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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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)
Securities registered pursuant to Section 12(b) of the Act.
Title of Each Class Name of each exchange on which registered
------------------- -----------------------------------------
Common Shares of Beneficial Interest, New York Stock
$0.03 par value Exchange
Series A Cumulative Redeemable Preferred New York Stock
Shares, $0.03 par value Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the common shares held by non-affiliates
(based upon the closing sale price on the New York Stock Exchange) on February
25, 1998 was approximately $1,204,961,470. As of February 25, 1998, there
were 26,665,814 shares of beneficial interest, $.03 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement in connection with its
Annual Meeting of Shareholders to be held May 8, 1998 are incorporated by
reference in Part III.
Exhibit Index beginning on Page 35
TABLE OF CONTENTS
ITEM NO PAGE NO.
- -------- --------
PART I
1. Business 1
2. Properties 3
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Shareholders 12
Executive Officers of the Registrant 13
PART II
5. Market for Registrant's Common Shares of Beneficial
Interest and Related Shareholder Matters 14
6. Selected Financial Data 15
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
8. Financial Statements and Supplementary Data 19
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 34
PART III
10. Trust Managers and Executive Officers of the Registrant 35
11. Executive Compensation 35
12. Security Ownership of Certain Beneficial Owners and
Management 35
13. Certain Relationships and Related Transactions 35
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 35
PART I
ITEM 1. BUSINESS
General. Weingarten Realty Investors (the "Company"), an unincorporated
trust organized under the Texas Real Estate Investment Trust Act, and its
predecessor entity began the ownership and development of shopping centers and
other commercial real estate in 1948. The Company is self-advised and
self-managed and, as of December 31, 1997, owned or had interests in 194
developed income-producing real estate projects, 169 of which were shopping
centers, located in the Houston metropolitan area and in other parts of Texas
and in Louisiana, Arizona, Nevada, New Mexico, Oklahoma, Arkansas, Kansas,
Colorado, Missouri, Tennessee and Maine. The Company's other commercial real
estate projects included 23 industrial projects, one multi-family housing
property and one office building, which serves, in part, as the Company's
headquarters. The Company's interests in these projects aggregated
approximately 22.2 million square feet of building area and 85.4 million
square feet of land area. The Company also owned interests in 25 parcels of
unimproved land under development or held for future development which
aggregated approximately 8.1 million square feet.
The Company currently employs 171 persons and its principal executive
offices are located at 2600 Citadel Plaza Drive, Houston, Texas 77008, and its
phone number is (713) 866-6000.
Reorganizations. In December 1984, the Company engaged in a series of
transactions primarily designed to enable it to qualify as a real estate
investment trust ("REIT") for federal income tax purposes for the 1985
calendar year and subsequent years. The Company contributed certain assets
considered unsuitable for ownership by the Company as a REIT and $3.5 million
in cash to WRI Holdings, Inc. ("Holdings"), a Texas corporation and a
newly-formed subsidiary of the Company, in exchange for voting and non-voting
common stock of Holdings (which was subsequently distributed to the Company's
shareholders) and $26.8 million of mortgage bonds. For additional information
concerning Holdings, refer to Note 6 of the Notes to Consolidated Financial
Statements at page 29.
On March 22, 1988, the Company's shareholders approved the conversion of
the Company's form of organization from a Texas corporation to an
unincorporated trust organized under the Texas Real Estate Investment Trust
Act. The conversion was effected by the Company's predecessor entity,
Weingarten Realty, Inc., transferring substantially all of its assets and
liabilities to the newly-formed Company in exchange for common shares of
beneficial interest, $.03 par value ("Common Shares"), of the Company. The
shareholders of the corporation received Common Shares for their shares of
Common Stock of the corporation (on a share-for-share basis), and the Company
continues the business that was previously conducted by the corporation. The
change did not affect the registrant's assets, liabilities, management or
federal income tax status as a REIT.
