Attached files
file | filename |
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EX-31.1 - EXHIBIT 31.1 - WEINGARTEN REALTY INVESTORS /TX/ | ex31_1.htm |
EX-31.2 - EXHIBIT 31.2 - WEINGARTEN REALTY INVESTORS /TX/ | ex31_2.htm |
EX-32.2 - EXHIBIT 32.2 - WEINGARTEN REALTY INVESTORS /TX/ | ex32_2.htm |
EX-32.1 - EXHIBIT 32.1 - WEINGARTEN REALTY INVESTORS /TX/ | ex32_1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
|
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarter ended September 30, 2009
|
|
OR
|
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from [__________________] to
[________________]
|
|
Commission
file number 1-9876
|
Weingarten
Realty Investors
(Exact
name of registrant as specified in its charter)
TEXAS
|
74-1464203
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
|
2600
Citadel Plaza Drive
|
||
P.O.
Box 924133
|
||
Houston,
Texas
|
77292-4133
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(713)
866-6000
|
||
(Registrant's
telephone number)
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. YES x NO ¨
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). YES ¨ NO ¨
Indicate by check mark whether the
Registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
Large
accelerated filer x
|
Accelerated
filer ¨
|
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
|
(Do not check if a smaller reporting company) |
Indicate by check mark whether the
Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).YES ¨ NO x
As of October 31, 2009, there were
119,790,012 common shares of beneficial interest of Weingarten Realty Investors,
$.03 par value, outstanding.
1
PART
I.
|
Financial
Information:
|
Page
Number
|
||
3
|
||||
4
|
||||
5
|
||||
6
|
||||
7
|
||||
33
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||||
47
|
||||
47
|
||||
PART
II.
|
Other
Information:
|
|||
48
|
||||
48
|
||||
50
|
||||
50
|
||||
51
|
||||
51
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51
|
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52
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||||
53
|
PART
I-FINANCIAL INFORMATION
|
||||||||||||||||
ITEM
1.
Financial Statements
|
||||||||||||||||
WEINGARTEN
REALTY INVESTORS
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenues:
|
||||||||||||||||
Rentals,
net
|
$ | 139,636 | $ | 149,725 | $ | 422,106 | $ | 441,288 | ||||||||
Other
|
4,908 | 4,242 | 12,321 | 10,310 | ||||||||||||
Total
|
144,544 | 153,967 | 434,427 | 451,598 | ||||||||||||
Expenses:
|
||||||||||||||||
Depreciation
and amortization
|
37,159 | 35,368 | 112,836 | 115,281 | ||||||||||||
Operating
|
25,733 | 26,045 | 76,014 | 77,151 | ||||||||||||
Ad
valorem taxes, net
|
18,275 | 19,967 | 55,012 | 54,620 | ||||||||||||
Impairment
loss
|
32,774 | 32,774 | ||||||||||||||
General
and administrative
|
6,178 | 5,816 | 19,198 | 19,774 | ||||||||||||
Total
|
120,119 | 87,196 | 295,834 | 266,826 | ||||||||||||
Operating
Income
|
24,425 | 66,771 | 138,593 | 184,772 | ||||||||||||
Interest
Expense, net
|
(36,431 | ) | (40,878 | ) | (115,247 | ) | (118,724 | ) | ||||||||
Interest
and Other Income, net
|
3,596 | 1,171 | 8,504 | 3,919 | ||||||||||||
Gain
on Redemption of Convertible Senior Unsecured Notes
|
16,453 | 25,311 | ||||||||||||||
Equity
in (Loss) Earnings of Real Estate Joint Ventures
and Partnerships, net
|
(4,763 | ) | 5,151 | 2,783 | 15,537 | |||||||||||
Gain
on Merchant Development Sales
|
491 | 1,418 | 18,619 | 8,240 | ||||||||||||
Provision
for Income Taxes
|
(4,364 | ) | (701 | ) | (7,071 | ) | (2,991 | ) | ||||||||
(Loss)
Income from Continuing Operations
|
(593 | ) | 32,932 | 71,492 | 90,753 | |||||||||||
Operating
(Loss) Income from Discontinued Operations
|
(1,294 | ) | 2,016 | 1,250 | 8,398 | |||||||||||
Gain
on Sale of Property from Discontinued Operations
|
398 | 4,520 | 7,385 | 53,983 | ||||||||||||
(Loss)
Income from Discontinued Operations
|
(896 | ) | 6,536 | 8,635 | 62,381 | |||||||||||
Gain
(Loss) on Sale of Property
|
994 | (43 | ) | 12,374 | 101 | |||||||||||
Net
(Loss) Income
|
(495 | ) | 39,425 | 92,501 | 153,235 | |||||||||||
Less: Net
Income Attributable to Noncontrolling Interests
|
(20 | ) | (2,515 | ) | (2,894 | ) | (6,968 | ) | ||||||||
Net
(Loss) Income Adjusted for Noncontrolling Interests
|
(515 | ) | 36,910 | 89,607 | 146,267 | |||||||||||
Dividends
on Preferred Shares
|
(8,869 | ) | (9,114 | ) | (26,607 | ) | (25,842 | ) | ||||||||
Redemption
Costs of Preferred Shares
|
(860 | ) | (1,850 | ) | ||||||||||||
Net
(Loss) Income Attributable to Common Shareholders
|
$ | (9,384 | ) | $ | 26,936 | $ | 63,000 | $ | 118,575 | |||||||
Earnings
Per Common Share - Basic:
|
||||||||||||||||
(Loss)
income from continuing operations attributable to common
shareholders
|
$ | (0.07 | ) | $ | 0.24 | $ | 0.51 | $ | 0.67 | |||||||
(Loss)
income from discontinued operations
|
(0.01 | ) | 0.08 | 0.08 | 0.75 | |||||||||||
Net
(loss) income attributable to common shareholders
|
$ | (0.08 | ) | $ | 0.32 | $ | 0.59 | $ | 1.42 | |||||||
Earnings
Per Common Share - Diluted:
|
||||||||||||||||
(Loss)
income from continuing operations attributable to common
shareholders
|
$ | (0.07 | ) | $ | 0.24 | $ | 0.51 | $ | 0.67 | |||||||
(Loss)
income from discontinued operations
|
(0.01 | ) | 0.08 | 0.08 | 0.74 | |||||||||||
Net
(loss) income attributable to common shareholders
|
$ | (0.08 | ) | $ | 0.32 | $ | 0.59 | $ | 1.41 | |||||||
Comprehensive
Income:
|
||||||||||||||||
Net
(Loss) Income
|
$ | (495 | ) | $ | 39,425 | $ | 92,501 | $ | 153,235 | |||||||
Other
Comprehensive Income (Loss):
|
||||||||||||||||
Loss
on derivatives
|
(7,204 | ) | ||||||||||||||
Amortization
of loss on derivatives
|
620 | 605 | 1,862 | 1,469 | ||||||||||||
Total
|
620 | 605 | 1,862 | (5,735 | ) | |||||||||||
Comprehensive
Income
|
125 | 40,030 | 94,363 | 147,500 | ||||||||||||
Comprehensive
Income Attributable to Noncontrolling Interests
|
(20 | ) | (2,515 | ) | (2,894 | ) | (6,968 | ) | ||||||||
Comprehensive
Income Adjusted for Noncontrolling Interests
|
$ | 105 | $ | 37,515 | $ | 91,469 | $ | 140,532 | ||||||||
See
Notes to Condensed Consolidated Financial Statements.
|
WEINGARTEN
REALTY INVESTORS
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amounts)
|
||||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
Property
|
$ | 4,806,661 | $ | 4,915,472 | ||||
Accumulated
Depreciation
|
(861,547 | ) | (812,323 | ) | ||||
Property
Held for Sale, net
|
51,007 | |||||||
Property,
net
|
3,996,121 | 4,103,149 | ||||||
Investment
in Real Estate Joint Ventures and Partnerships, net
|
311,353 | 357,634 | ||||||
Total
|
4,307,474 | 4,460,783 | ||||||
Notes
Receivable from Real Estate Joint Ventures and
Partnerships
|
323,141 | 232,544 | ||||||
Unamortized
Debt and Lease Costs, net
|
109,661 | 119,464 | ||||||
Accrued
Rent and Accounts Receivable (net of allowance for doubtful accounts
of $9,608 in 2009 and $12,412 in 2008)
|
84,948 | 103,873 | ||||||
Cash
and Cash Equivalents
|
104,694 | 58,946 | ||||||
Restricted
Deposits and Mortgage Escrows
|
14,526 | 33,252 | ||||||
Other,
net
|
92,854 | 105,350 | ||||||
Total
|
$ | 5,037,298 | $ | 5,114,212 | ||||
LIABILITIES
AND EQUITY
|
||||||||
Debt,
net
|
$ | 2,724,888 | $ | 3,148,636 | ||||
Accounts
Payable and Accrued Expenses
|
152,022 | 179,432 | ||||||
Other,
net
|
98,791 | 90,461 | ||||||
Total
|
2,975,701 | 3,418,529 | ||||||
Commitments
and Contingencies
|
41,000 | |||||||
Equity:
|
||||||||
Shareholders'
Equity:
|
||||||||
Preferred
Shares of Beneficial Interest - par value, $.03 per share; shares
authorized: 10,000
|
||||||||
6.75%
Series D cumulative redeemable preferred shares of beneficial
interest; 100 shares issued and outstanding in
2009 and 2008; liquidation preference
$75,000
|
3 | 3 | ||||||
6.95%
Series E cumulative redeemable preferred shares of beneficial
interest; 29 shares issued and outstanding in 2009 and
2008; liquidation preference $72,500
|
1 | 1 | ||||||
6.5%
Series F cumulative redeemable preferred shares of beneficial
interest; 140 shares issued and outstanding in 2009 and
2008; liquidation preference $350,000
|
4 | 4 | ||||||
Common
Shares of Beneficial Interest - par value, $.03 per share; shares
authorized: 150,000;
shares issued and outstanding: 119,790
in 2009 and 87,102 in 2008
|
3,605 | 2,625 | ||||||
Accumulated
Additional Paid-In Capital
|
1,949,308 | 1,514,940 | ||||||
Net
Income Less Than Accumulated Dividends
|
(80,015 | ) | (37,245 | ) | ||||
Accumulated
Other Comprehensive Loss
|
(27,814 | ) | (29,676 | ) | ||||
Shareholders'
Equity
|
1,845,092 | 1,450,652 | ||||||
Noncontrolling
Interests
|
216,505 | 204,031 | ||||||
Total Equity
|
2,061,597 | 1,654,683 | ||||||
Total
|
$ | 5,037,298 | $ | 5,114,212 | ||||
See
Notes to Condensed Consolidated Financial Statements.
|
(Unaudited)
|
||||||||
(In
thousands)
|
||||||||
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2009
|
2008
|
|||||||
Cash
Flows from Operating Activities:
|
||||||||
Net
Income
|
$ | 92,501 | $ | 153,235 | ||||
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
115,291 | 120,133 | ||||||
Amortization of
deferred financing costs and debt discounts
|
8,741 | 9,899 | ||||||
Impairment
loss
|
35,889 | |||||||
Equity in
earnings of real estate joint ventures and partnerships,
net
|
(2,783 | ) | (15,537 | ) | ||||
Gain on
merchant development sales
|
(18,619 | ) | (8,240 | ) | ||||
Gain on sale of
property
|
(19,759 | ) | (54,084 | ) | ||||
Gain on
redemption of convertible senior unsecured notes
|
(25,311 | ) | ||||||
Distributions
of income from real estate joint ventures and
partnerships
|
1,954 | 2,419 | ||||||
Changes in
accrued rent and accounts receivable, net
|
11,200 | (4,829 | ) | |||||
Changes in
other assets, net
|
(3,620 | ) | (21,297 | ) | ||||
Changes in
accounts payable and accrued expenses
|
(14,403 | ) | (28,385 | ) | ||||
Other,
net
|
8,156 | 4,209 | ||||||
Net cash
provided by operating activities
|
189,237 | 157,523 | ||||||
Cash
Flows from Investing Activities:
|
||||||||
Investment in
property
|
(85,693 | ) | (229,807 | ) | ||||
Proceeds from
sale and disposition of property, net
|
121,407 | 190,388 | ||||||
Change
in restricted deposits and mortgage escrows
|
18,726 | 21,049 | ||||||
Notes
receivable from real estate joint ventures and partnerships and
other receivables:
|
||||||||
Advances
|
(92,293 | ) | (109,610 | ) | ||||
Collections
|
5,555 | 25,161 | ||||||
Real
estate joint ventures and partnerships:
|
||||||||
Investments
|
(3,594 | ) | (4,036 | ) | ||||
Distributions
of capital
|
12,701 | 16,298 | ||||||
Net cash used
in investing activities
|
(23,191 | ) | (90,557 | ) | ||||
Cash
Flows from Financing Activities:
|
||||||||
Proceeds from
issuance of:
|
||||||||
Debt
|
556,040 | 386,660 | ||||||
Common shares
of beneficial interest, net
|
439,097 | 2,786 | ||||||
Preferred
shares of beneficial interest, net
|
118,013 | |||||||
Repurchase of
preferred shares of beneficial interest, net
|
(195,824 | ) | ||||||
Principal
payments of debt
|
(971,700 | ) | (229,370 | ) | ||||
Common
and preferred dividends paid
|
(130,409 | ) | (159,649 | ) | ||||
Debt
issuance costs paid
|
(5,633 | ) | (958 | ) | ||||
Other,
net
|
(7,693 | ) | (1,177 | ) | ||||
Net cash used
in financing activities
|
(120,298 | ) | (79,519 | ) | ||||
Net
increase (decrease) in cash and cash equivalents
|
45,748 | (12,553 | ) | |||||
Cash
and cash equivalents at January 1
|
58,946 | 65,777 | ||||||
Cash
and cash equivalents at September 30
|
$ | 104,694 | $ | 53,224 | ||||
See
Notes to Condensed Consolidated Financial Statements.
|
WEINGARTEN
REALTY INVESTORS
(Unaudited)
(In
thousands, except per share amounts)
Preferred
Shares of Beneficial Interest
|
Common
Shares of Beneficial Interest
|
Treasury
Shares of Beneficial Interest
|
Accumulated
Additional Paid-In Capital
|
Net
Income in Excess of Accumulated Dividends
|
Accumulated
Other Comprehensive Loss
|
Noncontrolling
Interests
|
Total
|
|||||||||||||||||||||||||
Balance,
January 1, 2008
|
$ | 8 | $ | 2,565 | $ | (41 | ) | $ | 1,485,496 | $ | 31,639 | $ | (15,475 | ) | $ | 96,885 | $ | 1,601,077 | ||||||||||||||
Net
income
|
146,267 | 6,968 | 153,235 | |||||||||||||||||||||||||||||
Issuance
of Series F preferred shares
|
2 | 116,415 | 1,540 | 117,957 | ||||||||||||||||||||||||||||
Redemption
of Series G preferred shares
|
(2 | ) | (193,548 | ) | (1,850 | ) | (195,400 | ) | ||||||||||||||||||||||||
Shares
issued in exchange for noncontrolling interests
|
368 | (368 | ) | - | ||||||||||||||||||||||||||||
Shares
issued under benefit plans
|
9 | 7,835 | 7,844 | |||||||||||||||||||||||||||||
Dividends
declared – common shares (1)
|
(132,267 | ) | (132,267 | ) | ||||||||||||||||||||||||||||
Dividends
declared – preferred shares (2)
|
(27,382 | ) | (27,382 | ) | ||||||||||||||||||||||||||||
Sale
of properties with noncontrolling interests
|
65,359 | 65,359 | ||||||||||||||||||||||||||||||
Treasury
shares cancelled (3)
|
(41 | ) | 41 | - | ||||||||||||||||||||||||||||
Distributions
to noncontrolling interests
|
(8,349 | ) | (8,349 | ) | ||||||||||||||||||||||||||||
Contributions
from noncontrolling interests
|
634 | 634 | ||||||||||||||||||||||||||||||
Other
comprehensive loss
|
(5,735 | ) | (5,735 | ) | ||||||||||||||||||||||||||||
Other,
net
|
(2,599 | ) | (2,599 | ) | ||||||||||||||||||||||||||||
Balance,
September 30, 2008
|
$ | 8 | $ | 2,533 | $ | - | $ | 1,416,566 | $ | 17,947 | $ | (21,210 | ) | $ | 158,530 | $ | 1,574,374 |
(1)
|
Common
dividends per share were $1.575 for the nine months ended September 30,
2008.
|
(2)
|
Series
D, E, F and G preferred dividends per share were $37.97, $130.31, $121.88
and $73.73, respectively, for the nine months ended September 30,
2008.
|
(3)
|
A
total of 1.4 million common shares of beneficial interest were purchased
in 2007 and subsequently retired on January 11,
2008.
|
Preferred
Shares of Beneficial Interest
|
Common
Shares of Beneficial Interest
|
Accumulated
Additional Paid-In Capital
|
Net
Income Less Than Accumulated Dividends
|
Accumulated
Other Comprehensive Loss
|
Noncontrolling
Interests
|
Total
|
||||||||||||||||||||||
Balance,
January 1, 2009
|
$ | 8 | $ | 2,625 | $ | 1,514,940 | $ | (37,245 | ) | $ | (29,676 | ) | $ | 204,031 | $ | 1,654,683 | ||||||||||||
Net
income
|
89,607 | 2,894 | 92,501 | |||||||||||||||||||||||||
Shares
issued in exchange for noncontrolling interests
|
6 | 6,394 | (6,400 | ) | - | |||||||||||||||||||||||
Issuance
of common shares
|
966 | 438,089 | 439,055 | |||||||||||||||||||||||||
Shares
issued under benefit plans
|
8 | 4,043 | 4,051 | |||||||||||||||||||||||||
Dividends
declared – common shares (1)
|
(105,770 | ) | (105,770 | ) | ||||||||||||||||||||||||
Dividends
declared – preferred shares (2)
|
(24,639 | ) | (24,639 | ) | ||||||||||||||||||||||||
Sale
of properties with noncontrolling interests
|
23,521 | 23,521 | ||||||||||||||||||||||||||
Distributions
to noncontrolling interests
|
(12,070 | ) | (12,070 | ) | ||||||||||||||||||||||||
Contributions
from noncontrolling interests
|
4,518 | 4,518 | ||||||||||||||||||||||||||
Purchase
and cancellation of convertible senior unsecured notes
|
(16,110 | ) | (16,110 | ) | ||||||||||||||||||||||||
Other
comprehensive income
|
1,862 | 1,862 | ||||||||||||||||||||||||||
Other,
net
|
1,952 | (1,968 | ) | 11 | (5 | ) | ||||||||||||||||||||||
Balance,
September 30, 2009
|
$ | 8 | $ | 3,605 | $ | 1,949,308 | $ | (80,015 | ) | $ | (27,814 | ) | $ | 216,505 | $ | 2,061,597 |
(1)
|
Common
dividends per share were $1.025 for the nine months ended September 30,
2009.
|
(2)
|
Series
D, E and F preferred dividends per share were $37.97, $130.31 and $121.88,
respectively, for the nine months ended September 30,
2009.
|
See Notes
to Condensed Consolidated Financial Statements.
WEINGARTEN
REALTY INVESTORS
(Unaudited)
Note
1. Interim
Financial Statements
Business
Weingarten
Realty Investors is a real estate investment trust (“REIT”) organized under the
Texas Real Estate Investment Trust Act. We, and our predecessor
entity, began the ownership and development of shopping centers and other
commercial real estate in 1948. Our primary business is leasing space
to tenants in the shopping and industrial centers we own or lease. We
also manage centers for joint ventures in which we are partners or for other
outside owners for which we charge fees.
We
operate a portfolio of properties that include neighborhood and community
shopping centers and industrial properties of approximately 72.3 million square
feet. We have a diversified tenant base with our largest tenant
comprising only 2.6% of total rental revenues during 2009.
We
currently operate, and intend to operate in the future, as a REIT.
Basis
of Presentation
Our
condensed consolidated financial statements include the accounts of our
subsidiaries and certain partially owned real estate joint ventures or
partnerships which meet the guidelines for consolidation. All
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, 2008 are derived from our audited financial statements
at that date. In our opinion, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consisted of normal recurring items. Interim results are
not necessarily indicative of results for a full year.
The
condensed consolidated financial statements and notes are presented as permitted
by Form 10-Q and certain information included in our annual financial statements
and notes has been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with our Annual Report on
Form 10-K for the year ended December 31, 2008.
Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”). Such statements
require management to make estimates and assumptions that affect the reported
amounts on our condensed consolidated financial statements. Actual
results could differ from these estimates.
Impairment
Our
property is reviewed for impairment, if events or changes in circumstances
indicate that the carrying amount of the property, including any identifiable
intangible assets (including site costs and capitalized interest), may not be
recoverable.
If such
an event occurs for our properties, a comparison is made of the current and
projected operating cash flows of each such property into the foreseeable future
on an undiscounted basis to the carrying amount of such property. Our
carrying amounts are adjusted, if necessary, to the estimated fair value to
reflect impairment in the value of the asset. Fair values are
determined by management utilizing cash flow models and market discount rates,
or by obtaining third-party broker and appraisal estimates.
