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WRI Weingarten Realty Investors

Participants
Michelle Wiggs Vice President, Investor Relations
Drew Alexander President and Chief Executive Officer
Steve Richter Executive Vice President and Chief Financial Officer
Johnny Hendrix Executive Vice President and Chief Operating Officer
Joe Shafer Chief Accounting Officer
Katy McConnell Citi
Ki Bin Kim SunTrust
Justin Devery Bank of America
Vince Tibone Street Advisors
Chris Lucas Capital One Securities
Call transcript
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Operator

Good morning and welcome to Weingarten Realty Inc.'s Second Quarter 2018 Earnings Call July 31, 2018. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note this conference is being recorded. it Michelle turn now I'll over Wiggs. to And you may begin. Michelle,

Michelle Wiggs

second and conference welcome morning quarter to Good our XXXX call.

Vice COO; Joining me Hendrix, Richter, Joe and Johnny Vice President and President CFO; and Executive Shafer, Steve CAO. Senior today is Executive Drew Vice Alexander, President and and CEO; President

this to and of due uncertainty management's These meaning subject Actual As More Private of are non-GAAP could better Weingarten's I'll operating variety a conference course website. supplemental Investor or from our Securities results. reminder, current of statements forward-looking funds are and Litigation certain is made statements we changes in results filings. in factors. SEC believe call factors differ certain and Act. may Alexander. circumstances. Reconciliation projected to such to those are make the contained on call help Relations tab and Drew which management operations under financial measures such package materially Company's measures based financial statements in information call, NAREIT, expectations understand of over located to reference analysts from the Reform information about these non-GAAP to available turn Also, to the forward-looking during as FFO, this the within the our now core both statements in a the during investors is these

Drew Alexander

for all you to and joining I'm you, Thank good thanks announce of quarter. pleased us. Michelle, to another

community with and goods to the neighborhood testimony and basic resiliency to quality centers and produce of is grocers and portfolio continue strong the a selling services. We our of merchants which results shopping

risk somewhat failures. from in tenant diversification of our benefit segment mitigates which also best tenant the We the

and made professionals of had four quality For instance manageable and years strength we've them thank Further, sincerely and great we over which locations the team are outstanding for our a our have Toys“R”Us, are strong. portfolio the tenant improvements seven location quite accomplishments. dramatic we last to is with I only

market signals. to As capital allocation, continue follow to we

been Our program successful. has disposition highly

XX an XXX dispositions, XXX we and quarter, the currently have XX of excess under closed the subsequent company closed quarter. During contract. million million Year-to-date, an dispositions million totaling million to of and additional

believe to the assets property in the our can right to sell when disposing portfolio selling of or net the the NAV. where continue strategy our We asset at portion of at is value bottom stock significant near level discount a is we

whatever reasonably range While projects, of activity. acquisitions, to guidance quality we're environment the end. take disposition redevelopment debt further special change advantage conditions proceeds our million fund to and to themselves give dividend our favor XXX These shares balance going million. to XXXX forward year to current and of present seems a large rapidly, new and can the while we've maintaining our pursue XXX fund position common development increased repurchase dispositions Accordingly, ability Basically, us a strong at opportunities sheets. disposition

best FFO, our is the current dispositions conditions. for While market long given shareholders the term believe impact we this strategy

Whitaker which and at Driscoll for track. nicely growth. Oaks. future will are Arlington provide West River developments new Our progressing Alex, way the are started and we Central the make to redevelopments earnings demolition Recently on

supplemental. as live, this work, are the slid first scores end this estimated outstanding in and coordinating shopping of XX start delayed half some up center project We a for our which to about the walkability the utilities, the The transforming our we're work wrapping Our River therefore quite noted of stabilization to XXXX play. bit, our high-rise prominent thirty experience tenant slight from of in Oaks excited a at and XXXX delay asset here did and Houston. permits

returns adjusted continues program Our robust to generally produce very risk is strong over and redevelopment XX%.

XX,XXX on high square construction Texas example land an offering. low projects. return both on foot risk, two beginning vacant These building As different are at we're

that the cautious capital excellent on on new continue continue work solid to Steve, it being and are to great redevelopment As to very focus. in financials. on pipeline, projects invested we with returns a will We've A we the our developments, work provide those the future projects continue many risk other quarter, with profile.