Location of Properties. Historically, the Company has emphasized
investments in properties located primarily in the Houston area. Since 1987,
the Company has actively acquired properties outside of Houston. Of the
Company's 219 properties which were owned as of December 31, 1997, 93 of its
194 developed properties and 16 of its 25 parcels of unimproved land were
located in the Houston metropolitan area. In addition to these properties,
the Company owned 54 developed properties and 5 parcels of unimproved land
located in other parts of Texas. Because of the Company's investments in the
Houston area, as well as in other parts of Texas, the Houston and Texas
economies affect, to some degree, the business and operations of the Company.
In 1997, the economies in Houston and Texas continued to grow, exceeding
the national average; the economy of the entire southwestern United States,
where the Company has its primary operations, also remained strong relative to
the national average. A deterioration in the Houston or Texas economies could
adversely affect the Company. However, the Company's centers are generally
anchored by grocery and drug stores under long-term leases, and such types of
stores, which deal in basic necessity-type items, tend to be less affected by
economic change.
Competition. There are other developers and owner-operators engaged in
the development, acquisition and operation of shopping centers and commercial
property who compete with the Company in its trade areas. This results in
competition for both acquisitions of existing income-producing properties and
also for prime development sites. There is also competition for tenants to
occupy the space that the Company and its competitors develop, acquire and
manage.
The Company believes that the principal competitive factors in attracting
tenants in its market areas are location, price, anchor tenants and
maintenance of properties and that the Company's competitive advantages
include the favorable locations of its properties, its ability to provide a
retailer with multiple locations in the Houston area with anchor tenants and
its practice of continuous maintenance and renovation of its properties.
Financial Information. Certain additional financial information
concerning the Company is included in the Company's Consolidated Financial
Statements located on pages 20 through 34 herein.
ITEM 2. PROPERTIES
At December 31, 1997, the Company's real estate properties consisted of
219 locations in twelve states. A complete listing of these properties,
including the name, location, building area and land area (in square feet),
as applicable, is as follows:
SHOPPING CENTERS
Building
Name and Location Area Land Area
- ----------------------------------------------------- --------- ----------
HOUSTON AND HARRIS COUNTY, TOTAL. . . . . . . . . . . 7,030,000 28,038,000
Alabama-Shepherd, S. Shepherd at W. Alabama . . . . . 28,000 * 88,000 *
Almeda Road, Almeda at Cleburne . . . . . . . . . . . 34,000 147,000
Bayshore Plaza, Spencer Hwy. at Burke Rd. . . . . . . 36,000 196,000
Bellaire Boulevard, Bellaire at S. Rice . . . . . . . 35,000 137,000
Bellfort, Bellfort at Southbank . . . . . . . . . . . 48,000 167,000
Bellfort Southwest, Bellfort at Gessner . . . . . . . 30,000 89,000
Bellwood, Bellaire at Kirkwood. . . . . . . . . . . . 136,000 655,000