Due to
our analysis of current economic considerations at each reporting period,
including the effects of tenant bankruptcies, lack of credit available to
retailers, the suspension of tenant expansion plans for new development projects
and declines in real estate values, plans related to our new development
properties including land held for development changed, and resulted in an
impairment charge. Impairments, primarily related to our new
development properties, of $35.2 million and $35.9 million were recognized for
the three months and nine months ended September 30, 2009,
respectively. No impairment was recognized in the related periods of
2008. Determining whether a property is impaired and, if impaired,
the amount of required write-down to fair value requires a significant amount of
judgment by management and is based on the best information available to
management at the time of evaluation. If market conditions continue
to deteriorate or managements’ plans for certain properties change, additional
write-downs could be required in the future.
Our
investment in real estate joint ventures and partnerships is reviewed for
impairment, if events or circumstances change indicating that the carrying
amount of an investment may not be recoverable. The ultimate
realization is dependent on a number of factors, including the performance of
each investment and market conditions. We will record an impairment
charge if we determine that a decline in the value of an investment is other
than temporary. Based on our analysis of the facts and circumstances
at each reporting period, no impairment on these investments was recorded for
the three or nine months ended September 30, 2009 and 2008. However,
due to the current credit and real estate market conditions, there is no
certainty that impairments would not occur in the future.
Restricted
Deposits and Mortgage Escrows
Restricted
deposits and mortgage escrows consist of escrow deposits held by lenders
primarily for property taxes, insurance and replacement reserves, and restricted
cash that is held for a specific use or in a qualified escrow account for the
purposes of completing like-kind exchange transactions. At
September 30, 2009 and December 31, 2008, we had $1.6 million and $22.5
million of restricted cash, respectively, and $12.9 million and $10.8 million
held in escrow related to our mortgages for each period,
respectively.
Per
Share Data
Earnings
per common share – basic is computed using net income attributable to common
shareholders and the weighted average shares outstanding. Earnings
per common share – diluted include the effect of potentially dilutive
securities. Income from continuing operations attributable to common
shareholders includes gain on sale of property in accordance with SEC
guidelines. Earnings per common share – basic and diluted components
for the periods indicated are as follows (in thousands):
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net
(loss) income attributable to common shareholders – basic and
diluted
|
$ | (9,384 | ) | $ | 26,936 | $ | 63,000 | $ | 118,575 | |||||||
Denominator:
|
||||||||||||||||
Weighted
average shares outstanding – basic
|
119,384 | 83,795 | 106,186 | 83,739 | ||||||||||||
Effect
of dilutive securities:
|
||||||||||||||||
Share
options and awards
|
521 | 559 | 549 | |||||||||||||
Operating
partnership units
|
||||||||||||||||
Weighted
average shares outstanding – diluted
|
119,384 | 84,316 | 106,745 | 84,288 |
Options
to purchase common shares of beneficial interest (“common shares”) of 3.1
million for both the three and nine months ended September 30, 2009 were not
included in the calculation of net income per common share – diluted as the
exercise prices were greater than the average market price for the
period. For the three and nine months ended September 30, 2008,
options to purchase common shares of 2.0 million and 1.2 million, respectively,
were not included in the calculation of net income per common share – diluted as
the exercise prices were greater than the average market price for the
period. Operating partnership units of 2.1 million and 2.0 million,
respectively, for the three and nine months ended September 30, 2009, and 2.4
million for both the three and nine months ended September 30, 2008 were not
included in the calculation of net income per common share – diluted because
these units had an anti-dilutive effect.
Cash
Flow Information
We issued
common shares valued at $6.4 million and $.4 million for the nine months ended
September 30, 2009 and 2008, respectively, in exchange for interests in real
estate joint ventures and partnerships, which had been formed to acquire
properties. We also accrued $21.8 million and $23.4 million as of
September 30, 2009 and 2008, respectively, associated with the construction of
property. Cash payments for interest on debt, net of amounts
capitalized, of $133.8 million and $137.6 million were made during the nine
months ended September 30, 2009 and 2008, respectively. A cash
payment of $3.1 million and $4.9 million for income taxes was made during the
nine months ended September 30, 2009 and 2008.
In
connection with the sale of improved properties, we received notes receivable
totaling $.2 million and $3.6 million during the nine months ended September 30,
2009 and 2008, respectively. During the nine months ended September
30, 2008, we assumed $.6 million and $8.5 million, respectively, of
noncontrolling interests and net assets and liabilities in association with
property acquisitions and investments in unconsolidated real estate joint
ventures.
Accumulated
Other Comprehensive Loss
As of
September 30, 2009, the balance in accumulated other comprehensive loss relating
to derivatives and our retirement liability was $15.0 million and $12.8 million,
respectively. As of December 31, 2008, the balance in accumulated
other comprehensive loss relating to derivatives and our retirement liability
was $16.9 million and $12.8 million, respectively.
Reclassifications
The
reclassification of prior years’ operating results for the three and nine months
ending September 30, 2008 for certain properties to discontinued operations was
made to conform to the current year presentation. For the nine months
ended September 30, 2008, we also reclassified in our Condensed Consolidated
Statement of Cash Flows amortization of deferred financing costs from changes in
other assets, net to amortization of deferred financing costs and debt discount
to conform to 2009 classification. These reclassifications had no
impact on previously reported net income, earnings per share, the condensed
consolidated balance sheet or cash flows from operating activities.
Retrospective
Application of Accounting Principles
The
retrospective application of adopting new accounting principles on prior years’
condensed consolidated financial statements was made to conform to the current
year presentation. The impact of these changes is described in Note
2.
Subsequent
Events
We have
evaluated subsequent events through November 6, 2009, which is the date these
condensed consolidated financial statements were issued.
Note
2. Newly
Issued Accounting Pronouncements
The
Financial Accounting Standards Board (“FASB“) issued Accounting Standard
Codification (“ASC”) update to ASC 820, “Fair Value Measurements and
Disclosures”, which deferred the provisions of implementation of fair value
reporting relating to nonfinancial assets and liabilities, and delayed
implementation by us until January 1, 2009. Adoption of the update to
this codification has not materially affected our financial
statements.
In
December 2007, the FASB issued an update to ASC 805, “Business
Combinations.” The update expands the original guidance’s definition
of a business. It broadens the fair value measurement and recognition
to all assets acquired, liabilities assumed and interests transferred as a
result of business combinations. The revision requires expanded
disclosures to improve the ability to evaluate the nature and financial effects
of business combinations. The update is effective for us for business
combinations made on or after January 1, 2009. Due to current
economic conditions, we do not plan any significant acquisitions in 2009,
thereby upon adoption, there was no material effect. However, this
update could have a material effect on our accounting for the future acquisition
of properties.
In
December 2007, the FASB issued an update to ASC 810,
“Consolidation.” The update requires that, in most cases, a
noncontrolling interest in a consolidated entity be reported as equity and any
losses in excess of a consolidated entity’s equity interest be recorded to the
noncontrolling interest. The statement requires fair value
measurement of any noncontrolling equity investment retained in a
deconsolidation. This update was effective for us on January 1, 2009,
and many provisions required retrospective application. The adoption
has resulted in an increase to equity in the Condensed Consolidated Balance
Sheet as of December 31, 2008 of $204.0 million for the reclassification of
minority interest to equity for noncontrolling interest in consolidated
entities. Net income in the Condensed Consolidated Statement of
Income and Comprehensive Income for the nine months ended September 30, 2008 has
increased by $7.0 million for the reclassification of income allocated to
minority interests; however, net income attributable to common shareholders and
earnings per common share – basic and diluted were not affected by this
reclassification. Additional disclosures due to the implementation
are included in Note 19.
In March
2008, the FASB issued an update to ASC 815, “Derivative and
Hedging.” The update requires enhanced disclosures about an entity’s
derivative and hedging activities. The update was effective for us on
January 1, 2009. Implementation has resulted in additional
disclosures included in Note 4.
In May
2008, the FASB issued updates to ASC 470 “Debt” and ASC 505
“Equity.” The updates require that the initial debt proceeds from the
sale of our convertible and exchangeable senior debentures be allocated between
a liability component and an equity component in a manner that will reflect our
effective nonconvertible borrowing rate. The resulting debt discount
will be amortized using the effective interest method over the period the debt
is expected to be outstanding as additional interest expense. The
updates were effective for us on January 1, 2009 and required retroactive
application. Upon adoption, the Condensed Consolidated Balance Sheet
as of December 31, 2008 was adjusted to reflect a reduction in debt of
approximately $22.9 million for the unamortized debt discount; accumulated
additional paid-in capital increased by approximately $39.5 million; and net
income less than accumulated dividends increased by approximately $17.1
million. The Condensed Consolidated Statement of Income and
Comprehensive Income for the nine months ended September 30, 2008 was adjusted
for incremental interest expense of $6.3 million, which reduced both earnings
per common share – basic and diluted by approximately $0.07.
In
November 2008, the FASB updated ASC 323 “Investments – Equity Method and Joint
Ventures.” The update requires an investment accounted for under the
equity method to be evaluated and recorded in accordance with ASC 805 “Business
Combinations” definition of business combinations and modeling. The
update is effective for us for equity method investments made on or after
January 1, 2009. Upon adoption, there was no material impact to our
financials statements.
In April
2009, the FASB updated ASC 825, “Financial Instruments.” The update
requires annual disclosures to be made also during interim reporting
periods. Implementation has resulted in certain additional
disclosures included in Note 16.
In May
2009, the FASB issued an update to ASC 855, “Subsequent Events,” which
establishes general standards of accounting and disclosure for events that occur
subsequent to the balance sheet date but before financial statements are issued
or are available to be issued. The update requires us to disclose the
date through which we have evaluated our subsequent events and the basis for
that date. Implementation has resulted in an additional disclosure
included in Note 1.
In June
2009, the FASB issued Statement of Financial Accounting Standards No. 167 (“SFAS
167”), “Amendments
to FASB Interpretation No. 46(R).” SFAS 167 was intended to
improve an organization’s variable interest entity reporting. SFAS
167 will require a change in the analysis used to determine whether an entity
has a controlling financial interest in a variable interest
entity. The analysis will be used to identify the primary beneficiary
of a variable interest entity. The holder of the variable interest
will be defined as the primary beneficiary if it has both the power to influence
the entity’s significant economic activities and the obligation to absorb
potentially significant losses or receive potentially significant
benefits. SFAS 167 also requires additional disclosures about an
entity’s variable interest entities. This statement is effective for
us on January 1, 2010. We are currently evaluating the impact that
the adoption of SFAS 167 will have on our consolidated financial
statements.
In August
2009, the FASB issued Accounting Standards Update No. 2009-05 (”ASU 2009-05”),
“Measuring Liabilities at Fair Value.” ASU 2009-05 provides
clarification for valuing liabilities in which a quoted market price in an
active market for an identical liability is not available. The
guidance also provides required techniques to determine a liability’s fair value
in this circumstance. The update is effective for us beginning
October 1, 2009 and adoption of ASU 2009-05 will not materially affect our
consolidated financial statements.
Note
3. Variable
Interest Entities
Management
determines whether an entity is a variable interest entity (“VIE”) and, if so,
determines which party is the primary beneficiary by analyzing which party
absorbs a majority of the expected losses or a majority of the expected residual
returns of the VIE, or both. Significant judgments and assumptions
inherent in this analysis include the design of the entity structure, the nature
of the entity’s operations, future cash flow projections, the entity’s financing
and capital structure, and contractual relationships and terms. We
consolidate a VIE when we have determined that we are the primary
beneficiary. Assets held by VIEs which are currently consolidated
approximate $293.3 million and $241.9 million at September 30, 2009 and December
31, 2008, respectively. Entities for which we are the primary
beneficiary and we consolidate are described below.
In March
2008, we contributed 18 neighborhood/community shopping centers located in Texas
with an aggregate fair value of approximately $227.5 million, and aggregating
more than 2.1 million square feet, to a joint venture. The activities
of this venture principally consist of owning and operating these shopping
centers. We sold an 85% interest in this joint venture to AEW Capital
Management on behalf of one of its institutional clients and received proceeds
of approximately $216.1 million. Financing totaling $154.3 million
was placed on the properties and guaranteed solely by us, for tax planning
purposes. This venture is deemed to be a VIE and, due to our guaranty
of the debt, we are the primary beneficiary and have consolidated this joint
venture. Our maximum exposure to loss associated with this joint
venture is primarily limited to our guaranty of the debt, which was
approximately $154.3 million at September 30, 2009.
We also
contributed eight neighborhood/community shopping centers with an aggregate fair
value of approximately $205.1 million, and aggregating approximately 1.1 million
square feet, to a joint venture in November 2008. Four of these
shopping centers are located in Texas, two in Tennessee and one each in Florida
and Georgia. The activities of this venture principally consist of
owning and operating these shopping centers. We sold a 70% interest
in this joint venture to Hines REIT Retail Holdings, LLC and received proceeds
of approximately $121.8 million. Financing totaling $100.0 million
was placed on the properties and guaranteed solely by us, for tax planning
purposes.
During
the first quarter of 2009, we contributed the final four properties to the joint
venture with Hines REIT Retail Holdings, LLC with an aggregate fair value of
approximately $66.8 million, and aggregating approximately 0.4 million square
feet. These four shopping centers are located one each in Florida and
North Carolina and two in Georgia, and we received net proceeds of approximately
$20.6 million. These contributions included loan assumptions on each of the
properties, which transferred secured debt totaling approximately $34.6 million
to the joint venture and guaranteed solely by us. This venture is
deemed to be a VIE and, due to our guaranty of the debt, we are the primary
beneficiary and have consolidated this joint venture. Our maximum
exposure to loss associated with this joint venture is primarily limited to our
guaranty of the debt, which was approximately $114.0 million at September 30,
2009.
Restrictions
on the use of these assets are significant because they are secured as
collateral for their debt, and we would be required to obtain our partners’
approval in accordance with the partnership agreements on any major
transactions. The impact of these transactions on our consolidated
financial statements has been limited to changes in noncontrolling interests and
reductions in debt from our partners’ contributions.
In
addition, we have an unconsolidated joint venture with an interest in an entity
which is deemed to be a VIE. In July 2008, a 47.75%-owned
unconsolidated real estate joint venture acquired an 83.34% interest in a joint
venture owning a 919,000 square foot new development to be constructed in
Aurora, Colorado. The unconsolidated joint venture guaranteed the
debt obtained by the acquired joint venture. The unconsolidated joint
venture’s maximum exposure to loss is limited to the guaranty of the debt, which
was approximately $43.0 million at September 30, 2009.
Note
4. Derivatives
and Hedging
In order
to manage our interest rate risk, we occasionally hedge the future cash flows of
our debt transactions, as well as changes in the fair value of our debt
instruments, principally through interest rate swaps with major financial
institutions. We recognize all derivatives as either assets or
liabilities at fair value and have designated our current interest rate swaps as
fair value hedges of fixed rate borrowings. At September 30, 2009 and
December 31, 2008, we had two interest rate swap contracts designated as fair
value hedges with an aggregate notional amount of $50.0 million that convert
fixed interest payments at rates of 4.2% to variable interest payments of .3%
and 2.0% at September 30, 2009 and December 31, 2008,
respectively. We have determined that they are highly effective in
limiting our risk of changes in the fair value of fixed-rate notes attributable
to changes in variable interest rates.
Changes
in the fair value of interest rate swap contracts designated as fair value
hedges, as well as changes in the fair value of the related debt being hedged,
are recorded in earnings each reporting period. For the three and
nine months ended September 30, 2009 and 2008, these changes in fair value
offset.
A summary
of the offsetting loss or gain on the interest rate swaps is as follows (in
thousands):
Income
Statement Classification
|
Gain
(Loss) on Swaps
|
Gain
(Loss) on Borrowings
|
||||||
Three
Months Ended September 30, 2009:
|
||||||||
Interest
expense, net
|
$ | 150 | $ | (150 | ) | |||
Nine
Months Ended September 30, 2009:
|
||||||||
Interest
expense, net
|
$ | (1,670 | ) | $ | 1,670 |
The
derivative instruments at September 30, 2009 and December 31, 2008 were reported
at their fair values in other assets, net of accrued interest, of $3.2 million
and $4.6 million, respectively. We had no derivative instruments
reported in other liabilities at September 30, 2009 and December 31, 2008,
respectively.
As of
September 30, 2009 and December 31, 2008, the balance in accumulated other
comprehensive loss relating to settled cash flow interest rate contracts was
$15.0 million and $16.9 million, respectively. Amounts amortized to
interest expense, net were $.6 million each during the three months ended
September 30, 2009 and 2008, and $1.9 million and $.9 million during the nine
months ended September 30, 2009 and 2008, respectively. Within the
next 12 months, approximately $2.5 million of the balance in accumulated other
comprehensive loss is expected to be amortized to interest expense.
For the
three and nine months ended September 30, 2009, the interest rate swaps
decreased interest expense, net and increased net income by $.5 million and $1.3
million, respectively. The decrease in our average interest rate of
our debt was .07% and .06% for the three and nine months ended September 30,
2009, respectively. For the three and nine months ended September 30,
2008, the interest rate swaps decreased interest expense, net and increased net
income by $.1 million and $.5 million, respectively, and decreased the average
interest rate of our debt by .02% for both periods. We could be
exposed to losses in the event of nonperformance by the counter-parties;
however, management believes such nonperformance is unlikely.
A summary
of our derivatives is as follows (in thousands):
Derivatives
Hedging Relationships
|
Location
of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into
Income
|
Amount
of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into
Income (Effective Portion)
|
Location
of Gain (Loss) Recognized in Income on Derivative
|
Amount
of Gain (Loss) Recognized in Income on Derivative
|
|||||||
Three
Months Ended September 30, 2009:
|
|||||||||||
Cash
Flow Interest Rate Contracts
|
Interest
expense, net
|
$ | (620 | ) | |||||||
Fair
Value Interest Rate Contracts
|
Interest
expense, net
|
$ | 150 | ||||||||
Nine Months
Ended September 30, 2009:
|
|||||||||||
Cash
Flow Interest Rate Contracts
|
Interest
expense, net
|
$ | (1,862 | ) | |||||||
Fair
Value Interest Rate Contracts
|
Interest
expense, net
|
$ | (1,670 | ) |
Note
5. Debt
Our debt
consists of the following (in thousands):
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Debt
payable to 2030 at 4.5% to 8.8%
|
$ | 2,502,032 | $ | 2,732,574 | ||||
Unsecured
notes payable under revolving credit agreements
|
190,000 | 383,000 | ||||||
Obligations
under capital leases
|
29,725 | 29,725 | ||||||
Industrial
revenue bonds payable to 2015 at 0.5% to 2.4%
|
3,131 | 3,337 | ||||||
Total
|
$ | 2,724,888 | $ | 3,148,636 |
The
grouping of total debt between fixed and variable-rate as well as between
secured and unsecured is summarized below (in thousands):
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
As
to interest rate (including the effects of interest rate
swaps):
|
||||||||
Fixed-rate
debt
|
$ | 2,465,988 | $ | 2,699,609 | ||||
Variable-rate
debt
|
258,900 | 449,027 | ||||||
Total
|
$ | 2,724,888 | $ | 3,148,636 | ||||
As
to collateralization:
|
||||||||
Unsecured
debt
|
$ | 1,503,897 | $ | 2,116,491 | ||||
Secured
debt
|
1,220,991 | 1,032,145 | ||||||
Total
|
$ | 2,724,888 | $ | 3,148,636 |
We have a
$575 million unsecured revolving credit facility held by a syndicate of banks
that expires in February 2010 and provides a one-year extension option available
at our request. Borrowing rates under this facility float at a margin
over LIBOR, plus a facility fee. The borrowing margin and facility
fee, which are currently 60.0 and 15.0 basis points, respectively, are priced
off a grid that is tied to our senior unsecured credit ratings. This
facility retains a competitive bid feature that allows us to request bids for
amounts up to $287.5 million from each of the syndicate banks, potentially
allowing us to obtain pricing below what we would pay using the pricing
grid.
At
September 30, 2009 and December 31, 2008, the balance outstanding under the
revolving credit facility was $190.0 million at a variable interest rate of 0.9%
and $383.0 million at a variable interest rate of 1.6%,
respectively. We also have an agreement for a $30 million unsecured
and uncommitted overnight facility with a bank that we use for cash management
purposes, of which no amounts were outstanding at September 30, 2009 and
December 31, 2008. Letters of credit totaling $10.0 million and
$10.1 million were outstanding under the revolving credit facility at September
30, 2009 and December 31, 2008, respectively. The available balance
under our revolving credit agreement was $375.0 million and $181.9 million at
September 30, 2009 and December 31, 2008, respectively. During the
nine months ended September 30, 2009, the maximum balance and weighted average
balance outstanding under these facilities were $423.0 million and $212.4
million, respectively, at a weighted average interest rate of
1.4%. During 2008, the maximum balance and weighted average balance
outstanding under both facilities combined were $503.0 million and $362.0
million, respectively, at a weighted average interest rate of
3.4%. At September 30, 2009, we had $69.3 million invested in
overnight cash instruments and none at December 31, 2008.
