with (1) or (2) below.
43
44
| of service, including fractions of years, but not less than one year) with the Employer that produces the highest average. A Participant’s 415 Compensation for a calendar year of service shall not include compensation in excess of the limitation under Code Section 401(a)(17) that is in effect for the calendar year in which such year of service begins. |
| (e) | "Defined benefit plan" has the meaning given such term in Code Section 415(k). |
| (f) | The "limitation year" means the Plan Year. |
| (h) | The “maximum permissible benefit” means the lesser of the "Defined Benefit Dollar Limitation" or the "Defined Benefit Compensation Limitation" (both adjusted where required, as provided below). |
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46
|
(I) |
"Limitation Years" Beginning Before July 1, 2007. If the Annuity Starting Date for the Participant’s benefit is after age 65 and occurs in a Limitation Year beginning before July 1, 2007, the "Defined Benefit Dollar Limitation" for the Participant’s Annuity Starting Date is the annual amount of a benefit payable in the form of a "Straight Life Annuity" commencing at the Participant’s Annuity Starting Date that is the actuarial equivalent of the "Defined Benefit Dollar Limitation" (adjusted under Section 12.2(h)(1) for years of participation less than ten (10), if required) with actuarial equivalence computed using whichever of the following produces the smaller annual amount: (1) the interest rate and mortality table (or other tabular factor) specified in the Plan; or (2) a five-percent (5%) interest rate assumption and the applicable mortality table as defined in the Plan. |
(II) "Limitation Years" Beginning Before July 1, 2007.
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For this purpose, severance from employment means termination of employment with the Employer maintaining the Plan. An Employee does not have a severance from employment if, in connection with a change of employment, the Employee’s new employer maintains the Plan with respect to the Employee.
| 12.3 | Maximum Limitation on Annual Benefits |
Subject to the provisions of Section 12.4, the "aggregate annual retirement benefit" accrued or payable to a Participant may not at any time within any "limitation year" exceed the "maximum permissible benefit".
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| 12.4 | Exceptions |
As permitted pursuant to Method 2 described in Q&A 14 of Revenue Ruling 98-1, in no event will a Participant's "aggregate annual retirement benefit" be less than the Participant's "old law benefit" limited under the provisions of Code Section 415, as in effect on December 7, 1994. The Plan mortality and interest rate factors for purposes of applying Code Section 415(b)(2)(B), (C), and (D) shall be the mortality and interest rate factors in effect under the Plan as of December 7, 1994, determined without regard to any amendment to the Plan that was adopted after that date. If the interest rate factor under the Plan in effect on December 7, 1994 is a variable interest rate, such variable interest rate shall be the rate calculated on the date the Participant's benefit is being determined, rather than the rate calculated on December 7, 1994. Notwithstanding any other provision of this Section to the contrary, in no event will a Participant's "old law benefit" exceed the Participant's total benefit (prior to adjustment for compliance with Code Section 415) under the terms of the Plan in effect after the "freeze date”.
| 12.5 | Manner of Reduction |
If the Participant's "aggregate annual retirement benefit" exceeds the limitations specified in this Article, the reduction in the amount of his "annual retirement benefit" shall be equal to the amount by which his "aggregate annual retirement benefit" exceeds the limitations of this Article multiplied by a fraction, the numerator of which is his "annual retirement benefit" (determined without regard to this Article) and the denominator of which is his "aggregate annual retirement benefit" (determined without regard to the limitations of this Article or any corresponding limitation in any other defined benefit plan maintained by an Employer or any affiliated employer).
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| 13.1 | Pension Fund |
The Pension Fund is maintained by the Funding Agent for the Plan under a Funding Agreement with the Sponsor. Subject to the provisions of Title IV of ERISA, benefits under the Plan shall be only such as can be provided by the assets of the Pension Fund, and no liability for payment of benefits shall be imposed upon the Employers or any Affiliated Company, or any of their officers, employees, directors, or stockholders.
| 13.2 | Contributions by the Employers |
So long as the Plan continues, contributions will be made by the Employers at such times and in such amounts as the Sponsor in its sole discretion shall from time to time determine, based on the advice of the Actuary and consistent with the funding policy for the Plan. Subject to the provisions of Section 13.5, all such contributions shall be delivered to the Funding Agent for deposit in the Pension Fund. Participants shall make no contributions under the Plan.
| 13.3 | Expenses of the Plan |
The expenses of administration of the Plan, including the expenses of the Administrator and fees of the Funding Agent and any investment advisor, shall be paid from the Pension Fund, unless the Sponsor or an Employer elects to make payment.
| 13.4 | No Reversion |
The Pension Fund shall be for the exclusive benefit of Participants and persons claiming under or through them. All contributions pursuant to Section 13.2 hereof shall be based on the facts then understood by the Sponsor, shall be conditioned upon the initial qualification of the Funding Agreement and Plan under Code Sections 401 and 501(a), and, unless otherwise specified by the Sponsor, shall be conditioned upon deductibility of the contributions under Code Section 404 in the year for which such contributions were made. All such contributions shall be irrevocable and such contributions as well as the Pension Fund, or any portion of the principal or income thereof, shall never revert to or inure to the benefit of the Employers or any Affiliated Company except that:
| (a) | the residual amounts specified in Article XVI may be returned to the Employers; |
| (b) | any contributions which are made under a mistake of fact may be returned to the Employers within one year after the contributions were made; |
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The Sponsor shall determine, in its sole discretion, whether the contributions described above, other than the residual amounts described in paragraph (a), shall be returned to an Employer. If any such contributions are to be returned, the Sponsor shall so direct the Funding Agent, in writing, no later than ten days prior to the last day upon which they may be returned.