Bingle Square, U.S. Hwy. 290 at Bingle. . . . . . . . 46,000 168,000
Braeswood Square, N. Braeswood at Chimney Rock. . . . 103,000 422,000
Centre at Post Oak, Westheimer at Post Oak Blvd.. . . 184,000 505,000
Copperfield Village, Hwy. 6 at F.M. 529 . . . . . . . 153,000 712,000
Crestview, Bissonnet at Wilcresty . . . . . . . . . . 9,000 35,000
Crosby, F.M. 2100 at Kenning Road (61%) . . . . . . . 36,000 * 124,000 *
Cullen Place, Cullen at Reed. . . . . . . . . . . . . 7,000 30,000
Cullen Plaza, Cullen at Wilmington. . . . . . . . . . 81,000 318,000
Cypress Pointe, F.M. 1960 at Cypress Station. . . . . 191,000 737,000
Cypress Village, Louetta and Grant Road . . . . . . . 19,000 98,000
Del Sol Market Place, Telephone at Monroe . . . . . . 26,000 87,000
Eastpark, Mesa Rd. at Tidwell . . . . . . . . . . . . 140,000 665,000
Edgebrook, Edgebrook at Gulf Fwy. . . . . . . . . . . 78,000 360,000
Fiesta Village, Quitman at Fulton . . . . . . . . . . 30,000 80,000
Fondren Southwest Village, Fondren at W. Bellfort . . 225,000 1,014,000
Fondren/West Airport, Fondren at W. Airport . . . . . 62,000 223,000
45/York Plaza, I-45 at W. Little York . . . . . . . . 210,000 840,000
Glenbrook Square, Telephone Road. . . . . . . . . . . 71,000 320,000
Griggs Road, Griggs at Cullen . . . . . . . . . . . . 85,000 422,000
Harrisburg Plaza, Harrisburg at Wayside . . . . . . . 95,000 334,000
Heights Plaza, 20th St. at Yale . . . . . . . . . . . 72,000 228,000
Humblewood Shopping Plaza, Eastex Fwy. at F.M. 1960 . 180,000 784,000
I-45/Telephone Rd. Center, I-45 at Maxwell Street . . 126,000 819,000
Inwood Village, W. Little York at N. Houston-Rosslyn. 68,000 305,000
Jacinto City, Market at Baca. . . . . . . . . . . . . 24,000 * 67,000 *
Kingwood, Kingwood Dr. at Chesnut Ridge . . . . . . . 155,000 648,000
Landmark, Gessner at Harwin . . . . . . . . . . . . . 56,000 228,000
Lawndale, Lawndale at 75th St.. . . . . . . . . . . . 53,000 177,000
Little York Plaza, Little York at E. Hardy. . . . . . 115,000 486,000
Long Point, Long Point at Wirt (77%). . . . . . . . . 58,000 * 257,000 *
Lyons Avenue, Lyons at Shotwell . . . . . . . . . . . 63,000 179,000
Market at Westchase, Westheimer at Wilcrest . . . . . 84,000 333,000
Miracle Corners, S. Shaver at Southmore . . . . . . . 87,000 386,000
Northbrook, Northwest Fwy. at W. 34th . . . . . . . . 204,000 656,000
North Main Square, Pecore at N. Main. . . . . . . . . 18,000 64,000
Table continued on next page
Building
Name and Location Area Land Area
- -------------------------------------------------------------- --------- ----------
North Oaks, F.M. 1960 at Veterans Memorial . . . . . . . . . . 322,000 1,246,000
North Triangle, I-45 at F.M. 1960. . . . . . . . . . . . . . . 16,000 113,000
Northway, Northwest Fwy. at 34th . . . . . . . . . . . . . . . 212,000 793,000
Northwest Crossing, N.W. Fwy. at Hollister (75%) . . . . . . . 135,000 * 671,000 *
Northwest Park Plaza, F.M. 149 at Champions Forest . . . . . . 32,000 268,000
Oak Forest, W. 43rd at Oak Forest. . . . . . . . . . . . . . . 124,000 541,000
Orchard Green, Gulfton at Renwick. . . . . . . . . . . . . . . 64,000 257,000
Randall's/Cypress Station, F.M. 1960 at I-45 . . . . . . . . . 141,000 618,000
Randall's/El Dorado, El Dorado at Hwy. 3 . . . . . . . . . . . 119,000 429,000