In May
2009, we entered into a $103 million secured loan from a major life insurance
company. The loan is for approximately 8.5 years at a fixed interest
rate of 7.49% and is collateralized by four properties. The net
proceeds received were invested in short-term investments and subsequently used
to settle the June tender offer discussed below.
In July
2009, we entered into a $70.8 million secured loan from a major life insurance
company. The loan is for seven years at a fixed interest rate of 7.4%
and is collateralized by five properties. In September 2009, we
entered into a $57.5 million secured loan from a major life insurance
company. The loan is for 10 years at a fixed interest rate of 7.0%
and is collateralized by 10 properties. The net proceeds received
from both transactions were used to reduce amounts outstanding under our $575
million revolving credit facility.
In August
2009, we sold $100 million of unsecured senior notes with a coupon of 8.1% which
will mature September 15, 2019. We may redeem the notes, in whole or
in part, on or after September 15, 2014, at our option, at a redemption price
equal to 100% of their principal amount, plus accrued and unpaid
interest. The net proceeds of $97.5 million were used to reduce
amounts outstanding under our $575 million revolving credit
facility.
In the
second quarter of 2009, we repurchased and retired $82.3 million face value of
our 3.95% convertible senior unsecured notes for $70.4 million, including
accrued interest. We realized an $8.9 million gain on the
extinguishment of this debt.
During
2009, we made a cash tender offer for up to $427.9 million face value on a
series of unsecured notes and our convertible senior unsecured
notes. We completed the first tier of the offering in June for a
total face value of $102.9 million, of which $20.6 million of unsecured fixed
rate medium term notes with a weighted average interest rate of 7.54% and a
weighted average maturity of 1.6 years, and $82.3 million of 7% senior unsecured
notes due 2011 were purchased at par by us.
In July
2009, we completed the tender offer for an additional $319.7 million face value
of our 3.95% convertible senior unsecured notes due 2026, purchased for $311.1
million, including interest and expenses. This transaction resulted
in a gain of $16.5 million.
At
September 30, 2009 and December 31, 2008, we have $135.2 million and $537.2
million face value of 3.95% convertible senior unsecured notes outstanding due
2026, respectively. These bonds are recorded at a discount of $4.2
million and $22.9 million as of September 30, 2009 and December 31, 2008,
respectively, resulting in an effective rate of 5.75%. Interest is
payable semi-annually in arrears on February 1 and August 1 of each
year. The debentures are convertible under certain circumstances for
our common shares at an initial conversion rate of 20.3770 common shares per
$1,000 of principal amount of debentures (an initial conversion price of
$49.075). In addition, the conversion rate may be adjusted if certain
change in control transactions or other specified events occur on or prior to
August 4, 2011. Upon the conversion of debentures, we will deliver
cash for the principal return, as defined, and cash or common shares, at our
option, for the excess of the conversion value, as defined, over the principal
return. The debentures are redeemable for cash at our option
beginning in 2011 for the principal amount plus accrued and unpaid
interest. Holders of the debentures have the right to require us to
repurchase their debentures for cash equal to the principal of the debentures
plus accrued and unpaid interest in 2011, 2016 and 2021 and in the event of a
change in control.
Subsequent
to September 30, 2009, we entered into a $26.6 million secured loan from a
major bank. The loan is for a four year term with a one year
extension option at a floating interest rate of 375 basis points over LIBOR with
a 1.50% LIBOR floor. This loan is collateralized by two
properties.
In
November 2008, we contributed assets to a joint venture with an institutional
investor. In conjunction with this transaction, the joint venture
issued $100.0 million of fixed-rate secured long-term debt with a five year term
at a rate of 6.0% that we guaranteed. The net proceeds received from
the issuance of this debt were distributed to us and used to reduce amounts
outstanding under our $575 million revolving credit facility.
In March
2008, we contributed assets to a joint venture with an institutional
investor. In conjunction with this transaction, the joint venture
issued $154.3 million of fixed-rate secured long-term debt with an average life
of 7.3 years at an average rate of 5.4% that we guaranteed. We
received all of the proceeds from the issuance of this debt and such proceeds
were used to reduce amounts outstanding under our $575 million revolving credit
facility.
In
January 2008, we elected to repay at par a fixed-rate 8.33% mortgage totaling
$121.8 million that was collateralized by 19 supermarket-anchored shopping
centers in California.
Various
leases and properties, and current and future rentals from those lease and
properties, collateralize certain debt. At September 30, 2009 and
December 31, 2008, the carrying value of such property aggregated $2.0 billion
and $1.8 billion, respectively.
Scheduled
principal payments on our debt (excluding $190.0 million due under our revolving
credit agreements, $21.0 million of certain capital leases, $3.2 million fair
value of interest rate swaps, ($4.2) million discount on convertible bonds, and
$18.4 million of non-cash debt-related items) are due during the following years
(in thousands):
2009
remaining
|
$ | 13,986 | ||
2010
|
115,934 | |||
2011
|
219,832 | |||
2012
|
342,592 | |||
2013
|
417,797 | |||
2014
|
384,475 | |||
2015
|
253,992 | |||
2016
|
215,850 | |||
2017
|
119,005 | |||
2018
|
55,040 | |||
Thereafter
|
357,932 | |||
Total
|
$ | 2,496,435 |
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 believe we were in compliance with all restrictive
covenants as of September 30, 2009.
Note
6. Preferred
Shares
In June
and July of 2008, we redeemed $120 million and $80 million of depositary shares,
respectively, retiring all of the Series G Cumulative Redeemable Preferred
Shares. Each depositary share represented one-hundredth of a Series G
Cumulative Redeemable Preferred Share. These depositary shares were
redeemed, at our option, at a redemption price of $25 multiplied by a graded
rate per depositary share based on the date of redemption plus any accrued and
unpaid dividends thereon. Upon the redemption of these shares, the
related original issuance costs of $1.9 million were reported as a deduction in
arriving at net income attributable to common shareholders. The
Series G Preferred Shares paid a variable-rate quarterly dividend through July
2008 calculated on the period’s three-month LIBOR rate plus a percentage
determined by the number of days outstanding.
We issued
$150 million and $200 million of depositary shares on June 6, 2008 and January
30, 2007, respectively. Each depositary share represents
one-hundredth of a Series F Cumulative Redeemable Preferred
Share. The depositary shares are redeemable, in whole or in part, on
or after January 30, 2012 at our option, at a redemption price of $25 per
depositary share, plus any accrued and unpaid dividends thereon. The
depositary shares are not convertible or exchangeable for any of our other
property or securities. The Series F Preferred Shares pay a 6.5%
annual dividend and have a liquidation value of $2,500 per
share. Series F Preferred Shares issued in June 2008 were issued at a
discount, resulting in an effective rate of 8.25%. Net proceeds of
$117.8 million and $194.0 million from the issuance in June 2008 and January
2007, respectively, were used to repay amounts outstanding under our revolving
credit facilities and for other general corporate
purposes. Subsequent to the 2008 issuance, our revolving credit
facilities were used to finance the partial redemption of the Series G
Cumulative Redeemable Preferred Shares as described above.
In July
2004, we issued $72.5 million of depositary shares with each share representing
one-hundredth of a Series E Cumulative Redeemable Preferred
Share. The depositary shares are redeemable at our option, in whole
or in part, for cash at a redemption price of $25 per depositary share, plus any
accrued and unpaid dividends thereon. The depositary shares are not
convertible or exchangeable for any of our other property or
securities. The Series E preferred shares pay a 6.95% annual dividend
and have a liquidation value of $2,500 per share.
In April
2003, $75 million of depositary shares were issued with each share representing
one-thirtieth of a Series D Cumulative Redeemable Preferred
Share. The depositary shares are currently redeemable at our option,
in whole or in part, for cash at a redemption price of $25 per depositary share,
plus any accrued and unpaid dividends thereon. The depositary shares
are not convertible or exchangeable for any of our property or
securities. The Series D preferred shares pay a 6.75% annual dividend
and have a liquidation value of $750 per share.
Currently
we do not anticipate redeeming either the Series E or Series D preferred shares
due to current market conditions; however, no assurance can be given if
conditions change.
Note
7. Common
Shares of Beneficial Interest
In July
2007, our Board of Trust Managers authorized a common share repurchase program
as part of our ongoing investment strategy. Under the terms of the
program, we could purchase up to a maximum value of $300 million of our common
shares during the following two years. This program expired in July
2009, and no additional shares were repurchased.
In
October 2008, we sold 3.0 million common shares at $34.20 per
share. Net proceeds from this offering were $98.1 million and were
used to repay indebtedness outstanding under our revolving credit facilities and
for other general corporate purposes.
On March
12, 2009, we entered into an ATM Equity Offering Sales Agreement with Merrill
Lynch, Pierce, Fenner & Smith Incorporated, which is a continuous equity
program relating to our common shares with an aggregate sales price of up to
$125.0 million. No shares were issued under this
program. Upon the completion of our equity offering in April 2009, we
terminated this agreement and program.
In April
2009, we issued 32.2 million common shares at $14.25 per share. Net
proceeds from this offering were $439.1 million and were used to repay
indebtedness outstanding under our revolving credit facilities and for other
general corporate purposes.
In April
2009, our Board of Trust Managers authorized a reduction of our quarterly
dividend rate per share of $.525 to $.25 commencing with the second quarter 2009
distribution.
Note
8. Property
Our
property consisted of the following (in thousands):
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Land
|
$ | 932,742 | $ | 964,982 | ||||
Land
held for development
|
155,116 | 118,078 | ||||||
Land
under development
|
33,606 | 101,587 | ||||||
Buildings
and improvements
|
3,529,669 | 3,488,385 | ||||||
Construction
in-progress
|
155,528 | 242,440 | ||||||
Total
|
$ | 4,806,661 | $ | 4,915,472 |
The
following carrying charges were capitalized (in thousands):
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Interest
|
$ | 1,435 | $ | 5,236 | $ | 7,454 | $ | 15,376 | ||||||||
Ad
valorem taxes
|
202 | 627 | 1,190 | 2,032 | ||||||||||||
Total
|
$ | 1,637 | $ | 5,863 | $ | 8,644 | $ | 17,408 |
During
the nine months ended September 30, 2009, we invested $41.5 million in new
development projects, and we sold four shopping centers, an industrial project
and six retail buildings at four operating properties. Gross sales
proceeds from these dispositions totaled $68.3 million and generated gains of
$19.7 million.
An
impairment charge, as described in Note 1, of $35.9 million was recognized for
the nine months ended September 30, 2009 and none for the related period of
2008.
Subsequent
to September 30, 2009, we sold nine operating properties, seven of which
were located in Texas and one each in Arizona and North Carolina, and a retail
building in Arizona, for approximately $76.9 million.
Furthermore
in October 2009, we entered into an agreement to contribute six retail
properties, located in Florida and Georgia, valued at approximately $160.8
million to an unconsolidated joint venture in which we will retain a 20%
ownership interest. We closed on four properties with a total value
of $114.3 million. The remaining two properties will be contributed
upon the assumption of their loans.
Note
9. Discontinued
Operations
During
the first nine months of 2009, we sold four shopping centers and an industrial
project, four of which were located in Texas and one in North
Carolina. Also, as of September 30, 2009, we classified six
properties as held for sale. These six properties, two of which are
located in Texas and New Mexico and one each in Arizona and North Carolina, had
a net book value of $51.0 million as of September 30, 2009. During
2008, one industrial center located in Texas and nine shopping centers, five of
which were located in Texas, one in California and three in Louisiana, were
sold. The operating results of these properties, as well as any gains
on the respective disposition, have been reclassified and reported as
discontinued operations in the Condensed Consolidated Statements of Income and
Comprehensive Income. Revenues recorded in operating (loss) income
from discontinued operations for the three months ended September 30, 2009 and
2008, totaled $2.8 million and $5.0 million, respectively, and $10.6 million and
$19.7 million for the nine months ended September 30, 2009 and 2008,
respectively. Included in the Condensed Consolidated Balance Sheet at
December 31, 2008 were $39.1 million of property and $15.0 million of
accumulated depreciation related to the properties sold during the nine months
ended September 30, 2009.
Discontinued
operations reported in 2009 and 2008 had no debt that was required to be repaid
upon their disposition. As of September 30, 2009, a property
classified as held for sale had outstanding debt of $9.1 million, which will be
assumed by the purchaser.
We
elected not to allocate other consolidated interest to discontinued operations
because the interest savings to be realized from the proceeds of the sale of
these operations were not material.
For the
three and nine months ended September 30, 2009, an impairment loss of $2.4
million and $3.1 million, respectively, was reported in discontinued
operations. No impairment was recognized in the related periods of
2008.
Note
10. Notes
Receivable from Real Estate Joint Ventures and Partnerships
We have
ownership interests in a number of real estate joint ventures and
partnerships. Notes receivable from these entities bear interest
ranging from 2.1% to 8.0% at September 30, 2009 and 2.8% to 10.0% at December
31, 2008. These notes are due at various dates through 2012 and are
generally secured by real estate assets. We believe these notes are
fully collectible and no allowance has been recorded. Interest income
recognized on these notes was $1.2 million for both the three months ended
September 30, 2009 and 2008, and $3.2 million and $2.9 million for the nine
months ended September 30, 2009 and 2008, respectively.
Note
11. Related
Parties
Through
our management activities and transactions with our real estate joint venture
and partnerships, we had accounts receivable of $1.2 million and $2.0 million
outstanding as of September 30, 2009 and December 31, 2008,
respectively. We also had accounts payable and accrued expenses of
$9.8 million and $10.2 million outstanding as of September 30, 2009 and December
31, 2008, respectively. For the three months ended September 30, 2009
and 2008, we recorded joint venture fee income of $1.3 million and $1.4 million,
respectively. For the nine months ended September 30, 2009 and 2008,
we recorded joint venture fee income of $4.2 million and $4.4 million,
respectively.
Note
12. Investment
in Real Estate Joint Ventures and Partnerships
We own
interests in real estate joint ventures or limited partnerships and have
tenancy-in-common interests in which we exercise significant influence, but do
not have financial and operating control. We account for these
investments using the equity method, and our interests range from 7.8% to
75%. Combined condensed financial information of these ventures (at
100%) is summarized as follows (in thousands):
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Combined
Condensed Balance Sheets
|
||||||||
Property
|
$ | 1,970,181 | $ | 1,951,771 | ||||
Accumulated
depreciation
|
(160,541 | ) | (129,227 | ) | ||||
Property,
net
|
1,809,640 | 1,822,544 | ||||||
Other
assets, net
|
234,844 | 256,688 | ||||||
Total
|
$ | 2,044,484 | $ | 2,079,232 | ||||
Debt,
net (primarily mortgage payables)
|
$ | 438,128 | $ | 472,486 | ||||
Amounts
payable to Weingarten Realty Investors
|
337,956 | 248,969 | ||||||
Other
liabilities, net
|
92,216 | 149,265 | ||||||
Total
|
868,300 | 870,720 | ||||||
Accumulated
equity
|
1,176,184 | 1,208,512 | ||||||
Total
|
$ | 2,044,484 | $ | 2,079,232 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Combined
Condensed Statements of Income
|
||||||||||||||||
Revenues,
net
|
$ | 42,237 | $ | 39,021 | $ | 128,261 | $ | 117,344 | ||||||||
Expenses:
|
||||||||||||||||
Depreciation
and amortization
|
14,204 | 10,868 | 40,702 | 30,099 | ||||||||||||
Interest,
net
|
7,871 | 5,491 | 22,470 | 14,808 | ||||||||||||
Operating
|
8,507 | 6,218 | 23,612 | 19,146 | ||||||||||||
Ad
valorem taxes, net
|
5,084 | 4,480 | 15,915 | 13,834 | ||||||||||||
General
and administrative
|
1,581 | 809 | 4,144 | 1,786 | ||||||||||||
Impairment
loss
|
6,923 | 6,923 | ||||||||||||||
Total
|
44,170 | 27,866 | 113,766 | 79,673 | ||||||||||||
Gain
on merchant development sales
|
443 | 933 | ||||||||||||||
Gain
(loss) on sale of property
|
(3 | ) | 11 | 35 | ||||||||||||
Net
(loss) income
|
$ | (1,933 | ) | $ | 11,595 | $ | 14,506 | $ | 38,639 |
Our
investment in real estate joint ventures and partnerships, as reported on our
Condensed Consolidated Balance Sheets, differs from our proportionate share of
the entities' underlying net assets due to basis differentials, which arose upon
the transfer of assets to the joint ventures. The basis
differentials, which totaled $12.1 million both at September 30, 2009 and
December 31, 2008, are generally amortized over the useful lives of the related
assets.
Fees
earned by us for the management of these real estate joint ventures and
partnerships totaled, in millions, $1.3 and $1.4 for the three months ended
September 30, 2009 and 2008, respectively, and $4.2 and $4.4 for the nine months
ended September 30, 2009 and 2008, respectively.
In April
2009, we sold an unconsolidated joint venture interest in a property located in
Colorado with gross sales proceeds of approximately $15.0 million, which were
reduced by the release of a debt obligation of $11.7 million.
Subsequent
to September 30, 2009, we entered into an agreement to contribute six retail
properties, located in Florida and Georgia, valued at approximately $160.8
million to an unconsolidated joint venture in which we will retain a 20%
ownership interest. We closed on four properties with a total value
of $114.3 million. The remaining two properties will be contributed
upon the assumption of their loans.
During
2008, a 25%-owned unconsolidated real estate joint venture acquired a 4,000
square foot building located in Port Charlotte, Florida. A 50%-owned
unconsolidated real estate joint venture was formed for the purposes of
developing an industrial building in Houston, Texas, while a 32%-owned
unconsolidated real estate joint venture commenced construction of a retail
property in Salt Lake City, Utah.
In July
2008, a 47.75%-owned unconsolidated real estate joint venture acquired an 83.34%
interest in a joint venture owning a 919,000 square foot new development to be
constructed in Aurora, Colorado.
In August
2008, we executed a real estate limited partnership with a foreign institutional
investor to purchase up to $250 million of retail properties in various
states. Our ownership in this unconsolidated real estate limited
partnership is 20.1%. As of September 30, 2009, no properties have
been purchased.
In
December 2008, a 50%-owned real estate joint venture was executed related to the
redevelopment project in Sheridan, Colorado. The joint venture
entered into a financing arrangement totaling $6.7 million, which matures in
December 2038 and is secured by its property.
Effective
December 31, 2008, four previously consolidated joint venture agreements were
amended, which triggered a reconsideration event and resulted in the
deconsolidation of these entities from our consolidated financial
statements.
Note
13. Income
Tax Considerations
We
qualify as a REIT under the provisions of the Internal Revenue Code, and
therefore, no tax is imposed on us for our taxable income distributed to
shareholders. To maintain our REIT status, we must distribute at
least 90% of our ordinary taxable income to our shareholders and meet certain
income source and investment restriction requirements. Our
shareholders must report their share of income distributed in the form of
dividends.
Our
taxable REIT subsidiary is subject to federal, state and local income
taxes. We have recorded a federal income tax provision of $5.8
million and $.8 million during the nine months ended September 30, 2009 and
2008, respectively, and $4.1 million and $.02 million during the three months
ended September 30, 2009 and 2008, respectively. Also, a current tax
receivable of $.2 million and a current tax obligation of $.6 million have been
recorded at September 30, 2009 and December 31, 2008, respectively, in
association with this tax.
Our
deferred tax assets and liabilities, including a valuation allowance, consisted
of the following (in thousands):
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Deferred
tax assets:
|
||||||||
Impairment
loss
|
$ | 13,945 | $ | 9,936 | ||||
Allowance
on other assets
|
1,428 | 1,363 | ||||||
Interest
expense
|
2,210 | 861 | ||||||
Other
|
378 | 174 | ||||||
Total
deferred tax assets
|
17,961 | 12,334 | ||||||
Valuation
allowance
|
(9,605 | ) | ||||||
Total
deferred tax assets, net of allowance
|
$ | 8,356 | $ | 12,334 | ||||
Deferred
tax liabilities:
|
||||||||
Straight-line
rentals
|
$ | 464 | $ | 152 | ||||
Book-tax
basis differential
|
3,634 | |||||||
Total
deferred tax liabilities
|
$ | 4,098 | $ | 152 | ||||
We have
recorded a net deferred tax asset of $8.4 million; including the benefit of
$13.9 million of impairment losses, which will not be recognized until the
related properties are sold. Realization is dependent on generating
sufficient taxable income in the year the property is
sold. Management believes it is more likely than not that a portion
of this deferred tax asset will be not be realized and during the third quarter
of 2009 established a valuation allowance of $9.6 million. The amount of the
deferred tax asset considered realizable, however, could be reduced if estimates
of future taxable income are reduced.
GAAP
prescribes a recognition threshold and measurement attribute for the financial
statement recognition of a tax position taken, or expected to be taken, in a tax
return. A tax position may only be recognized in the financial
statements if it is more likely than not that the tax position will be sustained
upon examination. We believe it is more likely than not that our tax
positions will be sustained in any tax examinations.
