Weingarten Realty Investors (WRI)

Q3 2011 Earnings Call

October 31, 2011 11:00 am ET

Executives

Johnny L. Hendrix - Chief Operating Officer and Executive Vice President

Andrew M. Alexander - Chief Executive Officer, President, Trust Manager, Chairman of Executive Committee and Chairman of Pricing Committee

Stephen C. Richter - Chief Financial Officer and Executive Vice President

Robert Smith - Senior Vice President of Development

Kristin Horn - Director of Investor Relations

Analysts

Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division

Christy McElroy - UBS Investment Bank, Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Richard C. Moore - RBC Capital Markets, LLC, Research Division

Vincent Chao - Deutsche Bank AG, Research Division

Christopher R. Lucas - Robert W. Baird & Co. Incorporated, Research Division

Ki Bin Kim - Macquarie Research

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

Craig R. Schmidt - BofA Merrill Lynch, Research Division

Quentin Velleley - Citigroup Inc, Research Division

Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division

Carol L. Kemple - Hilliard Lyons, Research Division

Presentation

Operator

Welcome to the Weingarten Realty Third Quarter Earnings Conference Call. My name is Matt, and I will be your operator for today's call. [Operator Instructions] I will now turn the call over to Ms. Kristin Horn. Ms. Horn, you may begin.

Kristin Horn

Good morning, and welcome to our third quarter 2011 conference call. Joining me today is Drew Alexander, President and CEO; Stanford Alexander, Chairman; Johnny Hendrix, Executive Vice President and COO; Steve Richter, Executive Vice President and CFO; Robert Smith, Senior Vice President; and Joe Shafer, Senior Vice President and CAO.

As a reminder, certain statements made during the course of this call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results could differ materially from those projected in such forward-looking statements due to a variety of factors. More information about these factors is contained in the company's SEC filings.

Also, during the conference call, management may make reference to certain non-GAAP financial measures such as funds from operations, or FFO, which we believe help analysts and investors better understand Weingarten's operating results. A reconciliation to this non-GAAP financial measure is available in our supplemental information packet located under the Investor Relations tab of our website. I would also like to request that callers observe a 2-question limit during the Q&A portion of our call in order to give everyone a chance to participate. If you have additional questions, please rejoin the queue. I will now turn the call over to Drew Alexander.

Andrew M. Alexander

Thank you, Kristin, and thanks to all of you for joining our call. I'm pleased to announce another quarter of solid operating results. Last quarter, we discussed the fragile and inconsistent economy, and today, we remain concerned with the strength of the recovery. Nevertheless, we remain focused on continued improvement in our operating properties and our solid operating results for the quarter are reflective of this effort.

We made great progress in increasing total occupancy with a 40 basis point increase over the prior quarter to 91.6%. This is in spite of an additional 77,000 square feet of vacancy due to the Borders' bankruptcy. We also continue to make progress on small shop leasing with a 40 basis point increase in this metric from the prior quarter. Leasing velocity has remained consistent, and the fallout of small shop tenants has declined, so those factors contributed to improved occupancy. In addition, we've also taken steps to further enhance our capital structure and liquidity. As Steve will discuss in greater detail, we closed on a $200 million term loan and amended our credit facility, both with attractive terms. Most importantly, we extended the term of our credit facility to 4 years with an additional one-year extension at our option, ensuring adequate liquidity to handle all near-term debt maturities. With so much uncertainty in the market today, our ability to access capital is extremely important.

After our accelerated disposition program, Johnny will provide the details of our efforts in a little bit, but let me just reinforce our focus on our asset recycling initiative we announced at our Investor Day in April. We are making good progress but experienced some headwinds with the current turmoil in the scene of the U.S. market. While we won't fire sale these assets, we believe we will work through these market conditions and continue to successfully execute our strategy.

I'll now turn the call over to Steve to discuss our financial results.

Stephen C. Richter

Thanks, Drew. Weingarten reported funds from operation, or FFO, per diluted share of $0.01 for the third quarter of 2011. Recurring FFO was $56.2 million, or $0.47 per diluted share, for the quarter versus $0.44 for last year, resulting in an increase of 6.8%. Reported FFO was adjusted for $0.44 per share of noncash impairments and $0.02 per share for the write-off of unamortized debt cost resulting from the early extension and renewal of our revolver and arriving at recurring FFO. All these details are outlined on Page 5 of our supplemental package.

The $0.44 of impairments can be summarized into 3 basic categories: First, approximately $0.21 relates to our strategic plan to dispose of lower tier assets. After specifically identifying potential disposition properties and analyzing current market data, we have recognized impairments on properties we believe we are likely to sell over the next couple of years as part of this initiative.

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