Steve Richter

same Thanks compared quarter. XX, the June per quarter morning, very for XXXX year. to Core FFO prior everyone. for to increase report for solid recoveries. $X.XX reimbursements $X.XX debt bad benefited FFO quarter from and higher Drew. Good per I was expense space share ended another pleased am XXXX share Core the the increased rents, of

to was interest XXXX and outstanding from XXXX. of the with debt reduction Additionally, lower due expense disposition proceeds

both these per income than press from $X.XX income years. A were Dispositions for to by FFO reconciliation the net by more release. increases in dispositions FFO reduced share operating is of the offset However, included quarter. our reduced in core

loan of is second the the Our $XXX sheet $XXX early in balance term our proceeds tranches, stronger we With which our million than million disposition paid second in quarter. two off ever. closed

no of average We a bonds a strong and shares repurchase share. quarter share. bonds million common of maturities average and $XX.X unsecured XX.X% was of that have to well-laddered capitalization also times at debt by maturity an total common have million supported per per Year-to-date, $XX.X an has $XX.XX XXXX. schedule until EBITDA price end, of of significant X.X shares our At market $XX.XX to of million net debt we price $XXX,XXX and repurchase was $XX.X

arise. metrics provide that flexibility liquidity significant strong opportunities and great Our to pursue credit

of share. As net per a share per to our $X.XX $X.XX earnings range range NAREIT a to per FFO income increasing are and to of guidance, to $X.XX we share $X.XX

core guidance year. for the are reaffirming FFO We

for aggressive on for Drew decreased earlier, for centers And competition are and dispositions. has the acquisition. been pricing, as touched guidance quality strong guidance Given increasing we

our All our of supplemental. the included are details of on XX of Johnny? Page guidance

Johnny Hendrix

and last very was strong overall of a highlighted performance overall Thanks We're second XX.X%, same retailers deliver fallout appetite Las expansion industry remained in XX.X% growth our lease had and meeting more we Since than adjusted with apocalypse the our occupancy spreads Vegas. meetings velocity XX%. focused retail and property continuing recon annual rent call, was produce to for industry. Steve. great new quarter narrative the replaced Leasing discussions risk on with pleased by from been ago hundreds This results better but redevelopments mood the shareholders. retail in for to of challenges realistic. the expected. steady, real to with company NOI program redevelopment We our Tenant returns. has that is X.X%, over the and estate attended rent increased was the are The year has was definitely the modest, continues

desirable than real want occupy. Weingarten's properties population for retailers enjoy shopping growth outsize years our urban education has Most locations of highly portfolio business good to come. states low and transform population higher that will after and with to are are centers in densities levels. average strong Our markets tax incomes, primarily very sought friendly,

couple for to strong Maxx. We clothing maintain to specialty update of a come. and Other business, like expanding see you good retailers categories from to service, Lucky. bankruptcies. to continue home for continue entertainment our include Ross furnishing, and and we demand want expect space occupancy T.J. craft, I on like years will Burlington, supermarkets I Sprouts

is The spaces at we lease all these Each there not locations be us. will they $X.X tremendous The feet quarter station, the and yet Toys“R”Us four has rent. rejected as expect for again lease represent million with Palms minimum prospects and First, rents been categorized replacement Argyle in bought spaces yet, run three I with closed and Argyle been think square all to My same. end has had leases has for will the impact be the expectation four loss be base properties, is four occupied annual Bunker we it negotiating and in but locations Hill for XX rent. about at no XXX,XXX months. of We're generating The soon. Cypress has XX upside. will

this should Mas. overall, foods be one y long Winn-Dixie The locations Southeastern term So bankruptcy and complete. had Fresco positive for now Weingarten. to We is a

supermarket, sold is Food bankruptcy store refurbishing to leases open two Southeastern Ideal foods from who They Baskets, has emerged and locations. third currently affirmed an and the soon. independent for should the

any affect new leases XXX our XX the We closely year. significant new bankruptcy. and $X.X As executed a there will representing rent that do believe not a bankruptcies or two We We is second the we us risk occupancy on leases in rent. and signed further this monitor will quarter. and This not list Burlington base renewals lose result, retailers watch home million during goods from stores. this a included

two leased fitness other with also facilities, along We medical service and tenants. type restaurants

rent off with quarter, pleased the lease remember a rent are new It's to denominator. We XX.X% spreads. particularly with this growth is based important small growth

is redevelopment around our a X.X%. so the And the our line for our easily can or by year. projections two Year-to-date, is guidance far. leases. the spread of quarter is consistent one expectations one in be So property used overall That's with same our this we skewed for NOI with rest Year-to-date, good with X%.