In
addition, we are subject to the State of Texas business tax (“Texas Franchise
Tax”), which is determined by applying a tax rate to a base that considers both
revenues and expenses. Therefore, the Texas Franchise Tax is
considered an income tax and is accounted accordingly.
We
recorded a provision for the Texas Franchise Tax for the three months ended
September 30, 2009 and 2008, of $.3 million and $.7 million, respectively, and
$1.3 million and $2.2 million for the nine months ended September 30, 2009 and
2008, respectively. The deferred tax assets associated with this tax
each totaled $.1 million as of September 30, 2009 and December 31, 2008 and the
deferred tax liability associated with this tax totaled $.1 million and $.2
million as of September 30, 2009 and December 31, 2008,
respectively. Also, a current tax obligation of $1.4 million and $2.4
million has been recorded at September 30, 2009 and December 31, 2008,
respectively, in association with this tax.
Note
14. Commitments
and Contingencies
We
participate in six real estate ventures structured as DownREIT partnerships that
have properties in Arkansas, California, Georgia, North Carolina, Texas and
Utah. As a general partner, we have operating and financial control
over these ventures and consolidate their operations in our consolidated
financial statements. These ventures allow the outside limited
partners to put their interest to the partnership for our common shares or an
equivalent amount in cash. We may acquire any limited partnership
interests that are put to the partnership, and we have the option to redeem the
interest in cash or a fixed number of our common shares, at our
discretion. We also participate in a real estate venture that has a
property in Texas that allows its outside partner to put operating partnership
units to us. We have the option to redeem these units in cash or a
fixed number of our common shares, at our discretion. During the nine
months ended September 30, 2009 and 2008, we issued common shares valued at $6.4
million and $.4 million, respectively, in exchange for certain of these limited
partnership interests or operating partnership units. The aggregate
redemption value of the operating partnership units was approximately $40
million and $46 million as of September 30, 2009 and December 31, 2008,
respectively.
In
January 2007, we acquired two retail properties in Arizona. This
purchase transaction includes an earnout provision of approximately $29 million
that is contingent upon the subsequent development of space by the property
seller. This contingency agreement expires in 2010. We
have an estimated obligation of $4.7 million and $3.9 million recorded as of
September 30, 2009 and December 31, 2008, respectively. Since
inception of this obligation, $12.5 million has been paid. Amounts
paid or accrued under such earnouts are treated as additional purchase price and
capitalized to the related property.
We are
subject to numerous federal, state and local environmental laws, ordinances and
regulations in the areas where we own or operate properties. We are
not aware of any material contamination, which may have been caused by us or any
of our tenants that would have a material effect on our consolidated financial
statements.
As part
of our risk management activities, we have applied and been accepted into state
sponsored environmental programs which will limit our expenses if contaminants
need to be remediated. We also have an environmental insurance policy
that covers us against third party liabilities and remediation
costs.
While we
believe that we do not have any material exposure to environmental remediation
costs, we cannot give absolute assurance that changes in the law or new
discoveries of contamination will not result in increased liabilities to
us.
Related
to our investment in a redevelopment project in Sheridan, Colorado that is held
in an unconsolidated real estate joint venture, we, our joint venture partner
and the joint venture have each provided a guaranty for the payment of any debt
service shortfalls on bonds issued in connection with the
project. The Sheridan Redevelopment Agency (“Agency”) issued $97
million of Series A bonds used for an urban renewal 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 bond liability has been paid in full or 2030 (unless such
date is otherwise extended by the Agency.) At inception on February
27, 2007, we evaluated and determined that the fair value of the guaranty is
nominal to us as the guarantor. However, a liability was recorded by
the joint venture equal to net amounts funded under the bonds.
In
connection with the above project, we and our joint venture partner were also
signatories to a completion guaranty that required, among other things, certain
infrastructure to be substantially completed and occupants of 75% of the retail
space to be open for regular business as of December 31, 2008. Under
specified circumstances, the completion guaranty allowed for extension of the
completion date until June 30, 2009. At inception on February 27,
2007, we evaluated the guaranty and determined that its then fair value was
nominal. By a letter dated December 1, 2008, the guarantors requested
extension of the completion date pursuant to the terms of the
guaranty. On December 16, 2008, one of the parties benefited by the
guaranty filed a lawsuit against us alleging that we were not entitled to the
extension and was seeking $97 million in liquidated damages together with other
relief. In July 2009, we settled the lawsuit. Among the
obligations performed or to be performed by us under the terms of the settlement
are to cause the joint venture to purchase a portion of the bonds in the amount
of $51.3 million at par plus accrued and unpaid interest to the date of such
purchase, and to the extent that the outstanding letter of credit supporting
additional bonds totaling $45.7 million with a current term of 20 months is not
replaced by an alternate letter of credit issued by another qualified provider
on or before July 21, 2010, we will be obligated to provide up to 103% of the
outstanding stated amount of the letter of credit as additional collateral in
the form of either cash or a back-to-back letter of credit.
On July
22, 2009, as part of the settlement agreement, among other things, the lawsuit
was dismissed with prejudice; we loaned $52.0 million including accrued interest
and fees to the joint venture, which then purchased the bonds; and the
completion guaranty was terminated. This increased our notes
receivable from real estate joint ventures and partnerships and reduced the
contingent liability of $41 million recorded at December 31, 2008.
Also in
connection with the Sheridan, Colorado joint venture and the issuance of the
related Series A bonds, we, our joint venture partner and the joint venture have
also provided a performance guaranty on behalf of the Sheridan Redevelopment
Agency for the satisfaction of all obligations arising from two interest rate
swap agreements for the combined notional amount of $97 million that matures in
December 2029. We evaluated and determined that the fair value of the
guaranty both at inception and December 31, 2008 was nominal.
We have
evaluated the remaining outstanding guaranties and have determined that the fair
value of these guaranties is nominal.
We are
also involved in various matters of litigation arising in the normal course of
business. While we are unable to predict with certainty the amounts
involved, our management and counsel are of the opinion that, when such
litigation is resolved, any additional liability, if any, will not have a
material effect on our consolidated financial statements.
Note
15. Identified
Intangible Assets and Liabilities
Identified
intangible assets and liabilities associated with our property acquisitions are
as follows (in thousands):
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Identified
Intangible Assets:
|
||||||||
Above-Market
Leases (included in Other Assets, net)
|
$ | 17,782 | $ | 17,921 | ||||
Above-Market
Leases – Accumulated Amortization
|
(11,203 | ) | (9,771 | ) | ||||
Below-Market
Assumed Mortgages (included in Debt, net)
|
2,072 | 2,072 | ||||||
Below-Market
Assumed Mortgages – Accumulated Amortization
|
(735 | ) | (525 | ) | ||||
Valuation
of In Place Leases (included in Unamortized Debt and Lease Costs,
net)
|
60,916 | 64,027 | ||||||
Valuation
of In Place Leases – Accumulated Amortization
|
(32,703 | ) | (29,104 | ) | ||||
$ | 36,129 | $ | 44,620 | |||||
Identified
Intangible Liabilities:
|
||||||||
Below-Market
Leases (included in Other Liabilities, net)
|
$ | 38,494 | $ | 38,712 | ||||
Below-Market
Leases – Accumulated Amortization
|
(21,641 | ) | (18,265 | ) | ||||
Above-Market
Assumed Mortgages (included in Debt, net)
|
53,895 | 53,895 | ||||||
Above-Market
Assumed Mortgages – Accumulated Amortization
|
(31,783 | ) | (28,284 | ) | ||||
$ | 38,965 | $ | 46,058 |
These
identified intangible assets and liabilities are amortized over the applicable
lease terms or the remaining lives of the assumed mortgages, as
applicable.
The net
amortization of above-market and below-market leases increased rental revenues
by $.6 million and $.9 million for the three months ended September 30, 2009 and
2008, respectively, and by $2.0 million and $2.6 million for the nine months
ended September 30, 2009 and 2008, respectively. The estimated net
amortization of these intangible assets and liabilities will increase net rental
revenues for each of the next five years as follows (in thousands):
2009
remaining
|
$ | 729 | ||
2010
|
1,858 | |||
2011
|
1,361 | |||
2012
|
1,113 | |||
2013
|
966 |
The
amortization of the in place lease intangible recorded in depreciation and
amortization, was $1.7 million and $1.9 million for the three months ended
September 30, 2009 and 2008, respectively, and $6.6 million and $6.4 million for
the nine months ended September 30, 2009 and 2008, respectively. The
estimated amortization of this intangible asset will increase depreciation and
amortization for each of the next five years as follows (in
thousands):
2009
remaining
|
$ | 1,591 | ||
2010
|
5,666 | |||
2011
|
4,416 | |||
2012
|
3,543 | |||
2013
|
2,741 |
The
amortization of above-market and below-market assumed mortgages decreased net
interest expense by $1.1 million and $1.2 million for the three months ended
September 30, 2009 and 2008, respectively, and by $3.3 million and $4.5 million
for the nine months ended September 30, 2009 and 2008,
respectively. The estimated amortization of these intangible assets
and liabilities will decrease net interest expense for each of the next five
years as follows (in thousands):
2009
remaining
|
$ | 1,048 | ||
2010
|
3,713 | |||
2011
|
2,416 | |||
2012
|
1,242 | |||
2013
|
798 |
Note
16. Fair
Value Measurements
Fair
value is a market-based measurement, not an entity-specific
measurement. Therefore, a fair value measurement should be determined
based on the assumptions that market participants would use in pricing an asset
or liability. As a basis for considering market participant
assumptions in fair value measurements, GAAP establishes a fair value hierarchy
that distinguishes between market participant assumptions based on market data
obtained from sources independent of the reporting entity (observable inputs
that are classified within Levels 1 and 2 of the hierarchy) and the reporting
entity’s own assumptions about market participant assumptions (unobservable
inputs classified within Level 3 of the hierarchy).
Level 1
inputs utilize quoted prices (unadjusted) in active markets for identical assets
or liabilities that we have the ability to access. Level 2 inputs are
inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs may
include quoted prices for similar assets and liabilities in active markets, as
well as inputs that are observable for the asset or liability (other than quoted
prices), such as interest rates and yield curves that are observable at commonly
quoted intervals. Level 3 inputs are unobservable inputs for the
asset or liability, which are typically based on an entity’s own assumptions, as
there is little, if any, related market activity. In instances where
the determination of the fair value measurement is based on inputs from
different levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls is based on the
lowest level input that is significant to the fair value measurement in its
entirety. Our assessment of the significance of a particular input to
the fair value measurement in its entirety requires judgment, and considers
factors specific to the asset or liability.
The fair
value of our financial instruments was determined using available market
information and appropriate valuation methodologies as of September 30, 2009 and
December 31, 2008.
Recurring
Fair Value Measurements:
Investments
held in grantor trusts
These
assets are valued based on publicly quoted market prices for identical
assets.
Derivative
instruments
We use
interest rate swaps with major financial institutions to manage our interest
rate risk. The
valuation of these instruments is determined using widely accepted valuation
techniques including discounted cash flow analysis on the expected cash flows of
each derivative. This analysis reflects the contractual terms of the
derivatives, including the period to maturity, and uses observable market-based
inputs, including interest rate curves and implied volatilities. The
fair values of our interest rate swaps have been determined using the market
standard methodology of netting the discounted future fixed cash receipts (or
payments) and the discounted expected variable cash payments (or
receipts). The variable cash payments (or receipts) are based on an
expectation of future interest rates (forward curves) derived from observable
market interest rate curves.
We
incorporate credit valuation adjustments to appropriately reflect both our own
nonperformance risk and the respective counter-party’s nonperformance risk in
the fair value measurements. In adjusting the fair value of our
derivative contracts for the effect of nonperformance risk, we have considered
the impact of netting and any applicable credit enhancements, such as
collateral, thresholds and guarantees.
Although
we have determined that the majority of the inputs used to value our derivatives
fall within Level 2 of the fair value hierarchy, the credit valuation
adjustments associated with our derivatives utilize Level 3 inputs, such as
estimates of current credit spreads to evaluate the likelihood of default by
ourselves and our counter-parties. However, as of September 30, 2009
and December 31, 2008, we have assessed the significance of the impact of the
credit valuation adjustments on the overall valuation of our derivative
positions and have determined that the credit valuation adjustments are not
significant to the overall valuation of our derivatives. As a result,
we have determined that the derivative valuations in their entirety are
classified in Level 2 of the fair value hierarchy.
Assets
measured at fair value on a recurring basis as of September 30, 2009 and
December 31, 2008, aggregated by the level in the fair value hierarchy in which
those measurements fall, are as follows (in thousands):
Quoted
Prices in Active Markets for Identical Assets and Liabilities
(Level
1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
Fair
Value at
September
30, 2009
|
||||||||||
Assets:
|
|||||||||||||
Derivative
instruments
|
$ | 3,206 | $ | 3,206 | |||||||||
Investments
held in grantor trusts
|
$ | 13,284 | 13,284 | ||||||||||
Total
|
$ | 13,284 | $ | 3,206 |
-
|
$ | 16,490 |
Quoted
Prices in Active Markets for Identical Assets and Liabilities
(Level
1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
Fair
Value at
December
31, 2008
|
||||||||||
Assets:
|
|||||||||||||
Derivative
instruments
|
$ | 4,625 | $ | 4,625 | |||||||||
Investments
held in grantor trusts
|
$ | 25,595 | 25,595 | ||||||||||
Total
|
$ | 25,595 | $ | 4,625 | - | $ | 30,220 |
Nonrecurring
Fair Value Measurements:
Property
Impairments
Property
is reviewed for impairment if events or changes in circumstances indicate that
the carrying amount of the property, including any identifiable intangible
assets, site costs and capitalized interest, may not be
recoverable. In such an event, a comparison is made of the current
and projected operating cash flows of each such property into the foreseeable
future on an undiscounted basis to the carrying amount of such
property. Fair values are determined by management utilizing cash
flow models and market discount rates, or by obtaining third-party broker
valuation estimates, appraisals or bona fide purchase offers.
Assets
measured at fair value on a nonrecurring basis as of September 30, 2009,
aggregated by the level in the fair value hierarchy in which those measurements
fall, are as follows (in thousands):
Quoted
Prices in Active Markets for Identical Assets and Liabilities
(Level
1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
Fair
Value at September 30, 2009
|
Total
Gains (Losses)
|
||||||||||||||||
Property
|
$ | 97,991 | $ | 97,991 | $ | (32,774 | ) | |||||||||||||
Property
Held for Sale
|
$ | 22,200 | 22,200 | (2,379 | ) | |||||||||||||||
Total
|
- | $ | 22,200 | $ | 97,991 | $ | 120,191 | $ | (35,153 | ) |
In
accordance with our policy of evaluating and recording impairments on the
disposal of long-lived assets, property, including property held for sale, with
a carrying amount of $155.4 million was written down to its fair value of $120.2
million, resulting in a loss of $35.2 million, which was included in earnings
for the period. Included in the $35.2 million loss is $2.4 million,
which is reported in discontinued operations.
Fair
Value Disclosures:
Unless
otherwise described below, all other financial instruments are carried at
amounts which approximate their fair values.
Debt
The fair
values of our financial instruments approximate their carrying value in our
financial statements except for debt. We estimated the fair value of
our debt based on quoted market prices for publicly-traded debt and on the
discounted estimated future cash payments to be made for other
debt. The discount rates used approximate current lending rates for
loans or groups of loans with similar maturities and credit quality, assumes the
debt is outstanding through maturity and considers the debt’s collateral (if
applicable). We have utilized market information as available or
present value techniques to estimate the amounts required to be
disclosed. Since such amounts are estimates that are based on limited
available market information for similar transactions, there can be no assurance
that the disclosed value of any financial instrument could be realized by
immediate settlement of the instrument. Fixed-rate debt with carrying
values of $2.5 billion and $2.7 billion at September 30, 2009 and December 31,
2008, respectively, have fair values of approximately $2.2 billion and $2.3
billion, respectively. Variable-rate debt with carrying values of
$258.9 million and $449.0 million as of September 30, 2009 and December 31,
2008, respectively, has fair values of approximately $240.0 million and $432.1
million, respectively.
Note
17. Share
Options and Awards
We had an
Employee Share Option Plan that granted options to purchase 100 common shares to
every employee, excluding officers, upon completion of each five-year interval
of service. This plan was terminated effective January 1, 2008, but
some awards made pursuant to it remain outstanding as of September 30,
2009. Options granted under this plan were exercisable
immediately.
We also
had an Incentive Share Option Plan that provided for the issuance of up to 3.9
million common shares, either in the form of restricted shares or share
options. This plan expired in 2002, but some awards made pursuant to
it remain outstanding as of September 30, 2009. The share options
granted to non-officers vest over a three-year period beginning after the grant
date, and for officers vest over a seven-year period beginning two years after
the grant date.
We have a
Long-Term Incentive Plan for the issuance of options and share
awards. In 2006, the maximum number of common shares issuable under
this plan was increased to 4.8 million common shares, of which .4 million is
available for the future grant of options or awards at September 30,
2009. This plan expires in 2011. The share options granted
to non-officers vest over a three-year period beginning after the grant date,
and share options and restricted shares for officers vest over a five-year
period after the grant date. Restricted shares granted to trust
managers and options or awards granted to retirement eligible employees are
expensed immediately.
The grant
price for the Employee Share Option Plan is equal to the closing price of our
common shares on the date of grant. The grant price of the Long-Term
Incentive Plan is calculated as an average of the high and low of the quoted
fair value of our common shares on the date of grant. In both plans,
these options expire upon the earlier of termination of employment or 10 years
from the date of grant. In the Long-Term Incentive Plan, restricted
shares for officers and trust managers are granted at no purchase
price. Our policy is to recognize compensation expense for equity
awards ratably over the vesting period, except for retirement eligible
amounts. For the three months ended September 30, 2009 and 2008,
compensation expense, net of forfeitures, associated with share options and
restricted shares totaled $1.0 million and $1.1 million, of which $.3 million
was capitalized for both periods. For the nine months ended September
30, 2009 and 2008, compensation expense, net of forfeitures, associated with
share options and restricted shares totaled $2.8 million and $3.8 million, of
which $.8 million and $1.0 million was capitalized, respectively.
The fair
value of share options and restricted shares is estimated on the date of grant
using the Black-Scholes option pricing method based on the expected weighted
average assumptions in the following table. The dividend yield is an
average of the historical yields at each record date over the estimated expected
life. We estimate volatility using our historical volatility data for
a period of 10 years, and the expected life is based on historical data from an
option valuation model of employee exercises and terminations. The
risk-free rate is based on the U.S. Treasury yield curve in effect at the time
of grant. The fair value and weighted average assumptions are as
follows:
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2009
|
2008
|
|||||||
Fair
value per share
|
$ | 1.99 | $ | 3.07 | ||||
Dividend
yield
|
5.2 | % | 5.1 | % | ||||
Expected
volatility
|
31.3 | % | 18.8 | % | ||||
Expected
life (in years)
|
6.2 | 6.2 | ||||||
Risk-free
interest rate
|
1.7 | % | 2.8 | % |
Following
is a summary of the share option activity for the nine months ended September
30, 2009:
Weighted
|
||||||||
Shares
|
Average
|
|||||||
Under
|
Exercise
|
|||||||
Option
|
Price
|
|||||||
Outstanding,
January 1, 2009
|
3,317,655 | $ | 32.96 | |||||
Granted
|
1,182,252 | 11.85 | ||||||
Forfeited
or expired
|
(45,456 | ) | 24.57 | |||||
Outstanding,
September 30, 2009
|
4,454,451 | $ | 27.45 |
No
options were exercised during the first nine months of 2009. The
total intrinsic value of options exercised for the three months and nine months
ended September 30, 2008 was $.9 million and $2.2 million,
respectively. As of September 30, 2009 and December 31, 2008, there
was approximately $3.7 million and $3.4 million, respectively, of total
unrecognized compensation cost related to unvested share options, which is
expected to be amortized over a weighted average of 2.2 years and 1.7 years,
respectively.