| 13.5 | Forfeitures Not to Increase Benefits |
Any forfeitures arising from the termination of employment or death of an Employee, or for any other reason, shall be used to reduce Employer contributions to the Pension Fund, and shall not be applied to increase the benefits any Participant otherwise would receive under the Plan at any time prior to the termination of the Plan.
| 13.6 | Change of Funding Medium |
The Sponsor shall have the right to change at any time the means through which benefits under the Plan shall be provided. No such change shall constitute a termination of the Plan or result in the diversion to the Employers of any funds previously contributed in accordance with the Plan.
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| 14.1 | Authority of the Sponsor |
The Sponsor, which shall be the administrator for purposes of ERISA and the plan administrator for purposes of the Code, shall have all the powers and authority expressly conferred upon it herein and further shall have the sole discretionary right, authority, and power to interpret and construe the Plan, and to determine any disputes arising thereunder, subject to the provisions of Section 14.3. In exercising such powers and authority, the Sponsor at all times shall exercise good faith, apply standards of uniform application, and refrain from arbitrary action. The Sponsor may employ such attorneys, agents, and accountants as it may deem necessary or advisable to assist it in carrying out its duties hereunder. The Sponsor shall be a "named fiduciary" as that term is defined in ERISA Section 402(a)(2). The Sponsor may:
| (b) | designate a person or persons other than a named fiduciary to carry out any of such powers, authority, or responsibilities; |
except that no allocation by the Sponsor of, or designation by the Sponsor with respect to, any of such powers, authority, or responsibilities to another named fiduciary or a person other than a named fiduciary shall become effective unless such allocation or designation shall first be accepted by such named fiduciary or other person in a writing signed by it and delivered to the Sponsor.
| 14.2 | Action of the Sponsor |
Any act authorized, permitted, or required to be taken by the Sponsor under the Plan, which has not been delegated in accordance with Section 14.1, may be taken by a majority of the members of the board of directors of the Sponsor, either by vote at a meeting, or in writing without a meeting or by the employee or employees of the Sponsor designated by the board of directors to carry out such acts on behalf of the Sponsor. All notices, advice, directions, certifications, approvals, and instructions required or authorized to be given by the Sponsor under the Plan shall be in writing and signed by either (i) a majority of the members of the board of directors of the Sponsor, or by such member or members as may be designated by an instrument in writing, signed by all the members thereof, as having authority to execute such documents on its behalf, or (ii) the employee or employees of the Sponsor who have the authority to act on behalf of the Sponsor.
| 14.3 | Claims Review Procedure |
Whenever the Administrator decides for whatever reason to deny, whether in whole or in part, a claim for benefits filed by any person (hereinafter referred to as the "claimant"), the Administrator shall transmit to the claimant a written notice of its decision, which notice shall be written in a manner calculated to be understood by the claimant and shall contain a statement of (i) the specific reasons for the denial of the claim, (ii) specific reference to pertinent Plan provisions on which the denial is based, and (iii) a description of any additional material or information necessary for the
53
claimant to perfect the claim and an explanation of why such information is necessary. The notice shall also include a statement advising the claimant that, within 60 days of the date on which he receives such notice, he may obtain review of the decision of the Administrator in accordance with the procedures hereinafter set forth.
Within the 60-day period beginning on the date the claimant receives notice regarding disposition of his claim, the claimant or his authorized representative may request that the claim denial be reviewed by filing with the Administrator a written request therefor, which request shall contain the following information:
| (b) | the specific portions of the denial of his claim which the claimant requests the Administrator to review; |
| (c) | a statement by the claimant setting forth the basis upon which he believes the Administrator should reverse its previous denial of his claim for benefits and accept his claim as made; and |
| (d) | any written material (offered as exhibits) which the claimant desires the Administrator to examine in its consideration of his position as stated pursuant to paragraph (c) of this Section. |
Within 60 days of the date determined pursuant to paragraph (a) of this Section (or, if special circumstances require an extension, within 120 days of that date; provided that the delay and the reasons for the delay are communicated to the claimant within the initial 60-day period), the Administrator shall conduct a full and fair review of its decision denying the claimant's claim for benefits and shall render its written decision on review to the claimant. The Administrator's decision on review shall be written in a manner calculated to be understood by the claimant and shall specify the reasons and Plan provisions upon which the Administrator's decision was based.
| 14.4 | Qualified Domestic Relations Orders |
The Administrator shall establish reasonable procedures to determine the status of domestic relations orders and to administer distributions under domestic relations orders which are deemed to be qualified orders. Such procedures shall be in writing and shall comply with the provisions of Code Section 414(p) and regulations issued thereunder.