to would top expect margin the challenging. the range and year be end five same months time into the of of limited be surprises for At the negative could We and same significant X.XX to NOI built achieving X.X%. the property want guidance to over acknowledge next the impactful finish budget we the insider error is

risk the base NOI, redevelopment Much feet to million have of will of and property same very rent. is quarter. XXX,XXX commenced. program online fourth continues particularly leased the generate over and to represents that $XX good a next be in several space will months big over square come We that returns. about annual This in minimum boost adjusted Weingarten's

under over investment Entitlements approvals projects construction, $XX outparcel of we but multi-tenant have time, once Excluding Most incremental Oaks, take these are of commence the XX projects million. The redevelopment the risk. there very properties little be anticipated will returns River tenant is Driscoll and and do at buildings. an lot XX%. a of

in property second not new to did during purchase pursuing acquisition our we active the quarter, of great be centers continue markets. any we very While shopping target the

forward range. the center X.XX%. We the X.XX% Cap centers the rates has in tenancy supermarket Power centers shopping pricing challenges range a meet continue rates for ahead. range We anchored top X% and coastal to Drew? to look to to wider cap around depending on in to continuing seems to have significantly to trading X% in X%. command of X% are in great anchored markets markets XX been other supermarket see

Drew Alexander

Johnny. Thanks

maximize WRI REIT shareholders of the value The Our between to recent centers perception to at has we improved the disconnect creation continually retail through experienced in job estate The will reassess be the modestly, the our versus has retail value slight the strategy. markets of cycle different company changes many that retail shopping our the management accordingly retail eye on of is and real public been to and dramatic in position the especially others private is This even all prices. value has us real focused stock the respond long continue we the after estate causing with up in our like term team REITs and remain long run valuations to overall cycles term that the goal. on value for depressed, good remains world. goal. The the REITs

questions. capital the improve undoubtedly results. dry we're sheet platform strong arise. of Weingarten. Our and now for I Operator, joining continues well opportunities today the people, that we to powder and maintaining be properties while requirements, to great other and to a take in will balance growth continued positioned future for your to thank interest react necessary you fund still great includes Great happy great all to call our

Operator

begin Drew. have And Christy Instructions] We'll the we question-and-answer session. ahead. from McElroy, Citi, now [Operator go please Thanks

Katy McConnell

you guidance McConnell And disposition Can to Christy. your what's directionally, is morning. net Good a transaction This decision just increase just talk for more expectation market activities? quite Katy transaction currently? your trends for net about based little being on then on

Drew Alexander

Drew. Good it's morning, Katy,

strategy NAV, and other special rather does well that as of indicate the portfolio we I term if a retail dividend in of to stocks you REIT the talked very advantage said and significant seems our versus our new bottom level we you communicated it as really our the we buyback. fund you future stock to we that range, portions As we we have the disconnect you do the strong see balance you about know property keep take know some that properties, know as acquisitions redevelopment in if properties we stock of it's and that remarks conference just private think between that in than the our were us market is sheet signals large will right where is know development about the opportunities know to prepared pretty is are the long sell price sell can at value buyers this

focusing you honing of know you the you the weaker So the the about it's again know know map, some geography, market selling really property. signals

seeing what still for rates sevens. the generally So in we are cap we're selling middle

and at have we looking know indicated, pipeline, guidance. to we in we You increase it was thought what as the appropriate

a it's market market whole year, be this point, we going any given the next what conditions to that are conditions, hard little budgets say As know don't to to haven't and around strategy is we the like. done at

You know But my we'll you but continue will lower signal estimate be to next it's to the guess XXXX. XXXX know certainly is number you year. things a know than follow estimating hard

Katy McConnell

you. Okay, Thank great.