The
following table summarizes information about share options outstanding and
exercisable at September 30, 2009:
Outstanding
|
Exercisable
|
|||||||||||||||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||||||||||||||
Average
|
Weighted
|
Aggregate
|
Weighted
|
Average
|
Aggregate
|
|||||||||||||||||||||||
Remaining
|
Average
|
Intrinsic
|
Average
|
Remaining
|
Intrinsic
|
|||||||||||||||||||||||
Range
of
|
Contractual
|
Exercise
|
Value
|
Exercise
|
Contractual
|
Value
|
||||||||||||||||||||||
Exercise
Prices
|
Number
|
Life
|
Price
|
(000’s) |
Number
|
Price
|
Life
|
(000’s) | ||||||||||||||||||||
$ | 11.85 - $17.78 | 1,160,530 |
9.4
years
|
$ | 11.85 | |||||||||||||||||||||||
$ | 17.79 - $26.69 | 882,917 |
2.3
years
|
$ | 22.11 | 822,163 | $ | 21.93 |
2.2
years
|
|||||||||||||||||||
$ | 26.70 - $40.05 | 1,926,968 |
6.5
years
|
$ | 34.25 | 1,125,342 | $ | 34.67 |
5.6
years
|
|||||||||||||||||||
$ | 40.06 - $49.62 | 484,036 |
7.2
years
|
$ | 47.46 | 211,367 | $ | 47.47 |
7.2
years
|
|||||||||||||||||||
Total
|
4,454,451 |
6.5
years
|
$ | 27.45 | $ | - | 2,158,872 | $ | 31.07 |
4.5
years
|
$ | - |
A summary
of the status of unvested restricted share awards for the nine months ended
September 30, 2009 is as follows:
Unvested
|
||||||||
Restricted
|
Weighted
|
|||||||
Share
|
Average
Grant
|
|||||||
Awards
|
Date
Fair Value
|
|||||||
Outstanding,
January 1, 2009
|
167,402 | $ | 36.54 | |||||
Granted
|
288,979 | 12.20 | ||||||
Vested
|
(56,212 | ) | 20.94 | |||||
Forfeited
|
(5,388 | ) | 19.52 | |||||
Outstanding,
September 30, 2009
|
394,781 | $ | 21.18 |
As of
September 30, 2009 and December 31, 2008, there was approximately $5.2 million
and $4.1 million, respectively, of total unrecognized compensation cost related
to unvested restricted share awards, which is expected to be amortized over a
weighted average of 2.6 years and 2.3 years, respectively.
Note
18. Employee
Benefit Plans
We
sponsor a noncontributory qualified retirement plan and a separate and
independent nonqualified supplemental retirement plan for certain
employees. The components of net periodic benefit costs for both
plans are as follows (in thousands):
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Service
cost
|
$ | 935 | $ | 638 | $ | 2,690 | $ | 2,176 | ||||||||
Interest
cost
|
796 | 730 | 2,219 | 2,425 | ||||||||||||
Expected
return on plan assets
|
(331 | ) | (469 | ) | (860 | ) | (1,420 | ) | ||||||||
Prior
service cost
|
(33 | ) | (30 | ) | (86 | ) | (91 | ) | ||||||||
Recognized
loss (gain)
|
286 | (33 | ) | 743 | (95 | ) | ||||||||||
Total
|
$ | 1,653 | $ | 836 | $ | 4,706 | $ | 2,995 |
For the
nine months ended September 30, 2009 and 2008, we contributed $4.9 million and
$2.0 million, respectively, to the qualified retirement
plan. Currently, we do not anticipate making any additional
contributions to this plan during 2009.
We have a
Savings and Investment Plan pursuant to which eligible employees may elect to
contribute from 1% of their salaries to the maximum amount established annually
by the Internal Revenue Service. We match employee contributions at
the rate of $.50 per $1.00 for the first 6% of the employee's
salary. The employees vest in the employer contributions ratably over
a five year period. Compensation expense related to the plan was $.2
million for both the three months ended September 30, 2009 and 2008 and $.7
million for both the nine months ended September 30, 2009 and 2008.
We have
an Employee Share Purchase Plan under which 562,500 of our common shares have
been authorized for issuance. These shares, as well as common shares
purchased by us on the open market, are made available for sale to employees at
a discount of 15% from the quoted market price as defined by the
plan. Shares purchased by the employee under the plan are restricted
from being sold for two years from the earlier of the date of purchase or until
termination of employment. During the nine months ended September 30,
2009 and 2008, a total of 54,328 and 28,063 common shares were purchased for the
employees at an average per share price of $10.25 and $29.15,
respectively.
We also
have a deferred compensation plan for eligible employees allowing them to defer
portions of their current cash salary or share-based
compensation. Deferred amounts are deposited in a grantor trust,
which are included in other assets, and are reported as compensation expense in
the year service is rendered. Cash deferrals are invested based on
the employee’s investment selections from a mix of assets based on a “Broad
Market Diversification” model. Deferred share-based compensation
cannot be diversified, and distributions from this plan are made in the same
form as the original deferral.
Note
19. Noncontrolling
Interests
The
following table summarizes the effect of changes in our ownership interest in
subsidiaries on the equity attributable to us as follows (in
thousands):
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2009
|
2008
|
|||||||
Net
income adjusted for noncontrolling interests
|
$ | 89,607 | $ | 146,267 | ||||
Transfers
from the noncontrolling interests:
|
||||||||
Increase
in equity for operating partnership units
|
6,400 | 368 | ||||||
Change
from net income adjusted for noncontrolling interests and transfers from
the noncontrolling interests
|
$ | 96,007 | $ | 146,635 |
Note
20. Segment
Information
The
reportable segments presented are the segments for which separate financial
information is available, and for which operating performance is evaluated
regularly by senior management in deciding how to allocate resources and in
assessing performance. We evaluate the performance of the reportable
segments based on net operating income, defined as total revenues less operating
expenses and ad valorem taxes. Management does not consider the
effect of gains or losses from the sale of property in evaluating segment
operating performance.
The
shopping center segment is engaged in the acquisition, development and
management of real estate, primarily anchored neighborhood and community
shopping centers located in Arizona, Arkansas, California, Colorado, Florida,
Georgia, Illinois, Kansas, Kentucky, Louisiana, Maine, Missouri, Nevada, New
Mexico, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Utah
and Washington. The customer base includes supermarkets, discount
retailers, drugstores and other retailers who generally sell basic
necessity-type commodities. The industrial segment is engaged in the
acquisition, development and management of bulk warehouses and office/service
centers. Its properties are located in California, Florida, Georgia,
Tennessee, Texas and Virginia, and the customer base is
diverse. Included in "Other" are corporate-related items,
insignificant operations and costs that are not allocated to the reportable
segments.
Information
concerning our reportable segments is as follows (in thousands):
Shopping
|
||||||||||||||||
Center
|
Industrial
|
Other
|
Total
|
|||||||||||||
Three
Months Ended September 30, 2009:
|
||||||||||||||||
Revenues
|
$ | 129,155 | $ | 13,619 | $ | 1,770 | $ | 144,544 | ||||||||
Net
Operating Income (Loss)
|
91,490 | 9,162 | (116 | ) | 100,536 | |||||||||||
Equity
in (Loss) Earnings of Real Estate Joint Ventures and Partnerships,
net
|
(4,963 | ) | 312 | (112 | ) | (4,763 | ) | |||||||||
Three
Months Ended September 30, 2008:
|
||||||||||||||||
Revenues
|
$ | 137,202 | $ | 14,611 | $ | 2,154 | $ | 153,967 | ||||||||
Net
Operating Income
|
97,281 | 10,358 | 316 | 107,955 | ||||||||||||
Equity
in (Loss) Earnings of Real Estate Joint Ventures and Partnerships,
net
|
4,981 | 265 | (95 | ) | 5,151 | |||||||||||
Nine
Months Ended September 30, 2009:
|
||||||||||||||||
Revenues
|
$ | 387,189 | $ | 41,711 | $ | 5,527 | $ | 434,427 | ||||||||
Net
Operating Income
|
274,089 | 28,962 | 350 | 303,401 | ||||||||||||
Equity
in (Loss) Earnings of Real Estate Joint Ventures and Partnerships,
net
|
2,188 | 774 | (179 | ) | 2,783 | |||||||||||
Nine
Months Ended September 30, 2008:
|
||||||||||||||||
Revenues
|
$ | 402,860 | $ | 42,236 | $ | 6,502 | $ | 451,598 | ||||||||
Net
Operating Income
|
287,740 | 29,967 | 2,120 | 319,827 | ||||||||||||
Equity
in (Loss) Earnings of Real Estate Joint Ventures and Partnerships,
net
|
14,670 | 971 | (104 | ) | 15,537 | |||||||||||
As
of September 30, 2009:
|
||||||||||||||||
Investment in
Real Estate Joint Ventures and Partnerships, net
|
$ | 272,860 | $ | 38,493 | $ | - | $ | 311,353 | ||||||||
Total
Assets
|
3,598,283 | 362,704 | 1,076,311 | 5,037,298 | ||||||||||||
As
of December 31, 2008:
|
||||||||||||||||
Investment in
Real Estate Joint Ventures and Partnerships, net
|
$ | 318,003 | $ | 39,631 | $ | - | $ | 357,634 | ||||||||
Total
Assets
|
3,747,037 | 348,691 | 1,018,484 | 5,114,212 |
Net
operating income reconciles to Income from Continuing Operations as shown on the
Condensed Consolidated Statements of Income and Comprehensive Income as follows
(in thousands):
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Total
Segment Net Operating Income
|
$ | 100,536 | $ | 107,955 | $ | 303,401 | $ | 319,827 | ||||||||
Depreciation
and Amortization
|
(37,159 | ) | (35,368 | ) | (112,836 | ) | (115,281 | ) | ||||||||
Impairment
Loss
|
(32,774 | ) | (32,774 | ) | ||||||||||||
General
and Administrative
|
(6,178 | ) | (5,816 | ) | (19,198 | ) | (19,774 | ) | ||||||||
Interest
Expense, net
|
(36,431 | ) | (40,878 | ) | (115,247 | ) | (118,724 | ) | ||||||||
Interest and
Other Income, net
|
3,596 | 1,171 | 8,504 | 3,919 | ||||||||||||
Gain on
Redemption of Convertible Senior Unsecured
Notes
|
16,453 | 25,311 | ||||||||||||||
Equity
in (Loss) Earnings of Real Estate Joint Ventures and
Partnerships, net
|
(4,763 | ) | 5,151 | 2,783 | 15,537 | |||||||||||
Gain on
Merchant Development Sales
|
491 | 1,418 | 18,619 | 8,240 | ||||||||||||
Provision for
Income Taxes
|
(4,364 | ) | (701 | ) | (7,071 | ) | (2,991 | ) | ||||||||
(Loss)
Income from Continuing Operations
|
$ | (593 | ) | $ | 32,932 | $ | 71,492 | $ | 90,753 |
******
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
economic and local real estate conditions, (iii) the inability of major tenants
to continue paying their rent obligations due to bankruptcy, insolvency or
general downturn in their business, (iv) financing risks, such as the inability
to obtain equity, debt, or other sources of financing on favorable terms, (v)
changes in governmental laws and regulations, (vi) the level and volatility of
interest rates, (vii) the availability of suitable acquisition opportunities,
(viii) changes in expected development activity, (ix) increases in operating
costs, (x) tax matters, including failure to qualify as a real estate investment
trust, could have adverse consequences, (xi) investments through real estate
joint ventures and partnerships involve risks not present in investments in
which we are the sole investor and (xii) changes in merchant development
activity. Accordingly, there is no assurance that our expectations
will be realized.
The
following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto and the comparative summary
of selected financial data appearing elsewhere in this
report. Historical results and trends which might appear should not
be taken as indicative of future operations. Our results of
operations and financial condition, as reflected in the accompanying
consolidated financial statements and related footnotes, are subject to
management's evaluation and interpretation of business conditions, retailer
performance, changing capital market conditions and other factors which could
affect the ongoing viability of our tenants.
Executive
Overview
Weingarten
Realty Investors is a real estate investment trust (“REIT”) organized under the
Texas Real Estate Investment Trust Act. We, and our predecessor
entity, began the ownership and development of shopping centers and other
commercial real estate in 1948. Our primary business is leasing space
to tenants in the shopping and industrial centers we own or lease. We
also manage centers for joint ventures in which we are partners or for other
outside owners for which we charge fees.
We
operate a portfolio of rental properties which includes neighborhood and
community shopping centers and industrial properties of approximately 72.3
million square feet. We have a diversified tenant base with our
largest tenant comprising only 2.6% of total rental revenues during
2009.
Our
long-term strategy is to focus on increasing funds from operations (“FFO”) and
shareholder value. We do this through hands-on leasing, management
and selected redevelopment of the existing portfolio of properties, through
disciplined growth from selective acquisitions and new developments, and through
the disposition of assets that no longer meet our ownership
criteria. We do this while remaining committed to maintaining a
conservative balance sheet, a well-staggered debt maturity schedule and strong
credit agency ratings. During 2009, the depressed economic
environment and capital markets caused us to refocus our efforts on maintaining
our operating properties at current levels and managing our capital resources to
ensure adequate liquidity needed to address our upcoming debt
maturities. Accordingly, we have taken a number of steps in 2009 as
described below:
|
·
|
We
issued 32.2 million common shares of beneficial interest (“common shares”)
resulting in additional liquidity of $439.1 million. These
proceeds were used to fund the repurchases through July 2009 of $504.9
million principal of unsecured fixed rate medium term notes, 7% senior
unsecured notes and 3.95% convertible senior unsecured notes,
significantly reducing our debt maturities for the years 2009 through
2011. Although our 3.95% convertible senior unsecured notes do
not mature until 2026, we believe market conditions make it highly
probable they will be put back to us in
2011.
|
|
·
|
We
issued $267.6 million of secured debt, including $26.6 million subsequent
to September 30, 2009.
|
|
·
|
We
issued $100.0 million of unsecured notes
payable.
|
|
·
|
We
entered into a joint venture to which we have or will contribute six
properties valued at $160.8 million and to date have received net proceeds
of approximately $85.9 million.
|
|
·
|
We
have sold operating and merchant build properties for approximately
$193.1 million.
|
As a
result of these transactions, we have built adequate levels of liquidity and
reduced our debt maturities to very manageable levels. We were able
to reduce our debt maturities (including our revolver balance and the 3.95%
unsecured convertible debt due in 2026 with put options in 2011) in 2009, 2010
and 2011 from $1.4 billion at December 31, 2008 to $482.9 million as of October
31, 2009, which, at this time, we are highly confident can be refinanced or
extinguished upon maturity. As of October 31, 2009, no amounts were
outstanding under our revolving credit facility.
We strive
to maintain a strong, conservative capital structure, which provides ready
access to a variety of attractive capital sources. We carefully
balance obtaining low cost financing with minimizing exposure to interest rate
movements and matching long-term liabilities with the long-term assets acquired
or developed. While the availability and pricing of capital has
improved since the beginning of the year, there can be no assurance that such
pricing and availability will not deteriorate in the near future.
At
September 30, 2009, we owned or operated under long-term leases, either directly
or through our interest in real estate joint ventures or partnerships, a total
of 385 developed income-producing properties and 13 properties under various
stages of construction and development. The total number of centers
includes 315 neighborhood and community shopping centers, 80 industrial projects
and three other operating properties located in 23 states spanning the country
from coast to coast.
We also
owned interests in 41 parcels of land held for development that totaled
approximately 36.0 million square feet.
We had
approximately 7,100 leases with 5,200 different tenants at September 30,
2009.
Leases
for our properties range from less than a year for smaller spaces to over 25
years for larger tenants. Rental revenues generally include minimum
lease payments, which often increase over the lease term, reimbursements of
property operating expenses, including ad valorem taxes, and additional rent
payments based on a percentage of the tenants' sales. The majority of
our anchor tenants are supermarkets, value-oriented apparel/discount stores and
other retailers or service providers who generally sell basic necessity-type
goods and services. Through this challenging economic environment, we
believe stability of our anchor tenants, combined with convenient locations,
attractive and well-maintained properties, high quality retailers and a strong
tenant mix, should ensure the long-term success of our merchants and the
viability of our portfolio.
In
assessing the performance of our properties, management carefully tracks the
occupancy of the portfolio. The weakened economy contributed to a
drop in our occupancy from 93.7% at September 30, 2008 to 91.1% at September 30,
2009. While we will continue to monitor the economy and the effects
on our retailers, we believe the significant diversification of our portfolio
both geographically and by tenant base will allow us to maintain occupancy
levels of above 90% as we move through the end of the year and throughout 2010,
absent bankruptcies by multiple national or regional tenants. Another
important indicator of performance is the spread in rental rates on a same-space
basis as we complete new leases and renew existing leases. We
completed 927 new leases or renewals during the first nine months of 2009
totaling 4.2 million square feet, increasing rental rates an average of 4.4% on
a cash basis.
New
Development
At
September 30, 2009, we had 13 properties in various stages of
development. We have funded $241.5 million to date on these projects
and, at completion, we estimate our investment to be $241.9 million, net of
proceeds from land sales and tax incentive financing of $40.0
million. These properties are slated to be completed over the next
one to three years with a projected return on investment of approximately 7.3%
when completed.
We have
approximately $155.1 million in land held for development pending improvement in
economic conditions. Due to our analysis of current economic
considerations, including the effects of tenant bankruptcies, lack of credit
available to retailers and the suspension of tenant expansion plans for new
development projects and declines in real estate values, our plans related to
our new development properties including land held for development changed, and
resulted in an impairment charge. Impairments, primarily related to
our new development activities, of $35.9 million were recognized for the nine
months ended September 30, 2009. While we will continue to monitor
this market closely, we anticipate little if any investment in land held for
development or new projects for the remainder of 2009.
Merchant
development is a program where we acquire or develop a project with the
objective of selling all or part of it, instead of retaining it in our portfolio
on a long-term basis. Disposition of land parcels are also included
in this program. We generated gains from this program during the
first nine months of 2009 of approximately $18.6 million. Our 2009
and 2010 business plans call for no additional material merchant development
sales.
Acquisitions and Joint
Ventures
Acquisitions
are a key component of our long-term strategy, and joint venture arrangements
are key to both our current and long-term strategy. However, the
turmoil in the capital markets and current economic conditions have
significantly reduced transactions in the marketplace and, therefore, created
uncertainty with respect to pricing. Partnering with institutional
investors through real estate joint ventures enables us to acquire high quality
assets in our target markets while also meeting our financial return
objectives. We benefit from access to lower-cost capital, as well as
leveraging our expertise to provide fee-based services, such as acquisition,
leasing, property management and asset management, to the joint
ventures.
There
were no acquisitions of operating properties during the first nine months of
2009, and we do not anticipate any material purchases for the remainder of the
year and through the early part of 2010.
In
October 2009, we entered into an agreement to contribute six retail properties,
located in Florida and Georgia, valued at approximately $160.8 million to an
unconsolidated joint venture in which we will retain a 20% ownership
interest. We closed on four Florida properties with a total value of
$114.3 million, aggregating .8 million square feet and received net proceeds of
approximately $85.9 million. The remaining two properties will be
contributed upon the assumption of their existing loans. We sold an
80% interest in this joint venture to an institutional investor.
As of
March 31, 2009, we contributed the final four properties to the joint venture
with Hines REIT Retail Holdings, LLC with an aggregate value of approximately
$66.8 million, and aggregating approximately 0.4 million square
feet. These four shopping centers are located one each in Florida and
North Carolina and two in Georgia, and we received net proceeds of approximately
$20.6 million. These contributions included loan assumptions on each
of the properties, which transferred secured debt totaling approximately $34.6
million to the consolidated joint venture.
While we
are not currently pursuing new joint ventures utilizing our current asset pool,
we continue to pursue new joint venture relationships to provide equity for new
investments. It is uncertain whether we will be successful in
completing any additional transactions in near future.
Joint
venture fee income during the first nine months of 2009 was approximately $4.7
million or a decrease from the prior year of $.5 million. This fee
income is based upon revenues, net income and in some cases appraised property
values. Due to decreases in these factors at our unconsolidated joint
ventures, joint venture fee income has declined. We anticipate
these fees will remain consistent with our current performance throughout the
remainder of 2009.
Dispositions
Through November
6, 2009, we sold nine retail properties, five industrial properties and
seven retail buildings at five operating properties, for $145.2
million. Although the availability of debt financing for prospective
acquirers has been limited in the current capital markets, we expect to continue
to dispose of non-core properties during the remainder of 2009 and throughout
2010 as opportunities present themselves. Dispositions are a key
component of our liquidity strategy, and also part of our ongoing management
process where we prune our portfolio of properties that do not meet our
geographic or growth targets. Dispositions provide capital, which may
be recycled into properties that have barrier-to-entry locations within high
growth metropolitan markets. Over time, we expect this to produce a
portfolio with higher occupancy rates and stronger internal revenue
growth.
Critical
Accounting Policies
Our
discussion and analysis of financial condition and results of operations is
based on our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States (“GAAP”). The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities and contingencies as of the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
periods. We evaluate our assumptions and estimates on an ongoing
basis. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
A
disclosure of our critical accounting policies which affect our more significant
judgments and estimates used in the preparation of our condensed consolidated
financial statements is included in our Annual Report on Form 10-K for the year
ended December 31, 2008 in Management’s Discussion and Analysis of Financial
Condition. There have been no significant changes to our critical
accounting policies during 2009.
Results
of Operations
Comparison
of the Three Months Ended September 30, 2009 to the Three Months Ended September
30, 2008
Revenues
Total
revenues were $144.5 million in the third quarter of 2009 versus $154.0 million
in the third quarter of 2008, a decrease of $9.5 million or
6.2%. This decrease results primarily from a decrease in net rental
revenues from a decline in occupancy and the deconsolidation of four joint
ventures as of December 31, 2008 as a result of amendments to their operating
agreements.