| 14.5 | Indemnification |
In addition to whatever rights of indemnification the members of the board of directors of the Sponsor or any employee or employees to whom any power, authority, or responsibility is delegated pursuant to Section 14.2, may be entitled under the articles of incorporation, regulations, or bylaws of the Sponsor, under any provision of law, or under any other agreement, the Sponsor shall satisfy any liability actually and reasonably incurred by any such person or persons, including
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expenses, attorneys' fees, judgments, fines, and amounts paid in settlement (other than amounts paid in settlement not approved by the Sponsor), in connection with any threatened, pending, or completed action, suit, or proceeding which is related to the exercise or failure to exercise by such person or persons of any of the powers, authority, responsibilities, or discretion as provided under the Plan and the Funding Agreement, or reasonably believed by such person or persons to be provided thereunder, and any action taken by such person or persons in connection therewith, unless the same is judicially determined to be the result of such person's or persons' gross negligence or willful misconduct.
| 14.6 | Actions Binding |
Subject to the provisions of Section 14.3, any action taken by the Sponsor which is authorized, permitted, or required under the Plan shall be final and binding upon the Employers, the Funding Agent, all persons who have or who claim an interest under the Plan, and all third parties dealing with the Employers or the Funding Agent.
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| 15.1 | Adoption by Affiliated Companies |
An Affiliated Company that is not an Employer may, with the consent of the Sponsor, adopt the Plan and become an Employer hereunder by causing an appropriate written instrument evidencing such adoption to be executed in accordance with the requirements of its organizational authority. Any such instrument shall specify the effective date of the adoption. Unless otherwise specified in the adoption instrument, for purposes of computing the Service and Average Annual Earnings of an Employee who is in the employ of the Employer on the effective date of the adoption, employment with and compensation from the Employer before the effective date of the adoption shall be treated as employment with and Earnings from an Employer. Unless otherwise specifically provided in the adoption instrument, for purposes of computing the Credited Service of an Employee, only employment with the Employer for periods on or after the effective date of the adoption shall be treated as employment with an Employer. Any Employer shall undertake to contribute its appropriate share, as determined by the Sponsor, of any contributions made to the Funding Agent hereunder. Notwithstanding the foregoing, however, any adoption of the Plan by an Employer shall be subject to the receipt of a determination from the Internal Revenue Service to the effect that with respect to such Employer the Plan meets the requirements for qualification under Code Section 401(a), and, should an adverse determination be issued by the Internal Revenue Service, the adoption of the Plan by said Employer shall be null and void and of no effect whatsoever.
| 15.2 | Effective Plan Provisions |
An Employer who adopts the Plan shall be bound by the provisions of the Plan in effect at the time of the adoption and as subsequently in effect because of any amendment to the Plan.
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| 16.1 | Sponsor's Right of Amendment |
The Sponsor reserves the right at any time and from time to time, by means of a written instrument executed in the name of the Sponsor by its duly authorized representatives, to amend or modify the Plan and, to the extent provided therein, to amend or modify the Funding Agreement. No pension or other benefit granted prior to the time of any amendment or modification of the Plan shall be reduced, suspended, or discontinued as a result thereof, except to the extent necessary to enable the Plan to meet the requirements for qualification under the Code or the requirements of any governmental authority. Moreover, no such action shall operate to recapture for the Employers any contributions made to the Pension Fund, except as provided in Section 13.4 or Section 16.7.
Effective August 9, 2006, no amendment to this Plan shall retroactively decrease a Participant’s accrued benefit or otherwise retroactively place greater restrictions or conditions on a Participant’s rights to Code Section 411(d)(6) protected benefits, even if the amendment adds a restriction or condition that is otherwise permitted under Code Section 411(a), unless otherwise permitted under Treasury Regulations Sections 1.411(d)-3 or 1.411(d)-4. An optional form of benefit hereunder may be eliminated prospectively by an amendment to the Plan provided that such amendment satisfies the requirements of Treasury Regulations Sections 1.411(d)-3 or 1.411(d)-4.
| 16.2 | Termination of the Plan |
The Sponsor reserves the right, by means of a written instrument executed in the name of the Sponsor by its duly authorized representatives, at any time to terminate the Plan. In the event of termination, no further benefits shall accrue, no further contributions shall be made, except as may be required under Title IV of ERISA or Code Section 412, and all assets remaining in the Pension Fund, after provision has been made for payment of the expenses of administration and liquidation in connection with the termination, shall be allocated by the Funding Agent upon the advice of the Actuary, among the Participants and Beneficiaries of the Plan, in the following manner and order of precedence:
| (a) | In the case of benefits payable as an annuity, |
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For purposes of subparagraph (1) of this paragraph, the lowest benefit in pay status during a three-year period shall be considered the three-year benefit in pay status for such period.
| (b) | Next, |
For purposes of this paragraph, ERlSA Section 4021 shall be applied without regard to subsection (c) thereof.
| (c) | Next, to all nonforfeitable benefits under the Plan. |
| (d) | Last, to all other benefits under the Plan. |
Notwithstanding any other provision of the Plan to the contrary, other than Sections 16.3 through 16.8, the amount allocated to any Participant under this Section 16.2 shall be fully vested and nonforfeitable. The Sponsor shall furnish all information reasonably required for the purposes of making such allocations. The Funding Agent shall implement the allocations determined under this Section among the persons for whose benefit such allocations are made through distribution of the assets of the Pension Fund, through application of the amounts allocated to the purchase from an insurance company of immediate or deferred annuities, or through creation of one or more new funds for the purpose of distributing the assets of the Pension Fund (to the extent so allocated), or by a combination of the foregoing.