Operator

Kim. Please have we Bin ahead. SunTrust, From Ki go

Ki Bin Kim

Thanks, good morning, everyone.

don't standpoint. have a your So pressure you're billion is to great sell you shape in to sell of half assets, deleveraging and any balance on track about

balance assets NAV the per NAV you the share decision term should growth the at at point? as you gap same put near flow selling flow do looked term? some by long mindset cash investors, closing Weingarten how the unfairly, the put do position, under the of tipping in near cash versus is question and how box growth my does a pressure that penalty cash flow in maybe be optimizing so slight term per balance share some NAV And So in

Drew Alexander

morning, Good Bin, it's Ki Drew.

trigger as pressure again consequently know we've been Hopefully, board you of also some on an address remarks, as long management estate out That it's good know at we the you does and that's long management to a to from we're properties go know assets, problems maybe is question us the real know excellent FFO. property, is to assumptions observe a accurately that because you and perspective, de-risk know tried that de-risk of special question, to that you we something business occupied thing clear to say in know for the responsibility manage amount your there think gains to know term. is said you that to yesterday know is improve a and you a You remote you our selling we make off you money dividend. geography, term you to prepared our as difficult know multi-years. tenant, know a that think in some time issues And sell from meeting know our it you balance, more

some gain thing and is know we term short the it's long think While long pain it think you we right term to. it's term

working, see exist as guidance to So I increase for have we is which said before, again we'll market conditions conditions, based market ever-changing. the as in are upon strategy reacting what what's XXXX, XXXX, the

Ki Bin Kim

just you tone be year. goes becomes there next it Is five bit you just that expensive dilutive the and a to I Is there too standpoint where pace down it from you're a know delivering? looking leverage to of your that a balance - becomes little point and too mentioned up

Drew Alexander

discounts lower again looking of do. moment, long this decent at but but portion it We ability the the of have a the at seems is lot NAV of just to portfolio still fund. things we're to to some in and at right thing sell there pipeline term in to sure NAV development funded new I'm our a amount the pretty decent

also that opportunities a pipeline redevelopment in We our we're on. working have of lot

of footprint across we're in entire as well the very acquisitions As the active company.

competitive buy. As for his the that remarks, do very, want see the Johnny in we we qualities things said in centers, very quality to

do right we long cognizant other go more the focus trying term the So things the on to thing. short term FFO and factoring and of of but term to a the into long term, to balance and term but lot NAV tend long that short

Ki Bin Kim

one could in you is and lead to how new your Okay have - I and kick last set FFO accounting question, if are that with one the that expense? because squeeze your guys accounting on FFO the estimated standards formalized on much XXXX, in

Steve Richter

reviewing still announcement. of the Steve. new This is from Bin. Good morning, accounting we're Ki working through We're the and details

to WRI and the I'd million very range. the However, expect and believe be $X.XX will million that extensive G&A somewhere effective prepares legal we affected capitalization. note one component we do department negotiation of is which all decrease our efficient also is the by in-house in to $X.XX this which largest leases or in the an has $X $X cost

not that's totally currently. So but finished again, we're thinking we where is are

Ki Bin Kim

Okay. That's good fairly point, you. All companies right. I penalize mean it with does scale. Thank

Operator

ahead. Bank From we of go Please Craig have Schmidt. America

Justin Devery

topic maybe to be pertains wanted address as Justin how development? come should higher about or is I Craig. current construction Devery a up this future a Hi, quite more to it we costs on bit for which thinking lately that's importantly is

Drew Alexander

Sure, Justin, is it's Drew. mornings, good

it current or got good shape the important distinction pre-bought So we're an we lot contractors, materials. a bought max we've in guaranteed price to think is with as to I of make contracts pretty

as So two River Virginia, in to I in very we're good Oaks think projects, very, the big shape. three and the

factoring small building, big doing business as our pricing mostly on, the what thing an The three projects, lot issue, well that doing geopolitical is and and and questions of we're floater As issues, of question activities that friends of question looking is a in an would to steel nice in. Weingarten we're prices say it's the lots think of scope gets future, the about something excellent that into we that everything But I building. again for Realty, lots have things. of lot if doing beyond something a the more a we're the is definitely most immigration as I floater in broader sort tariffs gets the we're redevelopment. policy definitely national and But construction except we're at it's it's that of into small of the of it lumber, much labor

construction So increase rent. if are increases, the can we some there

developments is pretty a the in to good strong markets. very decent As residential percentage

locked So units. We increase again shouldn't because are those most and of construction can if there there is be that likewise price increases in.