Occupancy
(leased space) of the portfolio as compared to the prior year was as
follows:
September
30,
|
||||||||
2009
|
2008
|
|||||||
Shopping
Centers
|
92.1 | % | 94.5 | % | ||||
Industrial
|
88.0 | % | 91.4 | % | ||||
Total
|
91.1 | % | 93.7 | % |
Expenses
Total
expenses for the third quarter of 2009 were $120.1 million versus $87.2 million
in the third quarter of 2008, an increase of $32.9 million or
37.7%. This increase resulted primarily from the impairment loss of
$32.8 million associated with certain new development properties based on
current economic conditions, changes in our new development business plans, the
suspension in tenant expansion plans and declines in real estate
values. Overall, direct operating costs and expenses (operating and
net ad valorem taxes) of operating our properties as a percentage of rental
revenues were 31.5% and 30.7% in 2009 and 2008, respectively.
Interest
Expense, net
Net
interest expense totaled $36.4 million for the third quarter of 2009, down $4.4
million or 10.9% from the third quarter of 2008. The components of
net interest expense were as follows (in thousands):
Three
Months Ended
|
||||||||
September
30,
|
||||||||
2009
|
2008
|
|||||||
Gross
interest expense
|
$ | 38,312 | $ | 45,141 | ||||
Amortization
of convertible bond discount
|
538 | 2,162 | ||||||
Over-market
mortgage adjustment of acquired properties
|
(984 | ) | (1,189 | ) | ||||
Capitalized
interest
|
(1,435 | ) | (5,236 | ) | ||||
Total
|
$ | 36,431 | $ | 40,878 |
Gross
interest expense totaled $38.3 million in the third quarter of 2009, down $6.8
million or 15.1% from the third quarter of 2008. The decrease in
gross interest expense was due primarily to the reduction in the average debt
outstanding, relating to the retirement of the convertible notes and other
unsecured debt. For the third quarter of 2009, the weighted average
debt outstanding was $2.8 billion at a weighted average interest rate of 5.4% as
compared to $3.2 billion outstanding at a weighted average interest rate of 5.4%
in 2008. The decrease of $1.6 million in the amortization of
convertible bond discount relates to the retirement of the convertible notes,
and capitalized interest decreased $3.8 million as a result of new development
stabilizations, completions and the cessation of carrying costs capitalization
on several new development projects transferred to land held for
development.
Interest
and Other Income, net
Net
interest and other income was $3.6 million in the third quarter of 2009 versus
$1.2 million in the third quarter of 2008, an increase of $2.4 million or
200.0%. This increase resulted primarily from the fair value increase
of $2.7 million in the assets held in a grantor trust related to our deferred
compensation plan.
Gain
on Redemption of Convertible Senior Unsecured Notes
The gain
of $16.5 million resulted from the purchase and cancellation of $319.7 million
of our 3.95% convertible senior unsecured notes at a discount to par
value.
Equity
in (Loss) Earnings of Real Estate Joint Ventures and Partnerships,
net
The
decrease in net equity in earnings of real estate joint ventures and
partnerships of $9.9 million or 192.5% is primarily attributable to impairment
losses totaling $6.8 million for three new development
properties. The remaining decrease results from a decline in income
from our investments due to the cessation of carrying cost capitalization on
several new development properties, a decline in occupancy, a note receivable
write off and completions of new development and other capital
activities.
Provision
for Income Taxes
The
increase in the tax provision of $3.7 million is attributable primarily to our
taxable REIT subsidiary for our deferred assets relating to impairment
losses. A benefit of $4.6 million was recorded, which was
subsequently offset by a valuation allowance of $9.6 million.
Results
of Operations
Comparison
of the Nine Months Ended September 30, 2009 to the Nine Months Ended September
30, 2008
Revenues
Total
revenues were $434.4 million in the first nine months of 2009 versus $451.6
million in the first nine months of 2008, a decrease of $17.2 million or
3.8%. This decrease resulted from a decrease in net rental revenues
of $19.2 million, which is offset by an increase in other income of $2.0
million.
This
decrease in net rental revenues resulted primarily from a decline in occupancy,
an increase in bad debts expense of $1.0 million from write-offs associated with
the weakened economy and the deconsolidation of four joint ventures as of
December 31, 2008 as a result of amendments to their operating
agreements. The increase in other income resulted primarily from an
increase in lease cancellation income from various tenants.
Occupancy
(leased space) of the portfolio as compared to the prior year was as
follows:
September
30,
|
||||||||
2009
|
2008
|
|||||||
Shopping
Centers
|
92.1 | % | 94.5 | % | ||||
Industrial
|
88.0 | % | 91.4 | % | ||||
Total
|
91.1 | % | 93.7 | % |
Expenses
Total
expenses in the first nine months of 2009 were $295.8 million versus $266.8
million in the first nine months of 2008, an increase of $29.0 million or
10.9%. This increase resulted primarily from the impairment loss of
$32.8 million associated with certain new development properties based on
current economic conditions, changes in our new development business plans, the
suspension in tenant expansion plans and declines in real estate
values. Offsetting this increase of $32.8 million is a decrease in
depreciation and amortization expense of $2.4 million, which resulted primarily
from an acceleration of depreciation in the amount of $13.0 million for
redevelopment activities in 2008, which is offset by the completions of our new
developments and other capital activities in 2009. Overall, direct
operating costs and expenses (operating and net ad valorem taxes) of operating
our properties as a percentage of rental revenues were 31.0% and 29.9% in 2009
and 2008, respectively.
Interest
Expense, net
Net
interest expense totaled $115.2 million in the first nine months of 2009, down
$3.5 million or 2.9% from the first nine months of 2008. The
components of net interest expense were as follows (in thousands):
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
2009
|
2008
|
|||||||
Gross
interest expense
|
$ | 121,364 | $ | 132,026 | ||||
Amortization
of convertible bond discount
|
4,426 | 6,386 | ||||||
Over-market
mortgage adjustment of acquired properties
|
(3,089 | ) | (4,312 | ) | ||||
Capitalized
interest
|
(7,454 | ) | (15,376 | ) | ||||
Total
|
$ | 115,247 | $ | 118,724 |
Gross
interest expense totaled $121.4 million in the first nine months of 2009, down
$10.7 million or 8.1% from the first nine months of 2008. The
decrease in gross interest expense was due primarily to the reduction in the
average debt outstanding, relating to the retirement of the convertible notes
and other unsecured debt. For the first nine months of 2009, the
weighted average debt outstanding was $2.9 billion at a weighted average
interest rate of 5.4% as compared to $3.2 billion outstanding at a weighted
average interest rate of 5.5% in 2008. The decrease of $2.0 million
in the amortization of convertible bond discount relates to the retirement of
the convertible notes, and capitalized interest decreased $7.9 million as a
result of new development stabilizations, completions and the cessation of
carrying costs capitalization on several new development projects transferred to
land held for development.
Interest
and Other Income, net
Net
interest and other income was $8.5 million in the first nine months of 2009
versus $3.9 million in the first nine months of 2008, an increase of $4.6
million or 117.9%. This increase resulted primarily from the fair
value increase of $4.8 million in the assets held in a grantor trust related to
our deferred compensation plan.
Gain
on Redemption of Convertible Senior Unsecured Notes
The gain
of $25.3 million resulted from the purchase and cancellation of $402.0 million
of our 3.95% convertible senior unsecured notes at a discount to par
value.
Equity
in (Loss) Earnings of Real Estate Joint Ventures and Partnerships,
net
The
decrease in net equity in earnings of real estate joint ventures and
partnerships of $12.8 million or 82.1% is primarily attributable to impairment
losses totaling $6.8 million for three new development
properties. The remaining decrease results from a decline in income
from our investments due to the cessation of carrying cost capitalization on
several new development properties, a decline in occupancy, a note receivable
write off and completions of new development and other capital
activities.
Gain
on Merchant Development Sales
Gain on
merchant development sales of $18.6 million in the first nine months of 2009
resulted primarily from the gain on sale of a land parcel in New Mexico, sale of
an unconsolidated joint venture interest for a shopping center in Colorado and
the sale of an industrial building in Texas. The gain on merchant
development sales of $8.2 million in the first nine months of 2008 resulted
primarily from the sale of 21 land parcels plus the realization of a deferred
gain totaling $2.1 million that related to a prior year sale of a land
parcel.
Provision
for Income Taxes
The
increase in the tax provision of $4.1 million is attributable primarily to our
taxable REIT subsidiary for our deferred assets relating to impairment
losses. A benefit of $4.6 million was recorded, which was
subsequently offset by a valuation allowance of $9.6 million.
Effects
of Inflation
We have
structured our leases in such a way as to remain largely unaffected should
significant inflation occur. Most of the leases contain percentage
rent provisions whereby we receive increased rentals based on the tenants' gross
sales. Many leases provide for increasing minimum rentals during the
terms of the leases through escalation provisions. In addition, many
of our leases are for terms of less than 10 years, which allow us to adjust
rental rates to changing market conditions when the leases
expire. Most of our leases also require the tenants to pay their
proportionate share of operating expenses and ad valorem taxes. As a
result of these lease provisions, increases due to inflation, as well as ad
valorem tax rate increases, generally do not have a significant adverse effect
upon our operating results as they are absorbed by our tenants. Under
the current economic climate, little to no inflation is occurring.
Capital
Resources and Liquidity
Our
primary liquidity needs are paying our common and preferred dividends,
maintaining and operating our existing properties, paying our debt service costs
and funding our existing new development program. We anticipate that
cash flows from operating activities primarily in the form of rental revenues
will provide all our capital needs including: common and preferred dividends,
debt service costs, our current new development program and the capital
necessary to maintain and operate our existing properties. While our
occupancy is projected to remain around the 91% level during the remainder of
2009 and 2010, the operating cash flow generated at that occupancy should remain
adequate to provide capital for these liquidity needs.
The
primary sources of capital for funding any debt maturities and acquisitions are
our revolving credit facility; proceeds from both secured and unsecured debt
issuances; proceeds from common and preferred capital issuances; cash generated
from the sale of property and the formation of joint ventures; and cash flow
generated by our operating properties. Amounts outstanding under the
revolving credit facility are retired as needed with proceeds from the issuance
of long-term debt, common and preferred equity, cash generated from disposition
of properties and cash flow generated by our operating properties. As
of September 30, 2009, $190.0 million was outstanding under our $575 million
revolving credit facility. As of October 31, 2009, we had no amounts
outstanding under this facility.
The
credit market turmoil affected our ability to obtain additional capital earlier
in the year; however, we have been able to complete transactions thereby
significantly improving our overall liquidity. As described under
Investing Activities and Financing Activities below, through October 31,
2009, we completed: 1) an offering for 32.2 million common shares with net
proceeds totaling $439.1 million, 2) concurrent with the offering, we reduced
our quarterly dividend rate per share from $.525 to $.25 which commenced with
the second quarter 2009 distribution; 3) contributions of property to two joint
ventures that provided $106.5 million in cash; 4) dispositions including
merchant development sales of $176.4 million; and 5) secured and unsecured loans
totaling $267.6 million and $100.0 million, respectively. We
currently plan on obtaining additional secured debt in the retail joint venture
we closed subsequent to quarter end. If investment opportunities
present themselves, we may consider adding some additional debt as long as we
maintain acceptable overall levels of leverage. There can be no
assurance that we will obtain debt on terms acceptable to us. We
presently have $82.8 million of dispositions under contract or under letters of
intent, $50.5 million of which was deemed to be held for sale at September 30,
2009. Additionally, we have more than $90 million of individual
properties currently being marketed for sale. There can be no
assurance that these transactions can be completed as planned.
Our 2009
annual business plan reflects cost reductions, cutbacks in new development
expenditures and minimal operational growth from existing properties, as well as
fully funding all new development and other capital needs including the $97
million of principal debt payments due in 2009, of which $80 million has been
paid.
We have
repositioned our future debt maturities to manageable levels. During
the second quarter of 2009, we repurchased $82.3 million principal amount of our
3.95% convertible senior unsecured notes. In addition, we issued a
tender offer for up to $427.9 million aggregate principal amount of a series of
unsecured notes and our 3.95% convertible senior unsecured notes. As
a result of the tender offer, we repurchased $102.9 million principal amount of
our unsecured notes and $319.7 million principal amount of our 3.95% convertible
senior unsecured notes. These transactions were primarily funded with
excess cash from our April 2009 equity issuance and our $575 million revolving
credit facility.
We
believe we are in compliance with our debt covenants. Our most
restrictive debt covenants including debt to assets, secured debt to assets,
fixed charge and unencumbered interest coverage ratios, limit the amount of
additional leverage we can add; however, we believe the sources of capital
described above are adequate to execute our current business plan and remain in
compliance with our debt covenants.
We have
non-recourse debt secured by acquired or developed properties held in several of
our real estate joint ventures and partnerships. Off balance sheet
mortgage debt for our unconsolidated real estate joint ventures and partnerships
totaled $362.4 million of which our ownership percentage is $113.0 million at
September 30, 2009. Scheduled principal payments on this debt at 100%
are as follows (in millions):
Remaining
2009
|
$ | 1.6 | ||
2010
|
47.6 | |||
2011
|
17.5 | |||
2012
|
19.3 | |||
2013
|
47.9 | |||
2014
|
50.7 | |||
Thereafter
|
177.8 |
We hedge
the future cash flows of certain debt transactions, as well as changes in the
fair value of our debt instruments, principally through interest rate swaps with
major financial institutions. We generally have the right to sell or
otherwise dispose of our assets except in certain cases where we are required to
obtain our joint venture partners’ consent or a third party consent for assets
held in special purpose entities, which are 100% owned by us.
Investing
Activities
Acquisitions
and Joint Ventures
Retail
Properties.
There
were no acquisitions of retail properties during the first nine months of
2009.
As of
March 31, 2009, we contributed the final four properties to the joint venture
with Hines REIT Retail Holdings, LLC with an aggregate value of approximately
$66.8 million, and aggregating approximately 0.4 million square
feet. These four shopping centers are located one each in Florida and
North Carolina and two in Georgia, and we received net proceeds of approximately
$20.6 million. These contributions included loan assumptions on each
of the properties, which transferred secured debt totaling approximately $34.6
million to the joint venture.
In
October 2009, we contributed four Florida properties with an aggregate value of
approximately $114.3 million, and aggregating .8 million square feet, to an
unconsolidated real estate joint venture. We sold an 80% interest in
this joint venture to an institutional investor, and we received net proceeds of
$85.9 million. Two additional properties will also be contributed to
the joint venture subject to the completion of debt assumptions.
Industrial
Properties.
There
were no acquisitions of industrial properties during the first nine months of
2009.
Dispositions
Retail
Properties.
During
the first nine months of 2009, we sold four shopping centers, three of which
were located in Texas and one in North Carolina. Also, we sold six
retail buildings at four operating properties, two of which were located in
Louisiana and four in Nevada. Gross sales proceeds from these
dispositions totaled $64.7 million and generated gains of $20.0
million.
Subsequent
to September 30, 2009, we sold five operating properties, three of
which were located in Texas and one each in Arizona and North Carolina, and a
retail building in Arizona, for approximately $60.5
million.
Industrial
Properties.
During
the first nine months of 2009, an industrial property located in Texas was
sold for $3.6 million.
Subsequent to
September 30, 2009, we sold four Texas industrial properties for
approximately $16.4 million.
Merchant
Development.
During
the first nine months of 2009, we sold four land parcels, two of which were
located in Texas and one each in Arizona and New Mexico. Also, we
sold an industrial building located in Texas and an unconsolidated joint venture
interest in a shopping center located in Colorado. Gross sales
proceeds from these dispositions totaled $47.9 million, which were reduced by
the release of a debt obligation of $11.7 million, and generated gains of $18.6
million.
New Development and Capital
Expenditures
At
September 30, 2009, we had 13 projects under construction or in preconstruction
stages with a total square footage of approximately 3.4
million. These properties are slated to be completed over the next
one to three years, and we expect our investment on these properties to be
$241.9 million, net of proceeds from land sales and tax incentive financing of
$40.0 million.
Our new
development projects are financed initially under our revolving credit
facilities, using available cash generated from both secured and unsecured debt
issuances, from common and preferred capital issuances and from dispositions of
properties.
Capital
expenditures for additions to the existing portfolio, acquisitions, new
development and our share of investments in unconsolidated real estate joint
ventures and partnerships totaled $129.5 million and $331.5 million for the
first nine months of 2009 and 2008, respectively. We have entered
into commitments aggregating $58.1 million comprised principally of construction
contracts which are generally due in 12 to 36 months.
Financing
Activities
Debt
Total
debt outstanding was $2.7 billion at September 30, 2009. Total debt
at September 30, 2009 included $2.5 billion of which interest rates are fixed
and $258.9 million, including the effect of $50 million of interest rate swaps,
that bears interest at variable rates. Additionally, debt totaling
$1.2 billion was secured by operating properties while the remaining $1.5
billion was unsecured. At September 30, 2009, we had $69.3 million
invested in overnight cash instruments.
We have a
$575 million unsecured revolving credit facility held by a syndicate of
banks. This unsecured revolving facility expires in February 2010 and
provides a one year extension option available at our
request. Borrowing rates under this facility float at a margin over
LIBOR, plus a facility fee. The borrowing margin and facility fee,
which are currently 60.0 and 15.0 basis points, respectively, are priced off a
grid that is tied to our senior unsecured credit rating. This
facility includes a competitive bid feature where we are allowed to request bids
for borrowings up to $287.5 million from the syndicate banks. As of
October 31, 2009, no amounts were outstanding under this facility. The available
balance under our revolving credit facility was $565.0 million at October 31,
2009, which is net of $10.0 million in outstanding letters of
credit. We have begun negotiations to extend our unsecured revolving
credit facility. We believe we could extend the facility at the
current commitment level; however, we anticipate the renewed facility will be at
an amount less then the current level of $575 million.
We
believe we were in full compliance with all our covenants as of September 30,
2009. Our four most restrictive covenants include debt to assets,
secured debt to assets, fixed charge and unencumbered interest coverage
ratios. These ratios as defined in our agreements were as follows at
September 30, 2009:
Covenant
|
Restriction
|
Actual
|
||
Debt
to Asset Ratio
|
Less
than 60.0%
|
46.3%
|
||
Secured
Debt to Asset Ratio
|
Less
than 30.0%
|
21.3%
|
||
Fixed
Charge Ratio
|
Greater
than 1.5
|
1.94
|
||
Unencumbered
Interest Ratio
|
Greater
than 2.0
|
3.01
|
As of
September 30, 2009, we had two interest rate swap contracts designated as fair
value hedges with an aggregate notional amount of $50.0 million that convert
fixed interest payments at rates of 4.2% to variable interest payments of .3% at
September 30, 2009. We could be exposed to losses in the event of
nonperformance by the counter-parties; however, management believes such
nonperformance is unlikely.
In May
2009, we entered into a $103 million secured loan from a major life insurance
company. The loan is for approximately 8.5 years at an interest rate
of 7.49% and is collateralized by four properties.
In August
2009, we sold $100 million of unsecured senior notes with a coupon of 8.1% which
will mature September 15, 2019. We may redeem the notes, in whole or
in part, on or after September 15, 2014, at our option, at a redemption price
equal to 100% of their principal amount, plus accrued and unpaid
interest. The notes were issued in denominations of $20 and integral
multiples thereof and are listed on the New York Stock Exchange under the symbol
“WRD”. The net proceeds of $97.5 million were used to reduce amounts
outstanding under our $575 million revolving credit facility.
During
the third quarter of 2009, we entered into a $70.8 million secured loan from a
major life insurance company. The loan is for seven years at a fixed
interest rate of 7.4% and is collateralized by five properties. In
addition, we entered into a $57.5 million secured loan from a major life
insurance company. The loan is for 10 years at a fixed interest rate
of 7.0% and is collateralized by 10 properties. The net proceeds
received from both transactions were used to reduce amounts outstanding under
our $575 million revolving credit facility.
In the
second quarter of 2009, we elected to repurchase a portion of the 3.95%
convertible senior unsecured notes due 2026 in the open market. We
purchased and subsequently retired a face value of $82.3 million for $70.4
million, including accrued interest. We originally issued $575
million notes in 2006 and the debentures are convertible under certain
circumstances for our common shares at an initial conversion rate of 20.3770
common shares per $1,000 of principal amount of debentures (an initial
conversion price of $49.075). Upon the conversion of debentures, we
will deliver cash for the principal return, as defined, and cash or common
shares, at our option, for the excess of the conversion value, as defined, over
the principal return. The debentures are redeemable for cash at our
option beginning in 2011 for the principal amount plus accrued and unpaid
interest. Holders of the debentures have the right to require us to
repurchase their debentures for cash equal to the principal of the debentures
plus accrued and unpaid interest in 2011, 2016 and 2021 and in the event of a
change in control.
During
2009, we made a cash tender offer for up to $427.9 million face value on a
series of unsecured notes and our convertible senior unsecured
notes. We completed the first tier of the offering in June for a
total face value of $102.9 million, of which $20.6 million of unsecured fixed
rate medium term notes with a weighted average interest rate of 7.54% and a
weighted average maturity of 1.6 years, and $82.3 million of 7% senior unsecured
notes due 2011 were purchased at par by us.