Randall's/Kings Crossing, Kingwood Dr. at Lake Houston Pkwy. . 128,000 624,000
Randall's/Norchester, Grant at Jones . . . . . . . . . . . . . 109,000 475,000
Richmond Square, Richmond Ave. at W. Loop 610. . . . . . . . . 33,000 136,000
River Oaks, East, W. Gray at Woodhead. . . . . . . . . . . . . 65,000 206,000
River Oaks, West, W. Gray at S. Shepherd . . . . . . . . . . . 235,000 609,000
Sheldon Forest, North, I-10 at Sheldon . . . . . . . . . . . . 22,000 131,000
Sheldon Forest, South, I-10 at Sheldon . . . . . . . . . . . . 38,000 * 164,000 *
Shops at Three Corners, S. Main at Old Spanish Trail (70%) . . 183,000 * 803,000 *
Southgate, W. Fuqua at Hiram Clark . . . . . . . . . . . . . . 115,000 533,000
Spring Plaza, Hammerly at Campbell . . . . . . . . . . . . . . 56,000 202,000
Steeplechase, Jones Rd. at F.M. 1960 . . . . . . . . . . . . . 193,000 849,000
Stella Link, North, Stella Link at S. Braeswood (77%). . . . . 40,000 * 156,000 *
Stella Link, South, Stella Link at S. Braeswood. . . . . . . . 15,000 56,000
Studemont, Studewood at E. 14th St . . . . . . . . . . . . . . 28,000 91,000
Ten Blalock Square, I-10 at Blalock. . . . . . . . . . . . . . 97,000 321,000
10/Federal, I-10 at Federal. . . . . . . . . . . . . . . . . . 132,000 474,000
University Plaza, Bay Area At Space Center . . . . . . . . . . 96,000 424,000
The Village Arcade, University at Kirby. . . . . . . . . . . . 192,000 414,000
West Junction, Hwy. 6 at Kieth Harrow Dr. . . . . . . . . . . 67,000 264,000
Westbury Triangle, Chimney Rock at W. Bellfort . . . . . . . . 67,000 257,000
Westchase, Westheimer at Wilcrest. . . . . . . . . . . . . . . 236,000 766,000
Westhill Village, Westheimer at Hillcroft. . . . . . . . . . . 131,000 480,000
Wilcrest Southwest, Wilcrest at Southwest Fwy. . . . . . . . . 26,000 77,000
TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL. . . . . . . . . 5,061,000 22,038,000
Coronado, S.W. 34th St. at Wimberly Dr., Amarillo. . . . . . . 49,000 201,000
Grand Plaza, Interstate Hwy 40 at Grand Ave., Amarillo . . . . 157,000 637,000
Puckett Plaza, Bell Road, Amarillo . . . . . . . . . . . . . . 133,000 621,000
Spanish Crossroads, Bell St. at Atkinson St., Amarillo . . . . 72,000 275,000
Wolflin Village, Wolflin Ave. at Georgia St., Amarillo . . . . 191,000 513,000
Southridge Plaza, William Cannon Dr. at S. 1st St., Austin . . 143,000 565,000
Baywood, State Hwy. 60 at Baywood Dr., Bay City. . . . . . . . 40,000 169,000
Calder, Calder at 24th St., Beaumont . . . . . . . . . . . . . 34,000 129,000
North Park Plaza, Eastex Fwy. at Dowlen, Beaumont. . . . . . . 70,000 * 318,000 *
Phelan West, Phelan at 23rd St., Beaumont (67%). . . . . . . . 16,000 * 59,000 *
Southgate, Calder Ave. at 6th St., Beaumont. . . . . . . . . . 34,000 118,000
Westmont, Dowlen at Phelan, Beaumont . . . . . . . . . . . . . 95,000 507,000
Bryan Village, Texas at Pease, Bryan . . . . . . . . . . . . . 29,000 98,000
Parkway Square, Southwest Pkwy at Texas Ave., College Station. 158,000 685,000
Table continued on next page
Building
Name and Location Area Land Area
- -------------------------------------------------------------------- --------- ---------
Montgomery Plaza, Loop 336 West, Conroe. . . . . . . . . . . . . . . 233,000 911,000
River Pointe, I-45 at Loop 336, Conroe . . . . . . . . . . . . . . . 42,000 329,000