So and we're across parts other strong of Washington prices to you a in good really but very whole good wrestling construction Houston And effects Florida cognizant in geography, from are question of the hurricane seeing Washington very know markets that D.C. issue a issue. repair with. we're little the it's an it's we're very still a obviously Seattle,

Justin Devery

Sports one differently time helpful. place? that's a Authority terms in you, releasing get about Toys space just the we for for be one or And other tenant than bankruptcy it takes to me. Thank new thinking Should of demand any in

Johnny Hendrix

lower Hey, bit, Justin. will This leases to with it's Palms, spaces, again probably Construction speak the cost we market I Authority. Sports think time going better construction than are had Really can redevelopment. sports same, centers we Johnny. of spaces little have and the we given up is rents had say that in about generally likely larger eventually I be properties a you When I are think factor into you I today. turn probably authority. all a four the look the at is would shopping And that and better when one there with than to Palms the

again wanting a access users upside great that So different many tremendous that of property. to are got tenants We've and a many, we amount have there. even

Authority. anything quite again than we that So will experience with be different Sports

Justin Devery

Great. Thank guys. you,

Johnny Hendrix

you. Thank

Operator

from And Vince ahead. Street Instructions] Please we [Operator Tibone online. Advisors, Green have go

Vince Tibone

provide tailwind big seem same NOI recoveries color Can growth? in Good to that expense the provide a quarter some do you guys pretty on morning. property

Steve Richter

quarter-to-quarter. than around reimbursable rebuilt same by I the Steve. tax is margin The Good little move driven nothing of timing, really there get does QX. unusual and morning, bit the We a little primarily over bit in in Texas Vince, was occupancy other can't a improvement there. store from this

Vince Tibone

of year-over-year in So there kind even continued year the recoveries the half? rest will positive the be expense back for kind of

Steve Richter

that I to strong by anything improvement commence driven that going between year. pretty forward Again We looks through have Yeah, what still that think difference as occupancy dramatically going we is like. should have that's out shift. the the don't we move mostly it's there do signing

Vince Tibone

more cost you. the And just won't on follow-up forecasting annual cost bit natural for next of included you in experiencing I thank that into sense, kind a Make kind mean underwriting, us the what construction stabilize X% of some X% or provide you detail more construction a am are these there residential point. projects anything of overruns you then increases just little decreases a provide are or the or be years, Can bit one cost into incorporate to a over give confidence little these could cost on side.? are few to more property current projects

Drew Alexander

Vince, three Understand contractor locked majority are of morning. there costs the all ex-price are Good vast big there all in again increases, Yes, contingencies have is and that Drew. bought the guaranteed cost the some are material and of some so part out, it's contracts. my projects

and of the question, geopolitical So I and world. buyout the around are are between said there the questions things in we shape. contingencies, the other the a good as in are materials, think contract earlier I in of But that broader moving lot

Vince Tibone

all you. I Thank Okay. That's have.

Drew Alexander

you. Thank

Operator

From Capital go One ahead. Chris Please Securities, we Lucas. have

Chris Lucas

terms on the if what Good halfway if I you just wanted year morning, stuff the that's Steve debt sense what stock be based far this either the the follow-up of on expecting sort flexibility to so special wonder to back half? guidance of as versus about you're kind everybody. should were buyback and any repayment close increase thinking year, dividend back sort guess. of or I in of you we for for Maybe disposition then have through I

Steve Richter

aware, from the But gain a that again probably will you the we perspective a That's now know answer basis than a happens balance for don't are asset-by-asset balance higher Chris. we the really question on lot locations now liability what an dividend. in between an We've is to do signaled, the today very year. obviously last and dividend, others. have we've morning, excess what closed. year what some have or of is and year's difficult of the excess of percentage between special as probably That's already Good close

what exactly figure looks going out to forward. difficult that very it's So like

Chris Lucas

mean tended be the as left I stuff the what of potentially guess half centers this looks for smaller And curious just in that more quarter sold as the quarter, relates back second pool like potentially? sort mix to sold to be the you year. to it the I were of centers in Okay. power to the first the then year that