| 16.3 | Adjustment of Allocation |
The amount allocated under any paragraph of Section 16.2 with respect to any benefit shall be properly adjusted for any allocations of assets with respect to that benefit under a prior paragraph of Section 16.2.
| 16.4 | Assets Insufficient for Allocation |
If the assets available for allocation under any paragraph of Section 16.2 (other than paragraphs (c) and (d)) are insufficient to satisfy in full the benefits of all individuals which are described in that paragraph, the assets shall be allocated pro rata among such individuals on the basis of the present value (as of the date of termination of the Plan) of their respective benefits described in that paragraph.
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| 16.5 | Assets Insufficient for Allocation Under Paragraph (c) of Section 16.2 |
This Section applies if the assets available for allocation under paragraph (c) of Section 16.2 are not sufficient to satisfy in full the benefits of individuals described in such paragraph.
| 16.6 | Allocations Resulting in Discrimination |
If the Secretary of the Treasury determines that the allocation made pursuant to this Article (without regard to this Section) results in discrimination prohibited by Code Section 401(a)(4), then the assets allocated under paragraphs (b)(2), (c), and (d) of Section 16.2 shall be reallocated to the extent necessary to prevent the disqualification of the Plan (or any trust or annuity contract under the Plan) under Code Section 401(a).
| 16.7 | Residual Assets |
Subject to the provisions of Section 16.10, any residual assets of the Plan shall be distributable to the Employers if:
| (a) | all liabilities of the Plan to Participants and their beneficiaries have been satisfied; and |
| (b) | the distribution does not contravene any provision of law. |
| 16.8 | Meanings of Terms |
The terms used in Sections 16.2 through 16.7 shall have, where required, the same meaning as the same terms have as used in ERlSA Section 4044; provided, however, that any term specifically defined in the Plan shall retain its meaning as defined thereunder.
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| 16.9 | Payments by the Funding Agent |
The Funding Agent shall make the payments specified in a written direction of the Sponsor in accordance with the provisions of Section 16.2 until the same shall be superseded by a further written direction. The obligation of the Funding Agent to make any payment hereunder in all events shall be limited to the amount of the Pension Fund at the time any such payment shall become due.
| 16.10 | Residual Assets Distributable to the Employers |
Upon written notice from the Sponsor that any residual assets of the Plan are distributable to the Employers in accordance with the provisions of Section 16.7, then the Funding Agent shall pay over such residual assets, or an amount equal to the fair market value of that portion of such residual assets which are not so paid, to the Employers; provided, however, that, under no circumstances or conditions other than as set forth in this Section 16.10 and in Section 13.4, shall any contribution of the Employers, or any portion of the proceeds or avails thereof, ever revert, be paid, or inure to the benefit, directly or indirectly, of the Employers or any Affiliated Company; nor shall any portion of the principal or the income from the Pension Fund ever be used for or diverted to any purpose other than for the exclusive benefit of Participants and persons claiming under or through them pursuant to the Plan.
| 16.11 | Withdrawal of an Employer |
Each Employer shall have the right to withdraw from the Plan by action in accordance with its organizational authority, and by filing with the Sponsor written notice thereof, in which event the Employer shall cease to be an Employer for purposes of the Plan. An Employer shall be deemed automatically to withdraw from the Plan in the event it completely discontinues contributions to the Plan or it ceases to be an Affiliated Company.
If such withdrawal is for the purpose of establishing or merging with a separate plan which meets the requirements for qualification under applicable provisions of the Code, the portion of the assets of the Pension Fund which is applicable to the withdrawing Employer, as determined by the Sponsor upon the advice of the Actuary, on a fair and equitable basis, taking into account the contributions made by the Employer, benefit payments made with respect to its Employees and retired and former Employees, and other relevant factors, shall be transferred to and become a part of the trust fund or other financing medium maintained in connection with the separate plan, subject to the limitations on merger, consolidation, or transfers of Plan assets set forth in Section 17.5.
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| 17.1 | No Commitment as to Employment |
Nothing contained herein shall be construed as a commitment or agreement on the part of any person to continue his employment with his Employer, or as a commitment on the part of his Employer to continue the employment, compensation, or benefits of any person for any period, and all employees of an Employer shall remain subject to discharge, layoff, or disciplinary action to the same extent as if the Plan had never been put into effect.
| 17.2 | Claims of Other Persons |
Nothing in the Plan or Funding Agreement shall be construed as giving any Participant or any other person, firm, or corporation, any legal or equitable right as against the Employers, their officers, employees, or directors, or as against the Funding Agent, except such rights as are specifically provided for in the Plan or Funding Agreement or hereafter created in accordance with the terms and provisions of the Plan.
| 17.3 | Governing Law |
Except as provided under Federal law, the provisions of the Plan shall be governed by and construed in accordance with the laws of the State of Texas.
| 17.4 | Nonforfeitability of Benefits Upon Termination or Partial Termination |
Notwithstanding any other provision of the Plan, in the event of the termination or a partial termination of the Plan, including the complete discontinuation of contributions to the Plan, the rights of all Employees who are affected by such termination to benefits accrued to the date of such termination, to the extent funded as of such date, shall be nonforfeitable.
| 17.5 | Merger, Consolidation, or Transfer of Plan Assets |
The Plan shall not be merged or consolidated with any other plan, nor shall any of its assets or liabilities be transferred to another plan, unless, immediately after such merger, consolidation, or transfer of assets or liabilities, each Participant in the Plan would receive a benefit under the Plan which is at least equal to the benefit he would have received immediately prior to such merger, consolidation, or transfer of assets or liabilities (assuming in each instance that the Plan had then terminated).