In July
2009, we completed the tender offer for an additional $319.7 million face value
of our 3.95% convertible senior unsecured notes due 2026, at 95% of par
purchased for approximately for $311.1 million, including interest and
expenses. This transaction resulted in a gain of $16.5 million, and
the face value of our 3.95% convertible senior unsecured notes of $135.2 million
remain outstanding.
Subsequent
to September 30, 2009, we entered into a $26.6 million secured loan from a
major bank. The loan is for a four year term with a one year
extension option at a floating interest rate of 375 basis points over LIBOR with
a 1.50% LIBOR floor. This loan is collateralized by two
properties.
Equity
Common
and preferred dividends were $130.4 million in the first nine months of
2009. The quarterly dividend rate for our common shares was $.25
during the three months ended September 30, 2009. Our dividend payout
ratio on common equity for the three and nine months ended September 30, 2009
approximated 100.7% and 63.7%, respectively, based on FFO for the respective
period. These ratios are inclusive of the non-cash transactions
including impairment charges and the gain on the redemption of the convertible
senior unsecured notes in the respective period.
On March
12, 2009, we entered into an ATM Equity Offering Sales Agreement with Merrill
Lynch, Pierce, Fenner & Smith Incorporated, which was a continuous equity
program relating to our common shares with an aggregate sales price of up to
$125.0 million. No shares were issued under this
program. Upon the completion of our equity offering in April 2009, we
terminated this agreement and program.
In April
2009, we issued 32.2 million common shares at $14.25 per share. Net
proceeds from this offering were $439.1 million and were used to repay
indebtedness outstanding under our revolving credit facilities and for other
general corporate purposes. Additionally, we invested approximately
$110 million of the proceeds in short-term cash instruments.
In July
2007, our Board of Trust Managers authorized a common share repurchase program
as part of our ongoing investment strategy. Under the terms of the
program, we could purchase up to a maximum value of $300 million of our common
shares during the following two years. This program expired in July
2009, and no additional shares were repurchased.
In
December 2008, we filed a universal shelf registration which is effective for
the next three years. We will continue to closely monitor both the
debt and equity markets and carefully consider our available financing
alternatives, including both public and private placements.
Contractual
Obligations
We have
debt obligations related to our mortgage loans and unsecured debt, including our
credit facilities. We have shopping centers that are subject to
non-cancelable long-term ground leases where a third party owns and has leased
the underlying land to us to construct and/or operate a shopping
center. In addition, we have non-cancelable operating leases
pertaining to office space from which we conduct our business. The
table below excludes obligations related to our new development
projects. We have entered into commitments aggregating $58.1 million
comprised principally of construction contracts which are generally due in 12 to
36 months. The following table summarizes our primary contractual
obligations as of September 30, 2009 (in thousands):
Remaining
|
||||||||||||||||||||||||||||
2009
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
Total
|
||||||||||||||||||||||
Mortgages
and Notes Payable:
(1)
|
||||||||||||||||||||||||||||
Unsecured
Debt
|
$ | 24,446 | $ | 308,207 | $ | 195,371 | $ | 255,945 | $ | 222,398 | $ | 937,833 | $ | 1,944,200 | ||||||||||||||
Secured
Debt
|
31,271 | 146,071 | 160,419 | 203,239 | 192,647 | 874,900 | 1,608,547 | |||||||||||||||||||||
Ground
Lease Payments
|
892 | 3,528 | 3,439 | 3,251 | 3,222 | 129,400 | 143,732 | |||||||||||||||||||||
Other
Obligations (2)
|
37,870 | 33,546 | 71,416 | |||||||||||||||||||||||||
Total
Contractual Obligations
|
$ | 94,479 | $ | 491,352 | $ | 359,229 | $ | 462,435 | $ | 418,267 | $ | 1,942,133 | $ | 3,767,895 |
_______________
|
(1)
|
Includes
principal and interest with interest on variable-rate debt calculated
using rates at September 30, 2009 excluding the effect of interest rate
swaps, as they are currently in a net receivable
position.
|
|
(2)
|
Other
obligations include only 2009 income and ad valorem tax payments,
contributions to our retirement plan and other employee
payments. Severance and change in control agreements have not
been included as the amounts and payouts are not
anticipated.
|
Off
Balance Sheet Arrangements
As of
September 30, 2009, 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 $10.0 million and $10.1 million
were outstanding under the revolving credit facility at September 30, 2009 and
December 31, 2008, respectively.
We have
entered into several unconsolidated real estate joint ventures and
partnerships. Under many of these agreements, we and our joint
venture partners are required to fund operating capital upon shortfalls in
working capital. We have also committed to fund the capital
requirements of several new development joint ventures. As operating
manager of most of these entities, we have considered these funding requirements
in our business plan.
Reconsideration
events could cause us to consolidate these joint ventures and
partnerships. We evaluate reconsideration events as we become aware
of them. Some triggers to be considered are additional contributions
required by each partner and each partners’ 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 to weather the
current market crisis; however, if market conditions 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 still be in compliance
with our debt covenants, and we believe there would not be a material change in
our credit ratings.
Related
to our investment in a redevelopment project in Sheridan, Colorado that is held
in an unconsolidated real estate joint venture, we, our joint venture partner
and the joint venture have each provided a guaranty for the payment of any debt
service shortfalls on bonds issued in connection with the
project. The Sheridan Redevelopment Agency (“Agency”) issued $97
million of Series A bonds used for an urban renewal 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 bond liability has been paid in full or 2030 (unless such
date is otherwise extended by the Agency.) At inception on February
27, 2007, we evaluated and determined that the fair value of the guaranty is
nominal to us as the guarantor. However, a liability was recorded by
the joint venture equal to net amounts funded under the bonds.
In
connection with the above project, we and our joint venture partner were also
signatories to a completion guaranty that required, among other things, certain
infrastructure to be substantially completed and occupants of 75% of the retail
space to be open for regular business as of December 31, 2008. Under
specified circumstances, the completion guaranty allowed for extension of the
completion date until June 30, 2009. At inception on February 27,
2007, we evaluated the guaranty and determined that its then fair value was
nominal. By a letter dated December 1, 2008, the guarantors requested
extension of the completion date pursuant to the terms of the
guaranty. On December 16, 2008, one of the parties benefited by the
guaranty filed a lawsuit against us alleging that we were not entitled to the
extension and was seeking $97 million in liquidated damages together with other
relief. In July 2009, we settled the lawsuit. Among the
obligations performed or to be performed by us under the terms of the settlement
are to cause the joint venture to purchase a portion of the bonds in the amount
of $51.3 million at par plus accrued and unpaid interest to the date of such
purchase, and to the extent that the outstanding letter of credit supporting
additional bonds totaling $45.7 million with a current term of 20 months is not
replaced by an alternate letter of credit issued by another qualified provider
on or before July 21, 2010, we will be obligated to provide up to 103% of the
outstanding stated amount of the letter of credit as additional collateral in
the form of either cash or a back-to-back letter of credit.
On July
22, 2009, as part of the settlement agreement, among other things, the lawsuit
was dismissed with prejudice; we contributed $52.0 million including accrued
interest and fees to the joint venture which then purchased the bonds; and the
completion guaranty was terminated.
Also in
connection with the Sheridan, Colorado joint venture and the issuance of the
related Series A bonds, we, our joint venture partner and the joint venture have
also provided a performance guaranty on behalf of the Sheridan Redevelopment
Agency for the satisfaction of all obligations arising from two interest rate
swap agreements for the combined notional amount of $97 million that matures in
December 2029. We evaluated and determined that the fair value of the
guaranty both at inception and December 31, 2008 was nominal.
We have
evaluated the remaining outstanding guaranties and have determined that the fair
value of these guaranties is nominal.
In July
2008, a 47.75%-owned unconsolidated real estate joint venture acquired an 83.34%
interest in a joint venture owning a 919,000 square foot new development to be
constructed in Aurora, Colorado. The acquired joint venture is a
variable interest entity to the unconsolidated joint venture since it provided a
guaranty on debt obtained by the acquired joint venture, which was approximately
$43.0 million at September 30, 2009. We have evaluated and determined
that the fair value of the guaranty both at inception and September 30, 2009 was
nominal.
In August
2008, we executed a real estate limited partnership with a foreign institutional
investor to purchase up to $250 million of retail properties in various
states. Our ownership in this unconsolidated real estate limited
partnership is 20.1%. As of September 30, 2009, no properties had
been purchased.
Funds
from Operations
The
National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as
net income (loss) available to common shareholders computed in accordance with
GAAP, excluding gains or losses from sales of operating real estate assets and
extraordinary items, plus depreciation and amortization of operating properties,
including our share of unconsolidated real estate joint ventures and
partnerships. We calculate FFO in a manner consistent with the NAREIT
definition.
Management
uses FFO as a supplemental measure to conduct and evaluate our business because
there are certain limitations associated with using GAAP net income by itself as
the primary measure of our operating performance. Historical cost
accounting for real estate assets in accordance with GAAP implicitly assumes
that the value of real estate assets diminishes predictably over
time. Since real estate values instead have historically risen or
fallen with market conditions, management believes that the presentation of
operating results for real estate companies that uses historical cost accounting
is insufficient by itself. There can be no assurance that FFO
presented by us is comparable to similarly titled measures of other
REITs.
FFO
should not be considered as an alternative to net income or other measurements
under GAAP as an indicator of our operating performance or to cash flows from
operating, investing or financing activities as a measure of
liquidity. FFO does not reflect working capital changes, cash
expenditures for capital improvements or principal payments on
indebtedness.
FFO is
calculated as follows (in thousands):
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
(loss) income attributable to common shareholders
|
$ | (9,384 | ) | $ | 26,936 | $ | 63,000 | $ | 118,575 | |||||||
Depreciation
and amortization
|
35,646 | 34,282 | 109,446 | 114,535 | ||||||||||||
Depreciation
and amortization of unconsolidated real estate joint ventures and
partnerships
|
4,850 | 3,137 | 13,415 | 8,698 | ||||||||||||
Gain
on sale of property
|
(1,383 | ) | (4,470 | ) | (19,736 | ) | (53,437 | ) | ||||||||
(Gain)
loss on sale of property of unconsolidated real estate joint
ventures and partnerships
|
2 | (4 | ) | (12 | ) | |||||||||||
Funds
from operations
|
29,729 | 59,887 | 166,121 | 188,359 | ||||||||||||
Funds
from operations attributable to operating partnership
units
|
||||||||||||||||
Funds
from operations assuming conversion of OP units
|
$ | 29,729 | $ | 59,887 | $ | 166,121 | $ | 188,359 | ||||||||
Weighted
average shares outstanding - basic
|
119,384 | 83,795 | 106,186 | 83,739 | ||||||||||||
Effect
of dilutive securities:
|
||||||||||||||||
Share
options and awards
|
521 | 559 | 549 | |||||||||||||
Operating
partnership units
|
||||||||||||||||
Weighted
average shares outstanding - diluted
|
119,384 | 84,316 | 106,745 | 84,288 |
Newly
Issued Accounting Pronouncements
In June
2009, the FASB issued Statement of Financial Accounting Standards No. 167 (“SFAS
167”), “Amendments
to FASB Interpretation No. 46(R).” SFAS 167 was intended to
improve an organization’s variable interest entity reporting. SFAS
167 will require a change in the analysis used to determine whether an entity
has a controlling financial interest in a variable interest
entity. The analysis will be used to identify the primary beneficiary
of a variable interest entity. The holder of the variable interest
will be defined as the primary beneficiary if it has both the power to influence
the entity’s significant economic activities and the obligation to absorb
potentially significant losses or receive potentially significant
benefits. SFAS 167 also requires additional disclosures about an
entity’s variable interest entities. This statement is effective for
us on January 1, 2010. We are currently evaluating the impact that
the adoption of SFAS 167 will have on our consolidated financial
statements.
In August
2009, the FASB issued Accounting Standards Update No. 2009-05 (”ASU 2009-05”),
“Measuring Liabilities at Fair Value.” ASU 2009-05 provides
clarification for valuing liabilities in which a quoted market price in an
active market for an identical liability is not available. The
guidance also provides required techniques to determine a liability’s fair value
in this circumstance. The update is effective for us beginning
October 1, 2009 and adoption of ASU 2009-05 will not materially affect our
consolidated financial statements.
We use fixed and floating-rate debt to finance our capital requirements. These transactions expose us to market risk related to changes in interest rates. Derivative financial instruments are used to manage a portion of this risk, primarily interest rate swap agreements with major financial institutions. These swap agreements expose us to credit risk in the event of non-performance by the counter-parties to the swaps. We do not engage in the trading of derivative financial instruments in the normal course of business. At September 30, 2009, we had fixed-rate debt of $2.5 billion and variable-rate debt of $258.9 million, after adjusting for the net effect of $50 million notional amount of interest rate swaps. At December 31, 2008, we had fixed-rate debt of $2.7 billion and variable-rate debt of $449.0 million, after adjusting for the net effect of $50 million notional amount of interest rate swaps. In the event interest rates were to increase 100 basis points, annual net income and cash flows would decrease by approximately $4.6 million and $10.2 million based upon the variable-rate debt and notes receivable outstanding at September 30, 2009 and December 31, 2008, respectively, and the fair value of fixed-rate debt at September 30, 2009 and December 31, 2008 would decrease by $108.8 million and $143.3 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
Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of
September 30, 2009. 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 September 30, 2009.
There has
been no change to our internal control over financial reporting during the
quarter ended September 30, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART
II-OTHER INFORMATION
ITEM
1. Legal Proceedings
We are
involved in various matters of litigation arising in the normal course of
business. While we are unable to predict with certainty the amounts
involved, our management and counsel believe that when such litigation is
resolved, our resulting liability, if any, will not have a material adverse
effect on our consolidated financial statements.
ITEM
1A. Risk Factors
Our
credit ratings may not reflect all risks of an investment in the 8.10% notes and
there is no protection in the indenture for holders of the notes in the event of
a ratings downgrade.
Our
credit ratings are an assessment by rating agencies of our ability to pay our
debts when due. Consequently, real or anticipated changes in
our credit ratings will generally affect the fair value of the 8.10%
notes. These credit ratings may not reflect the potential impact of
risks relating to structure or marketing of the 8.10% notes. Credit
ratings are not a recommendation to buy, sell or hold any security, and may be
revised or withdrawn at any time by the issuing organization in its sole
discretion. Neither we nor any underwriter undertakes any obligation
to maintain the ratings or to advise holders of our notes of any change in
ratings. Each agency’s rating should be evaluated independently of
any other agency’s rating.
If
an active trading market is not maintained for the 8.10% notes, the ability to
sell the notes or to sell the notes at a price that is deemed sufficient may be
restricted.
The 8.10%
notes are a new issue of securities with no established trading
market. Although we have listed the notes on the New York Stock
Exchange under the symbol “WRD,” we cannot assure that the market will be
maintained which could lead to difficulties in selling the
notes. Even if a market was to be maintained, the notes could trade
at prices which may be higher or lower than the initial offering price depending
on many factors independent of our creditworthiness, including, among other
things:
|
§
|
The
time remaining to the maturity of the
notes;
|
|
§
|
Their
subordination to our existing and future
liabilities;
|
|
§
|
The
outstanding principal amount of the notes;
and
|
|
§
|
The
level, direction and volatility of market interest rates
generally.
|
The
price of our common shares is volatile and may decline.
The
market price of our common shares may fluctuate widely as a result of a number
of factors, many of which are outside our control. In addition, the stock market
is subject to fluctuations in share prices and trading volumes that affect the
market prices of the shares of many companies. These broad market
fluctuations have adversely affected and may continue to adversely affect the
market price of our common shares. Among the factors that could
affect the market price of our common shares are:
|
§
|
Actual
or anticipated quarterly fluctuations in our operating results and
financial condition;
|
|
§
|
Changes
in revenues or earnings estimates or publication of research reports and
recommendations by financial analysts or actions taken by rating agencies
with respect to our securities or those of other
REITs;
|
|
§
|
The
ability of our tenants to pay rent to us and meet their other obligations
to us under current lease;
|
|
§
|
Our
ability to re-lease space as leases
expire;
|
|
§
|
Our
ability to refinance our indebtedness as it
matures;
|
|
§
|
Any
changes in our distribution policy;
|
|
§
|
Any
future issuances of equity
securities;
|
|
§
|
Speculation
in the press or investment
community;
|
|
§
|
Strategic
actions by us or our competitors, such as acquisitions or
restructurings;
|
|
§
|
General
market conditions and, in particular, developments related to market
conditions for the real estate industry;
and
|
|
§
|
Domestic
and international economic factors unrelated to our
performance.
|
The future composition and quarterly cash distribution rate may change.
For each
of the four quarters during 2008 and the first quarter of 2009, we paid a cash
distribution at a quarterly rate of $.525 per common share ($2.10 per common
share for the year ended December 31, 2008). Commencing with our
second quarter 2009 dividend payout, we paid a cash distribution at a quarterly
rate of $.25 per common share.
While we
currently expect to pay future distributions in cash, we may pay up to 90% of
our distributions in common shares, as permitted by a recent IRS revenue
procedure that allows us to satisfy the REIT income distribution requirement by
distributing up to 90% of our distributions in common shares in lieu of paying
distributions entirely in cash. In the event that we pay a portion of
a distribution in common shares, which we reserve the right to do, recipients
would be required to pay tax on the entire amount of the distribution, including
the portion paid in common shares, in which case the recipients might have to
pay the tax using cash from other sources. Furthermore, with respect
to non-U.S. holders (as defined in the accompanying prospectus), we may be
required to withhold U.S. tax with respect to all or a portion of such
distribution that is payable in common shares. We may choose to make
distributions in common shares.
The
timing, amount and composition of any future distributions to our common
shareholders will be at the sole discretion of our Board of Trust Managers and
will depend upon a variety of factors as to which no assurance can be
given. Our ability to make distributions to our common shareholders
depends, in part, upon our operating results, overall financial condition, the
performance of our portfolio (including occupancy levels and rental rates), our
capital requirements, access to capital, our ability to qualify for taxation as
a REIT and general business and market conditions.
There
may be future dilution of our common shares.
Giving
effect to the issuance of common shares in April 2009, the receipt of the
expected net proceeds and the use of those proceeds, the offering will have a
dilutive effect on our expected earnings per share and funds from operations per
share for the year ending December 31, 2009.
Additionally,
our declaration of trust authorizes our Board of Trust Managers to, among other
things, issue additional common or preferred shares or securities convertible or
exchangeable into equity securities, without shareholder approval. We
may issue such additional equity or convertible securities to raise additional
capital. The issuance of any additional common or preferred shares or
convertible securities could be substantially dilutive to holders of our common
shares. Moreover, to the extent that we issue restricted shares,
options, or warrants to purchase our common shares in the future and those
options or warrants are exercised or the restricted shares vest, our
shareholders may experience further dilution. Holders of our common
shares have no preemptive rights that entitle them to purchase a pro rata share
of any offering of shares of any class or series and, therefore, such sales or
offerings could result in increased dilution to our shareholders.
We may
issue debt and equity securities or securities convertible into equity
securities, any of which may be senior to our common shares as to distributions
and in liquidation, which could negatively affect the value of our common
shares.
In the
future, we may attempt to increase our capital resources by entering into
unsecured or secured debt or debt-like financings, or by issuing additional debt
or equity securities, which could include issuances of medium-term notes, senior
notes, subordinated notes, secured debt, guarantees, preferred shares, hybrid
securities, or securities convertible into or exchangeable for equity
securities. In the event of our liquidation, our lenders and holders
of our debt and preferred securities would receive distributions of our
available assets before distributions to the holders of our common
shares. Because any decision to incur debt and issue securities in
future offerings may be influenced by market conditions and other factors beyond
our control, we cannot predict or estimate the amount, timing, or nature of our
future financings. Further, market conditions could require us to
accept less favorable terms for the issuance of our securities in the
future.
Adverse
global market and economic conditions may continue to adversely affect us and
could cause us to recognize additional impairment charges or otherwise harm our
performance.
Recent
market and economic conditions have been unprecedented and challenging with
tighter credit conditions. Continued concerns about the systemic
impact of the availability and cost of credit, the U.S. mortgage market,
inflation, energy costs, geopolitical issues and declining equity and real
estate markets have contributed to increased market volatility and diminished
expectations for the U.S. economy. The retail shopping sector has
been negatively affected by these recent market and economic
conditions. These conditions may result in our tenants delaying lease
commencements, declining to extend or renew leases upon expiration and/or
renewing at lower rates. These conditions also have forced some
weaker retailers, in some cases, to declare bankruptcy and/or close
stores. Certain retailers have announced store closings even though
they have not filed for bankruptcy protection. Lease terminations by
certain tenants or a failure by certain tenants to occupy their premises in a
shopping center could result in lease terminations or significant reductions in
rent by other tenants in the same shopping center under the terms of some
leases, in which case we may be unable to re-lease the vacated space at
attractive rents or at all, and our rental payments from our continuing tenants
could significantly decrease.
We are
unable to predict whether, or to what extent or for how long, these adverse
market and economic conditions will persist. The continuation and/or
intensification of these conditions may impede our ability to generate
sufficient operating cash flow to pay expenses, maintain properties, pay
dividends and refinance debt.