Drew Alexander

that advantage Drew. opportunity are it's because pricing of we're when taking is near and get is issue an of at Chris, big The advantageous we this we forward we disconnect Morning, that or NAV. feel moving

on always we we're more expect is going really ever lot it's than happen why So to working dividend. hard a which a is special of part frame to

brush would just power some on Wall it's we working centers in I are increasingly clear to properties, publically good They being we've centers, own still Kentucky there the inconsistent smaller broad but So this us in goal. sold Kentucky, it's a two. there's supermarket say the year two center to and some are still as anchored other continue map, with Street

observed, we've the looking sold disconnect that. term take the meantime, it's that One private of of one have that want do, taking our it's public changes advantage long to So do totally change. right and about it this quality, risk. conditions and the to advantage properties We the to that say and in slam to don't days for but the of the has the continuation is, on been at brakes stop because we would looking of I kinds at a market thing view delivering, these But it in can think of the it. the between

Chris Lucas

the can forward if because like I where sort that distributing this given disconnects you issues? to going plan days are gains size to a So point you under or the I as company is are of feel there about the you out is think operate and size guess either continuing assets there sell public Drew,

Drew Alexander

question while and is reach the some I because what part before do year that that's you as road are that great knew advantage there opportunity be say I think gets of part a factors and I said it, do to the inflection asked of an down we than go there take we of in the it just what the you on. would of farther things are to intend lot it, into and points that some Yeah, less that's why one guidance next difficult

Chris Lucas

Okay. Johnny And question for then on last just acquisitions front. the me.

some are that capital cost the guess you I'm give confidence what obviously you guys But Your seeing actually on you the in gives curious some XXXX of is money. bit that as to top marketplace active on in you sort freedom just of a dispositions an come on the a improved playing might terms bid? to I out

Johnny Hendrix

a on. mean lot there bids issues a especially to we going that are can and have can we for where resolve our boots property situations can for way. not going whole really But markets is that us, think to of be on advantage think very we to in no some where bid I that are that tough in the I of we Where couple these Well that guidance Again a will the the along We do I that don't difficult again have contract working we in things we be most with live close ground. we're in we have under of and now small the will be acquisitions reduce in that going have already that we're it's Chris. situations. winner a think active lot. we we're we're apply platform

Chris Lucas

morning. this lot. Thanks Appreciate your a time

Johnny Hendrix

Thanks you.

Operator

we Suntrust from a from go Ki And ahead. Kim. Instructions] have Please follow-up [Operator Bin

Ki Bin Kim

that that the work? too or of the accounting Is Core or it question all Toys“R”Us onetime just bankrupt, went income. how has to I discretion your on your necessarily bankruptcy write-off market ended rent leases things? or a whatever just is mechanics it's Quick it exclusive that is under but were that cost view cost does but on changed market know at FFO, the to Thanks. that because lease the mean me it

Joe Shafer

Chief Ki out for Officer. this we morning, put at Bin. bought market. under Toys“R”Us described pretty Joe it in is actually you Hey, Actually Accounting the you that piece the ramp time And is homes Shafer, This your well. the

liability that the balance sheet, a on liability the then up on flush lease them to when bankrupt any there, look with ended are terminate we goes income balance you you And needs at without your that's all you our So through that what typically to out and sheet with be written-off. do Toys statement. intangibles

Steve Richter

Ki Bin. Steve. This is

very Just the as a inception no acquisition. end really to what But has evaluated at the at the It depends, that's this market today. not recorded through as It adjusted and time. just a driver rent it's the may follow-up. go you be of front

Ki Bin Kim

call. And to That's wanted Right. I thanks why just clarify on the that for research. thought. the I doing

Steve Richter

Thanks.

Operator

Drew, closing at turn Okay. back remarks. the you to moment. it I'll No questions further for

Drew Alexander

Brandon. Thank call, And and enjoy read just our for on friends. with research everybody's the you, analyst all everybody relationship our we we

- So we best. any company summer Brandon. the other in wish any Thank everyone afternoon, Hope very is much. this and your great interest of around. the a you, you having We everybody. if and questions you be appreciate have Thank will all

Operator

this and conference. concludes Ladies Thank for you today's joining. gentlemen,

You may now disconnect.