If another qualified plan merges or consolidates with the Plan, notwithstanding any other provision of the Plan to the contrary, the forms of payment and other provisions that were available with respect to benefits accrued immediately prior to the transfer or merger under such other qualified plan and that may not be eliminated under Code Section 411(d)(6) shall continue to be available under the Plan with respect to the benefit that the Participant would have received immediately prior to such merger, consolidation or transfer of assets or liabilities.
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| 17.6 | Funding Agreement |
The Funding Agreement and the Pension Fund maintained thereunder shall be deemed to be a part of the Plan as if fully set forth herein and the provisions of the Funding Agreement are hereby incorporated by reference into the Plan.
| 17.7 | Benefit Offsets for Overpayments |
If a Participant or Beneficiary receives benefits hereunder for any period in excess of the amount of benefits to which he was entitled under the terms of the Plan as in effect for such period, such overpayment shall be offset against current or future benefit payments, as applicable, until such time as the overpayment is entirely recouped by the Plan.
| 17.8 | Internal Revenue Requirements |
Notwithstanding any other provision of the Plan to the contrary, to conform to the requirements of U.S. Treasury Regulations, the benefit payable under the Plan shall be subject to the following limitations:
| (a) | If the Plan is terminated, the benefit of any Highly Compensated Employee shall be limited to a benefit that is nondiscriminatory under Code Section 401(a)(4). |
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| 17.9 | Overall Permitted Disparity Limits |
If an Employer or an Affiliated Company maintains another qualified plan, in no event shall the "overall permitted disparity limits" of Internal Revenue Service regulations Section 1.401(1)-5 be exceeded. The "annual" overall disparity limit of Section 1.401(1)-5(b) shall not be exceeded if the “total annual disparity fraction" determined as of the end of the Plan Year for each Participant who accrues a benefit under the Plan for the Plan Year does not exceed one. An Employee's "total annual disparity fraction" is the sum of the Employee's annual disparity fractions under all qualified plans maintained by an Employer or an Affiliated Company as determined under Internal Revenue Service regulations Sections 1.401(l)-5(b)(3) through 1.401(l)-5(b)(8) for the plan year ending in the current Plan Year.
The "cumulative" permitted disparity limit of Internal Revenue Service regulations Section 1.401(1)-5(c) shall not be exceeded if a Participant's "cumulative disparity fraction" does not exceed 35. A Participant's "cumulative disparity fraction" is the sum of the Participant's "total annual disparity fractions" attributable to the Participant's total years of service under all plans maintained by an Employer or an Affiliated Company.
| 17.10 | Veterans Reemployment Rights |
Notwithstanding any other provision of the Plan to the contrary, contributions, benefits, and service credit with respect to qualified military service shall be provided in accordance with Code Section 4l4(u).
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| 18.1 | Top-Heavy Plan Definitions |
For purposes of this Article, the following terms have the following meanings.
| (b) | The "determination date" with respect to any Plan Year means the last day of the immediately preceding Plan Year. |
| (d) | A "non-key employee" means any Employee who is not a key employee. |
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Effective for Plan Years beginning after December 31, 2001, the present values of accrued benefits and the amounts of account balances of an Employee as of the determination date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Code Section 416(g)(2) during the one-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code Section 416(g)(2)(A)(i). In the case of a distribution made for a reason other than severance from employment, death, or disability, this provision shall be applied by substituting "five-year period" for "one-year period". The accrued benefits and accounts of any individual who has not performed services for an Employer or an Affiliated Company during the one-year period ending on the determination date shall not be taken into account.
Notwithstanding the foregoing, if a plan is included in a required or permissive aggregation group which is not a top-heavy group, such plan shall not be a top-
65
heavy plan. For purposes of this Article, the present value of the cumulative accrued benefits under the Plan shall be determined as of the date Plan costs for minimum funding purposes are computed, and shall be calculated using the actuarial assumptions otherwise employed under the Plan for actuarial valuations, except that the same actuarial assumptions shall be used for all plans within a required or permissive aggregation group.
| 18.2 | Applicability of Top-Heavy Plan Provisions |
Notwithstanding any other provision of the Plan to the contrary, if the Plan is deemed to be a top-heavy plan for any Plan Year, the provisions contained in this Article with respect to vesting and benefit accrual shall be applicable with respect to such Plan Year. If the Plan is determined to be a top-heavy plan and upon a subsequent determination date is determined no longer to be a top-heavy plan, the vesting and benefit accrual provisions specified elsewhere in the Plan shall again become applicable as of such subsequent determination date; provided, however, that in the event such prior vesting provisions do again become applicable, (i) the nonforfeitable accrued benefit of any Participant or Beneficiary shall not be reduced and (ii) any Participant with three years of service may elect to continue to have his nonforfeitable interest in his Accrued Benefit determined in accordance with the vesting schedule specified in Section 18.3.