As a
result of the ongoing market volatility and declining market conditions, for the
nine months ended September 30, 2009, we recognized non-cash impairment charges
of approximately $35.9 million and for the year ended December 31, 2008, we
recognized non-cash impairment charges of approximately $52.5
million.
Ongoing
adverse market and economic conditions and market volatility will likely
continue to make it difficult to value the properties and investments owned by
us and our unconsolidated joint ventures. There may be significant
uncertainty in the valuation, or in the stability of the value, of such
properties and investments that could result in a substantial decrease in the
value thereof. In addition, we intend to sell certain assets over the
next several years. No assurance can be given that we will be able to
recover the current carrying amount of all of our properties and those of our
unconsolidated joint ventures and/or our goodwill in the future. Our
failure to do so would require us to recognize additional impairment charges for
the period in which we reached that conclusion, which could materially and
adversely affect us.
We have
no other material changes to the risk factors discussed in our Annual Report on
Form 10-K for the year ended December 31, 2008.
None.
ITEM
3. Defaults Upon Senior Securities
None.
None.
ITEM
5. Other Information
Not
applicable.
ITEM
6. Exhibits
The
exhibits required by this item are set forth on the Exhibit Index attached
hereto.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
WEINGARTEN
REALTY INVESTORS
|
||
(Registrant)
|
||
By:
|
/s/
Andrew M. Alexander
|
|
Andrew
M. Alexander
|
||
Chief
Executive Officer
|
||
By:
|
/s/
Joe D. Shafer
|
|
Joe
D. Shafer
|
||
Vice
President/Chief Accounting Officer
|
||
(Principal
Accounting Officer)
|
DATE: November
6, 2009
(a)
|
Exhibits:
|
|
3.1
|
—
|
Restated
Declaration of Trust (filed as Exhibit 3.1 to WRI's Registration Statement
on Form 8-A dated January 19, 1999 and incorporated herein by
reference).
|
3.2
|
—
|
Amendment
of the Restated Declaration of Trust (filed as Exhibit 3.2 to WRI's
Registration Statement on Form 8-A dated January 19, 1999 and incorporated
herein by reference).
|
3.3
|
—
|
Second
Amendment of the Restated Declaration of Trust (filed as Exhibit 3.3 to
WRI's Registration Statement on Form 8-A dated January 19, 1999 and
incorporated herein by reference).
|
3.4
|
—
|
Third
Amendment of the Restated Declaration of Trust (filed as Exhibit 3.4 to
WRI's Registration Statement on Form 8-A dated January 19, 1999 and
incorporated herein by reference).
|
3.5
|
—
|
Fourth
Amendment of the Restated Declaration of Trust dated April 28, 1999 (filed
as Exhibit 3.5 to WRI's Annual Report on Form 10-K for the year ended
December 31, 2001 and incorporated herein by
reference).
|
3.6
|
—
|
Fifth
Amendment of the Restated Declaration of Trust dated April 20, 2001 (filed
as Exhibit 3.6 to WRI's Annual Report on Form 10-K for the year ended
December 31, 2001 and incorporated herein by
reference).
|
3.7
|
—
|
Amended
and Restated Bylaws of WRI (filed as Exhibit 99.2 to WRI's Registration
Statement on Form 8-A dated February 23, 1998 and incorporated herein by
reference).
|
3.8
|
—
|
Amendment
of Bylaws-Direct Registration System, Section 7.2(a) dated May 3, 2007
(filed as Exhibit 3.8 to WRI’s Form 10-Q for the quarter ended June 30,
2007 and incorporated herein by reference).
|
4.1
|
—
|
Form
of Indenture between Weingarten Realty Investors and The Bank of New York
Mellon Trust Company, N.A. (successor in interest to JPMorgan Chase Bank,
National Association, formerly Texas Commerce Bank National Association,
between WRI and Chase Bank of Texas, National Association (filed as
Exhibit 4(a) to WRI's Registration Statement on Form S-3 (No. 33-57659)
dated February 10, 1995 and incorporated herein by
reference).
|
4.2
|
—
|
Form
of Indenture between Weingarten Realty Investors and The Bank of New York
Mellon Trust Company, N.A. (successor in interest to JPMorgan Chase Bank,
National Association, formerly Texas Commerce Bank National Association,
between WRI and Chase Bank of Texas, National Association (filed as
Exhibit 4(b) to WRI's Registration Statement on Form S-3 (No. 33-57659)
and incorporated herein by reference).
|
4.3
|
—
|
Form
of Fixed Rate Senior Medium Term Note (filed as Exhibit 4.19 to WRI’s
Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
|
4.4
|
—
|
Form
of Floating Rate Senior Medium Term Note (filed as Exhibit 4.20 to WRI’s
Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
|
4.5
|
—
|
Form
of Fixed Rate Subordinated Medium Term Note (filed as Exhibit 4.21 to
WRI’s Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
|
4.6
|
—
|
Form
of Floating Rate Subordinated Medium Term Note (filed as Exhibit 4.22 to
WRI’s Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference).
|
4.7
|
—
|
Statement
of Designation of 6.75% Series D Cumulative Redeemable Preferred Shares
(filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated
April 17, 2003 and incorporated herein by reference).
|
4.8
|
—
|
Statement
of Designation of 6.95% Series E Cumulative Redeemable Preferred Shares
(filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated
July 8, 2004 and incorporated herein by reference).
|
4.9
|
—
|
Statement
of Designation of 6.50% Series F Cumulative Redeemable Preferred Shares
(filed as Exhibit 3.1 to WRI’s Registration Statement on Form 8-A dated
January 29, 2007 and incorporated herein by reference).
|
4.10
|
—
|
6.75%
Series D Cumulative Redeemable Preferred Share Certificate (filed as
Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated April 17,
2003 and incorporated herein by
reference).
|
4.11
|
—
|
6.95%
Series E Cumulative Redeemable Preferred Share Certificate (filed as
Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated July 8, 2004
and incorporated herein by reference).
|
||
4.12
|
—
|
6.50%
Series F Cumulative Redeemable Preferred Share Certificate (filed as
Exhibit 4.2 to WRI’s Registration Statement on Form 8-A dated January 29,
2007 and incorporated herein by reference).
|
||
4.13
|
—
|
Form
of Receipt for Depositary Shares, each representing 1/30 of a share of
6.75% Series D Cumulative Redeemable Preferred Shares, par value $.03 per
share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A
dated April 17, 2003 and incorporated herein by
reference).
|
||
4.14
|
—
|
Form
of Receipt for Depositary Shares, each representing 1/100 of a share of
6.95% Series E Cumulative Redeemable Preferred Shares, par value $.03 per
share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A
dated July 8, 2004 and incorporated herein by reference).
|
||
4.15
|
—
|
Form
of Receipt for Depositary Shares, each representing 1/100 of a share of
6.50% Series F Cumulative Redeemable Preferred Shares, par value $.03 per
share (filed as Exhibit 4.3 to WRI’s Registration Statement on Form 8-A
dated January 29, 2007 and incorporated herein by
reference).
|
||
4.16
|
—
|
Form
of 7% Notes due 2011 (filed as Exhibit 4.17 to WRI’s Annual Report on Form
10-K for the year ended December 31, 2001 and incorporated herein by
reference).
|
||
4.17
|
—
|
Form
of 3.95% Convertible Senior Notes due 2026 (filed as Exhibit 4.2 to WRI’s
Form 8-K on August 2, 2006 and incorporated herein by
reference).
|
||
4.18
|
Form
of 8.10% Note due 2019 (filed as Exhibit 4.1 to WRI’s Current Report on
Form 8-K dated August 14, 2009 and incorporated herein by
reference).
|
|||
10.1†
|
—
|
The
1993 Incentive Share Plan of WRI (filed as Exhibit 4.1 to WRI’s
Registration Statement on Form S-8 (No. 33-52473) and incorporated herein
by reference).
|
||
10.2†
|
—
|
1999
WRI Employee Share Purchase Plan (filed as Exhibit 10.6 to WRI’s Annual
Report on Form 10-K for the year ended December 31, 1999 and incorporated
herein by reference).
|
||
10.3†
|
—
|
2001
Long Term Incentive Plan (filed as Exhibit 10.7 to WRI’s Annual Report on
Form 10-K for the year ended December 31, 2001 and incorporated herein by
reference).
|
||
10.4
|
—
|
Master
Promissory Note in the amount of $20,000,000 between WRI, as payee, and
Chase Bank of Texas, National Association (formerly, Texas Commerce Bank
National Association), as maker, effective December 30, 1998 (filed as
Exhibit 4.15 to WRI’s Annual Report on Form 10-K for the year ended
December 31, 1999 and incorporated herein by reference).
|
||
10.5†
|
—
|
Weingarten
Realty Retirement Plan restated effective April 1, 2002 (filed as Exhibit
10.29 on WRI’s Annual Report on Form 10-K for the year ended December 31,
2005 and incorporated herein by reference).
|
||
10.6†
|
—
|
First
Amendment to the Weingarten Realty Retirement Plan, dated December 31,
2003 (filed as Exhibit 10.33 on WRI’s Annual Report on Form 10-K for the
year ended December 31, 2005 and incorporated herein by
reference).
|
||
10.7†
|
—
|
First
Amendment to the Weingarten Realty Pension Plan, dated August 1, 2005
(filed as Exhibit 10.27 on WRI’s Form 10-Q for the quarter ended September
30, 2005 and incorporated herein by reference).
|
||
10.8†
|
—
|
Mandatory
Distribution Amendment for the Weingarten Realty Retirement Plan dated
August 1, 2005 (filed as Exhibit 10.28 on WRI’s Form 10-Q for the quarter
ended September 30, 2005 and incorporated herein by
reference).
|
||
10.9†
|
—
|
Weingarten
Realty Investors Supplemental Executive Retirement Plan amended and
restated effective September 1, 2002 (filed as Exhibit 10.10 on WRI’s Form
10-Q for the quarter ended June 30, 2005 and incorporated herein by
reference).
|
||
10.10†
|
—
|
First
Amendment to the Weingarten Realty Investors Supplemental Executive
Retirement Plan amended on November 3, 2003 (filed as Exhibit 10.11 on
WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference).
|
||
10.11†
|
—
|
Second
Amendment to the Weingarten Realty Investors Supplemental Executive
Retirement Plan amended October 22, 2004 (filed as Exhibit 10.12 on WRI’s
Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by
reference).
|
10.12†
|
—
|
Third
Amendment to the Weingarten Realty Investors Supplemental Executive
Retirement Plan amended October 22, 2004 (filed as Exhibit 10.13 on WRI’s
Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by
reference).
|
10.13†
|
—
|
Weingarten
Realty Investors Retirement Benefit Restoration Plan adopted effective
September 1, 2002 (filed as Exhibit 10.14 on WRI’s Form 10-Q for the
quarter ended June 30, 2005 and incorporated herein by
reference).
|
10.14†
|
—
|
First
Amendment to the Weingarten Realty Investors Retirement Benefit
Restoration Plan amended on November 3, 2003 (filed as Exhibit 10.15 on
WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference).
|
10.15†
|
—
|
Second
Amendment to the Weingarten Realty Investors Retirement Benefit
Restoration Plan amended October 22, 2004 (filed as Exhibit 10.16 on WRI’s
Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by
reference).
|
10.16†
|
—
|
Third
Amendment to the Weingarten Realty Pension Plan dated December 23, 2005
(filed as Exhibit 10.30 on WRI’s Annual Report on Form 10-K for the year
ended December 31, 2005 and incorporated herein by
reference).
|
10.17†
|
—
|
Weingarten
Realty Investors Deferred Compensation Plan amended and restated as a
separate and independent plan effective September 1, 2002 (filed as
Exhibit 10.17 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and
incorporated herein by reference).
|
10.18†
|
—
|
Supplement
to the Weingarten Realty Investors Deferred Compensation Plan amended on
April 25, 2003 (filed as Exhibit 10.18 on WRI’s Form 10-Q for the quarter
ended June 30, 2005 and incorporated herein by
reference).
|
10.19†
|
—
|
First
Amendment to the Weingarten Realty Investors Deferred Compensation Plan
amended on November 3, 2003 (filed as Exhibit 10.19 on WRI’s Form 10-Q for
the quarter ended June 30, 2005 and incorporated herein by
reference).
|
10.20†
|
—
|
Second
Amendment to the Weingarten Realty Investors Deferred Compensation Plan,
as amended, dated October 13, 2005 (filed as Exhibit 10.29 on WRI’s Form
10-Q for the quarter ended September 30, 2005 and incorporated herein by
reference).
|
10.21†
|
—
|
Trust
Under the Weingarten Realty Investors Deferred Compensation Plan amended
and restated effective October 21, 2003 (filed as Exhibit 10.21 on WRI’s
Form 10-Q for the quarter ended June 30, 2005 and incorporated herein by
reference).
|
10.22†
|
—
|
Fourth
Amendment to the Weingarten Realty Investors Deferred Compensation Plan,
dated December 23, 2005 (filed as Exhibit 10.31 on WRI’s Annual Report on
Form 10-K for the year ended December 31, 2005 and incorporated herein by
reference).
|
10.23†
|
—
|
Trust
Under the Weingarten Realty Investors Retirement Benefit Restoration Plan
amended and restated effective October 21, 2003 (filed as Exhibit 10.22 on
WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference).
|
10.24†
|
—
|
Trust
Under the Weingarten Realty Investors Supplemental Executive Retirement
Plan amended and restated effective October 21, 2003 (filed as Exhibit
10.23 on WRI’s Form 10-Q for the quarter ended June 30, 2005 and
incorporated herein by reference).
|
10.25†
|
—
|
First
Amendment to the Trust Under the Weingarten Realty Investors Deferred
Compensation Plan, Supplemental Executive Retirement Plan, and Retirement
Benefit Restoration Plan amended on March 16, 2004 (filed as Exhibit 10.24
on WRI’s Form 10-Q for the quarter ended June 30, 2005 and incorporated
herein by reference).
|
10.26†
|
—
|
Third
Amendment to the Weingarten Realty Investors Deferred Compensation Plan
dated August 1, 2005 (filed as Exhibit 10.30 on WRI’s Form 10-Q for the
quarter ended September 30, 2005 and incorporated herein by
reference).
|
10.27
|
—
|
Amended
and Restated Credit Agreement dated February 22, 2006 among Weingarten
Realty Investors, the Lenders Party Hereto and JPMorgan Chase Bank, N.A.,
as Administrative Agent (filed as Exhibit 10.32 on WRI’s Form 10-K for the
year ended December 31, 2005 and incorporated herein by
reference).
|
10.28
|
—
|
Amendment
Agreement dated November 7, 2007 to the Amended and Restated Credit
Agreement (filed as Exhibit 10.34 on WRI’s Form 10-Q for the quarter ended
September 30, 2007 and incorporated herein by
reference).
|
10.29†
|
—
|
Fifth
Amendment to the Weingarten Realty Investors Deferred Compensation Plan
(filed as Exhibit 10.34 to WRI’s Form 10-Q for quarter ended June 30, 2006
and incorporated herein by
reference).
|
10.30†
|
—
|
Restatement
of the Weingarten Realty Investors Supplemental Executive Retirement Plan
dated August 4, 2006 (filed as Exhibit 10.35 to WRI’s Form 10-Q for the
quarter ended September 30, 2006 and incorporated herein by
reference).
|
10.31†
|
—
|
Restatement
of the Weingarten Realty Investors Deferred Compensation Plan dated August
4, 2006 (filed as Exhibit 10.36 to WRI’s Form 10-Q for the quarter ended
September 30, 2006 and incorporated herein by
reference).
|
10.32†
|
—
|
Restatement
of the Weingarten Realty Investors Retirement Benefit Restoration Plan
dated August 4, 2006 (filed as Exhibit 10.37 to WRI’s Form 10-Q for the
quarter ended September 30, 2006 and incorporated herein by
reference).
|
10.33†
|
—
|
Amendment
No. 1 to the Weingarten Realty Investors Supplemental Executive Retirement
Plan dated December 15, 2006 (filed as Exhibit 10.38 on WRI’s Form 10-K
for the year ended December 31, 2006 and incorporated herein by
reference).
|
10.34†
|
—
|
Amendment
No. 1 to the Weingarten Realty Investors Retirement Benefit Restoration
Plan dated December 15, 2006 (filed as Exhibit 10.39 on WRI’s Form 10-K
for the year ended December 31, 2006 and incorporated herein by
reference).
|
10.35†
|
—
|
Amendment
No. 1 to the Weingarten Realty Investors Deferred Compensation Plan dated
December 15, 2006 (filed as Exhibit 10.40 on WRI’s Form 10-K for the year
ended December 31, 2006 and incorporated herein by
reference).
|
10.36†
|
—
|
Amendment
No. 2 to the Weingarten Realty Investors Retirement Benefit Restoration
Plan dated November 9, 2007 (filed as Exhibit 10.43 on WRI’s Form 10-K for
the year ended December 31, 2007 and incorporated herein by
reference).
|
10.37†
|
—
|
Amendment
No. 2 to the Weingarten Realty Investors Deferred Compensation Plan dated
November 9, 2007 (filed as Exhibit 10.44 on WRI’s Form 10-K for the year
ended December 31, 2007 and incorporated herein by
reference).
|
10.38†
|
—
|
Amendment
No. 2 to the Weingarten Realty Investors Supplemental Executive Retirement
Plan dated November 9, 2007 (filed as Exhibit 10.45 on WRI’s Form 10-K for
the year ended December 31, 2007 and incorporated herein by
reference).
|
10.39†
|
—
|
Severance
Benefit and Stay Pay Bonus Plan dated September 20, 2007 (filed as Exhibit
10.46 on WRI’s Form 10-K for the year ended December 31, 2007 and
incorporated herein by reference).
|
10.40†
|
—
|
2007
Reduction in Force Severance Pay Plan dated November 6, 2007 (filed as
Exhibit 10.47 on WRI’s Form 10-K for the year ended December 31, 2007 and
incorporated herein by reference).
|
10.41†
|
—
|
Fifth
Amendment to the Weingarten Realty Retirement Plan, dated August 1, 2008
(filed as Exhibit 10.48 on WRI’s Form 10-Q for the quarter ended September
30, 2008 and incorporated herein by reference).
|
10.42†
|
—
|
Amendment
No. 3 to the Weingarten Realty Investors Retirement Benefit Restoration
Plan dated November 17, 2008 (filed as Exhibit 10.1 on WRI’s Form 8-K on
December 4, 2008 and incorporated herein by reference).
|
10.43†
|
—
|
Amendment
No. 3 to the Weingarten Realty Investors Deferred Compensation Plan dated
November 17, 2008 (filed as Exhibit 10.2 on WRI’s Form 8-K on December 4,
2008 and incorporated herein by reference).
|
10.44†
|
—
|
Amendment
No. 3 to the Weingarten Realty Investors Supplemental Executive Retirement
Plan dated November 17, 2008 (filed as Exhibit 10.3 on WRI’s Form 8-K on
December 4, 2008 and incorporated herein by reference).
|
10.45†
|
—
|
Amendment
No. 1 to the Weingarten Realty Investors 2001 Long Term Incentive Plan
dated November 17, 2008 (filed as Exhibit 10.4 on WRI’s Form 8-K on
December 4, 2008 and incorporated herein by reference).
|
10.46†
|
—
|
Severance
and Change to Control Agreement for Johnny Hendrix dated November 11, 1998
(filed as Exhibit 10.54 on WRI’s Form 10-K for the year ended December 31,
2008 and incorporated herein by reference).
|
10.47†
|
—
|
Severance
and Change to Control Agreement for Steven C. Richter dated November 11,
1998 (filed as Exhibit 10.54 on WRI’s Form 10-K for the year ended
December 31, 2008 and incorporated herein by
reference).
|
10.48†
|
—
|
Amendment
No. 1 to Severance and Change to Control Agreement for Johnny Hendrix
dated December 20, 2008 (filed as Exhibit 10.54 on WRI’s Form 10-K for the
year ended December 31, 2008 and incorporated herein by
reference).
|
10.49†
|
—
|
Amendment
No. 1 to Severance and Change to Control Agreement for Steven Richter
dated December 31, 2008 (filed as Exhibit 10.54 on WRI’s Form 10-K for the
year ended December 31, 2008 and incorporated herein by
reference).
|
10.50†
|
Promissory
Note with Reliance Trust Company, Trustee of the Trust under the
Weingarten Realty Investors Deferred Compensation Plan, Supplemental
Executive Retirement Plan and Retirement Benefit Restoration Plan dated
March 12, 2009 (filed as Exhibit 10.57 on WRI’s Form 10-Q for the quarter
ended March 31, 2009 and incorporated herein by
reference).
|
|
31.1*
|
—
|
Certification
pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Chief
Executive Officer).
|
31.2*
|
—
|
Certification
pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Chief
Financial Officer).
|
32.1**
|
—
|
Certification
pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the
Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
|
32.2**
|
—
|
Certification
pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the
Sarbanes-Oxley Act of 2002 (Chief Financial
Officer).
|
_______________
*
|
Filed
with this report.
|
**
|
Furnished
with this report.
|
†
|
Management
contract or compensation plan or
arrangement.
|
57