Portairs, Ayers St. at Horne Rd., Corpus Christi . . . . . . . . . . 121,000 416,000
Dickinson, I-45 at F.M. 517, Dickinson (72%) . . . . . . . . . . . . 55,000 * 225,000 *
Coronado Hills, Mesa at Balboa, El Paso. . . . . . . . . . . . . . . 128,000 575,000
Southcliff, I-20 and Grandbury Rd., Ft. Worth. . . . . . . . . . . . 116,000 * 568,000 *
Broadway, Broadway at 59th St., Galveston (77%). . . . . . . . . . . 58,000 * 167,000 *
Food King Place, 25th St. at Avenue P, Galveston . . . . . . . . . . 28,000 78,000
Galveston Place, Central City Blvd. at 61st St., Galveston . . . . . 123,000 527,000
Cedar Bayou, Bayou Rd., La Marque. . . . . . . . . . . . . . . . . . 15,000 51,000
Corum South, Gulf Fwy., League City. . . . . . . . . . . . . . . . . 112,000 680,000
Caprock Center, 50th at Boston Ave., Lubbock . . . . . . . . . . . . 375,000 1,255,000
Town & Country, 4th St. at University, Lubbock . . . . . . . . . . . 134,000 339,000
Angelina Village, Hwy. 59 at Loop 287, Lufkin. . . . . . . . . . . . 229,000 1,835,000
Independence Plaza, Town East Blvd., Mesquite. . . . . . . . . . . . 179,000 787,000
McKinney Centre, NEC of US Hwy 380 & U.S Hwy 75, McKinney . . . . . 13,000 69,000
University Park Plaza, University Dr. at E. Austin St., Nacogdoches. 78,000 283,000
Mid-County, Twin Cities Hwy. at Nederland Ave., Nederland. . . . . . 107,000 611,000
Gillham Circle, Gillham Circle at Thomas, Port Arthur. . . . . . . . 33,000 94,000
Village, 9th Ave. at 25th St., Port Arthur (77%) . . . . . . . . . . 39,000 * 185,000 *
Porterwood, Eastex Fwy. at F.M. 1314, Porter . . . . . . . . . . . . 99,000 487,000
Plaza, Ave. H at U.S. Hwy. 90A, Rosenberg. . . . . . . . . . . . . . 41,000 * 135,000 *
Rose-Rich, U.S. Hwy. 90A at Lane Dr., Rosenberg. . . . . . . . . . . 104,000 386,000
Bandera Village, Bandera at Hillcrest, San Antonio . . . . . . . . . 57,000 607,000
Oak Park Village, Nacogdoches at New Braunfels, San Antonio. . . . . 65,000 221,000
Parliament Square, W. Ave. at Blanco, San Antonio. . . . . . . . . . 65,000 260,000
San Pedro Court, San Pedro at Hwy. 281N., San Antonio. . . . . . . . 2,000 18,000
Valley View, West Ave. at Blanco Rd., San Antonio. . . . . . . . . . 89,000 341,000
Market at Town Center, Town Center Blvd., Sugar Land . . . . . . . . 392,000 1,732,000
Williams Trace, Hwy. 6 at Williams Trace, Sugar Land . . . . . . . . 263,000 1,187,000
New Boston Road, New Boston at Summerhill, Texarkana . . . . . . . . 90,000 335,000
Island Market Place, 6th St. at 9th Ave., Texas City . . . . . . . . 27,000 90,000
Mainland, Hwy. 1765 at Hwy. 3, Texas City. . . . . . . . . . . . . . 69,000 279,000
Palmer Plaza, F.M. 1764 at 34th St., Texas City. . . . . . . . . . . 97,000 367,000
Broadway, S. Broadway at W. 9th St., Tyler (77%) . . . . . . . . . . 46,000 * 197,000 *
Crossroads, I-10 at N. Main, Vidor . . . . . . . . . . . . . . . . . 116,000 516,000
LOUISIANA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 1,337,000 5,504,000
Park Terrace, U.S. Hwy. 171 at Parish, DeRidder. . . . . . . . . . . 137,000 520,000
Town & Country Plaza, U.S. Hwy. 190 West, Hammond. . . . . . . . . . 215,000 915,000
Westwood Village, W. Congress at Bertrand, Lafayette . . . . . . . . 141,000 942,000
East Town, 3rd Ave. at 1st St., Lake Charles . . . . . . . . . . . . 33,000 * 117,000 *