| 18.3 | Top-Heavy Vesting |
If the Plan is determined to be a top-heavy plan, an Employee's nonforfeitable right to a percentage of the accrued portion of his monthly normal retirement benefit shall be determined no less rapidly than in accordance with the following vesting schedule.
|
|
|
|
Years of Service |
Vested Interest |
|
less than 2 |
0% |
|
2, but less than 3 |
20% |
|
3, but less than 4 |
40% |
|
4, but less than 5 |
60% |
|
5 or more |
100% |
| 18.4 | Minimum Top-Heavy Benefit |
If the Plan is determined to be a top-heavy plan, the annual normal retirement benefit of an Employee who is a non-key employee and who is eligible therefore, payable in the form of a single life annuity beginning at his Normal Retirement Date, shall not be less than such Employee’s average compensation for years in the testing period multiplied by the lesser of:
| (a) | Two percent multiplied by his years of Service; or |
| (b) | 20 percent. |
For purposes of this Article, “Years of Service" shall only include years of Service completed after December 31, 1983, but shall not include any such year of Service with an Employer if the Plan was not a top-heavy plan with respect to the Plan Year ending within such year of Service. For purposes of satisfying the minimum benefit requirements of Code Section 416(c)(1) and the Plan,
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in determining years of Service with an Employer or an Affiliated Company, any Service with the Employer or Affiliated Company shall be disregarded to the extent that such Service occurs during a Plan Year when the Plan benefits (within the meaning of Code Section 410(b)) no key employee or former key employee.
Any minimum benefit required by this Section 18.4 shall be made without regard to the number of Hours of Service credited to an Employee for a Plan Year and without regard to any Social Security contribution made by his Employer on behalf of the Employee and without regard to whether the non-key employee was employed on a specific date. In the event the Plan is part of a required aggregation group in which another top-heavy plan is included, non-key employees who are also covered under such other top-heavy plan shall not receive minimum top-heavy benefits under both top-heavy plans. Such non-key employees shall receive the minimum top-heavy benefit provided under the Plan in lieu of the minimum top-heavy benefit or allocation provided under such other top-heavy plan.
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| 19.1 | Effective Date and Application |
| (b) | Interpretation of Provisions. The limitations imposed by this Article to the Plan shall be interpreted and administered in accordance with Code Section 436 and Regulation Section 1.436-1. |
| 19.2 | Funding Based Limitation on Shutdown Benefits and Other Unpredictable Contingent Event Benefits |
| 19.3 | Limitations on Plan Amendments Increasing Liability for Benefits |
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| 19.4 | Limitations on Accelerated Benefit Distributions |
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| payment of a benefit which under Code Section 411(a)(11) may be immediately distributed without the consent of the Participant. |
| (c) | Limited Payment if Funding Percentage at Least Sixty Percent (60%) But Less Than Eighty Percent (80%). |
The limitation set forth in this Section 19.4(c) does not apply to any payment of a benefit which under Code Section 411(a)(11) may be immediately distributed without the consent of the Participant.
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| 19.5 | Limitation on Benefit Accruals for Plans with Severe Funding Shortfalls |
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| 19.6 | Methods to Avoid or Terminate Benefit Limitations |
See Code Sections 436(b)(2), (c)(2), (e)(2), and (f) and Regulation Section 1.436 1(f) for rules relating to Employer contributions and other methods to avoid or terminate the application of the limitations set forth in Sections 19.2, 19.3 and 19.4 of this Article for a Plan Year. In general, the methods a Plan sponsor may use to avoid or terminate one or more of the benefit limitations under Sections 19.2, 19.3 and 19.4 of this Article for a Plan Year include Employer contributions and elections to increase the amount of plan assets which are taken into account in determining the Adjusted Funding Target Attainment Percentage, making an Employer contribution that is specifically designated as a current year contribution that is made to avoid or terminate application of certain of the benefit limitations, or providing security to the Plan.
| 19.7 | Special Rules |
| (a) | Rules of Operation for Periods Prior To and After Certification of Plan's Adjusted Funding Target Attainment Percentage. |
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| (b) | New Plans, Plan Termination, Certain Frozen Plans, and Other Special Rules. |
| (c) | Special Rules Under PRA 2010. |
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| 19.8 | Treatment of Plan as of Close of Prohibited or Cessation Period |
| (a) | Application to Prohibited Payments and Accruals. |
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In addition, benefit accruals that were not permitted to accrue because of the application of Section 19.5 of this Article shall be restored when that limitation ceases to apply if the continuous period of the limitation was 12 months or less and the Plan's enrolled actuary certifies that the Adjusted Funding Target Attainment Percentage for the Plan Year would not be less than sixty percent (60%) taking into account any restored benefit accruals for the prior Plan Year.
