Economy Dampens Weingarten Earnings

HOUSTON-A down economy pounded away at Weingarten Reality during the latter part of 2008. A glance at the company’s Q4 figures showed a net loss to common shareholders of $9.7 million versus $58.8 million of net income available to shareholders during Q4 of 2007.

Also impacting FFO and net income were a series of one-time impairment charges. A non-cash impairment of $46 million was charged to land held for future development, while a non-cash write-off of predevelopment costs totaled $16.8 million for the entire year.

Occupancy was down across the company’s portfolio, ending the year at 92.6% compared to 94.4% from the previous year. Still, the company’s liquidity stayed strong, with help from revolving credit and a joint venture with a subsidiary of Hines REIT Properties LP.

Through the partnership, the Houston-based Hines is paying $271 million to acquire a 70% interest in a portfolio of 12 shopping centers. Ten of the assets have already closed, with the other two anticipated to close in 30 days, upon the loan assumption. The two partners also completed $100 million secured financing on the assets.

Furthermore, Weingarten’s issuance of 3 million shares of common stock generated $98 million, which helped paid down the company’s revolving credit facility. “During the past 12 to 18 months, we reduced staff on several occasions, minimized expenditures and improved liquidity through sales and borrowing,” commented Weingarten president and CEO Drew Alexander. Though the Q4 was impacted by market conditions and one-time items, “we performed reasonably well, considering the environment,” Alexander noted.

Weingarten executive vice president of asset management Johnny Hendrix agreed, acknowledging that the portfolio’s strength is in the grocery-anchored centers. As tenants fall out of space in those centers, he comments, the space doesn’t remain empty for long.

However, the lack of demand is prompting Weingarten to stimulate demand among a non-traditional tenant base, such as medical. “Depending on the center, we could see some sort of dialysis center or clinic; something we may not have done a year or two ago,” he commented. “Maybe we’ll be looking at a call center or a large gym in place of one of the tenants.”

Meanwhile, on the asset disposition side, Hendrix said deals have fallen out, with Weingarten’s close ratio at 50% during 2008. The trend, he continued, has been toward one-off deals, generally valued at between $10 million and $12 million. “These tend to be local entrepreneurs with local banks,” he added. “Institutions and REITS are out of the market right now.”