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| 19.9 | Definitions |
| (b) | Annuity Starting Date. The term Annuity Starting Date means the annuity starting date as defined in Regulation Section 1.436-1(j)(2). |
| (c) | Prohibited Payment. The term Prohibited Payment means a prohibited payment as defined in Regulation Section 1.436-1(j)(6). |
| (d) | Section 436 Measurement Date. The term Section 436 Measurement Date means the section 436 date as defined in Regulation Section 1.436-1(j)(8). |
| (e) | Unpredictable Contingent Event Benefit. The term Unpredictable Contingent Event Benefit means an unpredictable contingent event as defined in Regulation Section 1.436-1(j)(9). |
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| 20.1 | Death benefits. |
In the case of a death or disability occurring on or after January 1, 2007, if a Participant dies while performing qualified military service (as defined in Code Section 414(u)), the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan as if the Participant had resumed and then terminated employment on account of death. The Plan will credit the Participant’s qualified military service as service for vesting purposes, as though the Participant had resumed employment under USERRA immediately prior to the Participant’s death.
| 20.2 | Differential wage payments. |
For years beginning after December 31, 2008, (i) an individual receiving a differential wage payment, as defined by Code Section 3401(h)(2), shall be treated as an employee of the employer making the payment, (ii) the differential wage payment shall be treated as compensation, and (iii) the Plan shall not be treated as failing to meet the requirements of any provision described in Code Section 414(u)(1)(C) by reason of any contribution or benefit which is based on the differential wage payment. The immediately preceding clause (iii) shall apply only if all employees of the Employer performing service in the uniformed services described in Code Section 3401(h)(2)(A) are entitled to receive differential wage payments (as defined in Code Section 3401(h)(2)) on reasonably equivalent terms and, if eligible to participate in a retirement plan maintained by the employer, to make contributions based on the payments on reasonably equivalent terms (taking into account Code Sections 410(b)(3), (4), and (5)).
* * * * *
Executed this 1 day of July, 2020.
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WEINGARTEN REALTY INVESTORS |
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By: |
/s/ Stephen C. Richter |
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Name: |
Stephen C. Richter |
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Title: |
Senior Vice President, Chief Financial Officer |
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Addendum A
Required Minimum Distributions
1.General Rules
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1.1 |
Effective Date. The provisions of this Addendum apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year. |
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1.2 |
Precedence. The requirements of this Addendum will take precedence over any inconsistent provisions of the Plan. |
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1.3 |
Requirements of Treasury Regulations Incorporated. All distributions required under this Addendum will be determined and made in accordance with the Treasury Regulations under Section 401(a)(9) of the Internal Revenue Code. |
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1.4 |
TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this Addendum, other than Section 1.3, distributions may be made under a designation made before January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the Plan that relate to Section 242(b)(2) of TEFRA. |
2.Time and Manner of Distribution.
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2.1 |
Required Beginning Date. The Participant’s entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant’s required beginning date. |
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2.2 |
Death of Participant Before Distributions Begin. If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows: |
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(a) |
If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, then distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 72 (age 701/2 for Plan Years prior to January 1, 2020), if later. |
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(b) |
If the Participant’s surviving spouse is not the Participant’s sole designated Beneficiary, then distributions to the designated Beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died. |
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(c) |
If there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire |
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interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.
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(d) |
If the Participant’s surviving spouse is the Participant’s sole designated Beneficiary and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, this Section 2.2, other than Section 2.2(a), will apply as if the surviving spouse were the Participant. |
For purposes of this Section 2.2 and Section 5, distributions are considered to begin on the Participant’s required beginning date (or, if Section 2.2(d) applies, the date distributions are required to begin to the surviving spouse under Section 2.2(a)). If annuity payments irrevocably commence to the Participant before the Participant’s required beginning date (or to the Participant’s surviving spouse before the date distributions are required to begin to the surviving spouse under Section 2.2(a)), the date distributions are considered to begin is the date distributions actually commence.
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2.3 |
Form of Distribution. Unless the Participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with Sections 3, 4 and 5 of this Addendum. If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(a)(9) of the Code and the Treasury regulations. Any part of the Participant’s interest which is in the form of an individual account described in Section 414(k) of the Code will be distributed in a manner satisfying the requirements of Section 401(a)(9) of the Code and the Treasury regulations that apply to individual accounts. |
3.Determination of Amount to be Distributed Each Year.
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3.1 |
General Annuity Requirements. If the Participant’s interest is paid in the form of annuity distributions under the Plan, payments under the annuity will satisfy the following requirements: |
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(a) |
the annuity distributions will be paid in periodic payments made at intervals not longer than one year; |
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(b) |
the distribution period will be over a life (or lives) or over a period certain not longer than the period described in Section 4 or 5; |
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(c) |
once payments have begun over a period certain, the period certain will not be changed even if the period certain is shorter than the maximum permitted; |
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(d) |
payments will either be nonincreasing or increase only as follows: |
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|
(1) |
by an annual percentage increase that does not exceed the annual percentage increase in a cost-of-living index that is based on prices of all items and issued by the Bureau of Labor Statistics; |
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(2) |
to the extent of the reduction in the amount of the Participant’s payments to provide for a survivor benefit upon death, but only if the Beneficiary whose life was being used to determine the distribution period described in Section 4 dies or is no longer the Participant’s Beneficiary pursuant to a qualified domestic relations order within the meaning of Section 414(p); |
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(3) |
to provide cash refunds of employee contributions upon the Participant’s death; or |
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(4) |
to pay increased benefits that result from a Plan amendment. |
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3.2 |
Amount Required to be Distributed by Required Beginning Date. The amount that must be distributed on or before the Participant’s required beginning date (or, if the Participant dies before distributions begin, the date distributions are required to begin under Section 2.2(a) or (b)) is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, e.g., bi-monthly, monthly, semi-annually, or annually. All of the Participant’s benefit accruals as of the last day of the first distribution calendar year will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the Participant’s required beginning date. |
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3.3 |
Additional Accruals After First Distribution Calendar Year. Any additional benefits accruing to the Participant in a calendar year after the first distribution calendar year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues. |
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4. |
Requirements For Annuity Distributions That Commence During Participant’s Lifetime. |
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4.1 |
Joint Life Annuities Where the Beneficiary Is Not the Participant’s Spouse. If the Participant’s interest is being distributed in the form of a joint and survivor annuity for the joint lives of the Participant and a nonspouse Beneficiary, annuity payments to be made on or after the Participant’s required beginning date to the designated Beneficiary after the Participant’s death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the Participant using the table set forth in Q&A-2 of Section 1.401(a)(9)-6 of the Treasury regulations. If the form of distribution combines a joint and survivor annuity for the joint lives of the Participant and a nonspouse Beneficiary and a period certain annuity, the requirement in the preceding sentence will apply to |
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annuity payments to be made to the designated Beneficiary after the expiration of the period certain.
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4.2 |
Period Certain Annuities. Unless the Participant’s spouse is the sole designated Beneficiary and the form of distribution is a period certain and no life annuity, the period certain for an annuity distribution commencing during the Participant’s lifetime may not exceed the applicable distribution period for the Participant under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations for the calendar year that contains the annuity starting date. If the annuity starting date precedes the year in which the Participant reaches age 70, the applicable distribution period for the Participant is the distribution period for age 70 under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations plus the excess of 70 over the age of the Participant as of the Participant’s birthday in the year that contains the annuity starting date. If the Participant’s spouse is the Participant’s sole designated Beneficiary and the form of distribution is a period certain and no life annuity, the period certain may not exceed the longer of the Participant’s applicable distribution period, as determined under this Section 4.2, or the joint life and last survivor expectancy of the Participant and the Participant’s spouse as determined under the Joint and Last Survivor Table set forth in Section 1.401(a)(9)-9 of the Treasury regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the calendar year that contains the annuity starting date. |
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5. |
Requirements For Minimum Distributions Where Participant Dies Before Date Distributions Begin. |
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5.1 |
Participant Survived by Designated Beneficiary. If the Participant dies before the date distribution of his or her interest begins and there is a designated Beneficiary, the Participant’s entire interest will be distributed, beginning no later than the time described in Section 2.2(a) or (b), over the life of the designated Beneficiary or over a period certain not exceeding: |
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(a) |
unless the annuity starting date is before the first distribution calendar year, the life expectancy of the designated Beneficiary determined using the Beneficiary’s age as of the Beneficiary’s birthday in the calendar year immediately following the calendar year of the Participant’s death; or |
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(b) |
if the annuity starting date is before the first distribution calendar year, the life expectancy of the designated Beneficiary determined using the Beneficiary’s age as of the Beneficiary’s birthday in the calendar year that contains the annuity starting date. |
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5.2 |
No Designated Beneficiary. If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death. |
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|
5.3 |
Death of Surviving Spouse Before Distributions to Surviving Spouse Begin. If the Participant dies before the date distribution of his or her interest begins, the Participant’s surviving spouse is the Participant’s sole designated Beneficiary, and the surviving spouse dies before distributions to the surviving spouse begin, this Section 5 will apply as if the surviving spouse were the Participant, except that the time by which distributions must begin will be determined without regard to Section 2.2(a).
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6.Definitions.
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6.1 |
Designated Beneficiary. The individual who is designated as the Beneficiary under Section 9.3 of the Plan and is the designated Beneficiary under Section 401(a)(9) of the Internal Revenue Code and Section 1.401(a)(9)-l, Q&A-4, of the Treasury regulations. |
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6.2 |
Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the Participant’s required beginning date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin pursuant to Section 2.2. |
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6.3 |
Life expectancy. Life expectancy as computed by use of the Single Life Table in Section 1.401(a)(9)-9 of the Treasury regulations. |
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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.
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BY: |
/s/ Andrew M. Alexander |
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Andrew M. Alexander |
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Chairman/President/Chief Executive Officer |
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August 5, 2020 |
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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.
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BY: |
/s/ Stephen C. Richter |
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Stephen C. Richter |
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Executive Vice President/Chief Financial Officer |
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August 5, 2020 |
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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 June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew M. Alexander, Chairman, 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.
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BY: |
/s/ Andrew M. Alexander |
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Andrew M. Alexander |
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Chairman/President/Chief Executive Officer |
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August 5, 2020 |
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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 June 30, 2020, 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.
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BY: |
/s/ Stephen C. Richter |
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Stephen C. Richter |
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Executive Vice President/Chief Financial Officer |
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August 5, 2020 |
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