14/Park Plaza, Hwy. 14 at General Doolittle, Lake Charles. . . . . . 207,000 654,000
Kmart Plaza, Ryan St., Lake Charles. . . . . . . . . . . . . . . . . 105,000 * 406,000 *
Southgate, Ryan at Eddy, Lake Charles. . . . . . . . . . . . . . . . 171,000 628,000
Danville Plaza, Louisville at 19th, Monroe . . . . . . . . . . . . . 143,000 539,000
Orleans Station, Paris, Robert E. Lee & Chatham, New Orleans . . . . 5,000 31,000
Southgate, 70th at Mansfield, Shreveport . . . . . . . . . . . . . . 73,000 359,000
Westwood, Jewella at Greenwood, Shreveport.. . . . . . . . . . . . . 107,000 393,000
Table continued on next page
Building
Name and Location Area Land Area
- ------------------------------------------------------------------- --------- ---------
ARIZONA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,026,000 4,545,000
University Plaza, Plaza Way at Milton Rd., Flagstaff. . . . . . . . 166,000 918,000
Camelback Village Square, Camelback at 7th Avenue, Phoenix. . . . . 135,000 543,000
Squaw Peak Plaza, 16th Street at Glendale Ave., Phoenix . . . . . . 61,000 220,000
Fountain Plaza, 77th St. at McDowell, Scottsdale. . . . . . . . . . 112,000 460,000
Rancho Encanto, 35th Avenue and Greenway Rd., Phoenix . . . . . . . 71,000 259,000
Broadway Marketplace, Broadway at Rural, Tempe. . . . . . . . . . . 86,000 347,000
Fry's Valley Plaza, S. McClintock at E. Southern, Tempe . . . . . . 145,000 570,000
Pueblo Anozira, McClintock Dr. at Guadalupe Rd., Tempe. . . . . . . 152,000 769,000
Desert Square Shopping Center, Golf Links at Kolb, Tucson . . . . . 98,000 459,000
NEVADA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 730,000 2,722,000
Mission Center, Flamingo Rd. at Maryland Pkwy, Las Vegas. . . . . . 71,000 254,000
Paradise Marketplace, Flamingo Rd. at Sandhill, Las Vegas . . . . . 149,000 536,000
Rainbow Plaza, Rainbow Blvd. at Charleston Blvd., Las Vegas . . . . 280,000 1,063,000
Rancho Towne & Country, Rancho Dr. at Charleston Blvd., Las Vegas . 87,000 350,000
Tropicana Marketplace, Tropicana at Jones Blvd., Las Vegas. . . . . 143,000 519,000
NEW MEXICO, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . 700,000 3,177,000
Eastdale, Candelaria Rd. at Eubank Blvd., Albuquerque . . . . . . . 111,000 601,000
North Towne Plaza, Academy Rd. @ Wyoming Blvd., Albuquerque . . . . 103,000 607,000
Valle del Sol, Isleta Blvd. at Rio Bravo, Albuquerque . . . . . . . 106,000 475,000
Wyoming Mall, Academy Rd. at Northeastern, Albuquerque. . . . . . . 323,000 1,309,000
DeVargas, N. Guadalupe at Paseo de Peralta, Santa Fe (23%). . . . . 57,000 * 185,000 *
OKLAHOMA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 687,000 3,173,000
Bryant Square, Bryant Ave. at 2nd St., Edmond . . . . . . . . . . . 268,000 1,259,000
Market Boulevard, E. Reno Ave. at N. Douglas Ave., Midwest City . . 36,000 142,000
Town & Country, Reno Ave at North Air Depot, Midwest City . . . . . 137,000 540,000
Windsor Hills Center, Meridian at Windsor Place, Oklahoma City. . . 246,000 1,232,000
ARKANSAS, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 534,000 2,054,000
Evelyn Hills, College Ave. at Abshier, Fayetteville . . . . . . . . 154,000 750,000
Broadway Plaza, Broadway at W. Roosevelt, Little Rock . . . . . . . 43,000 148,000
Geyer Springs, Geyer Springs at Baseline, Little Rock . . . . . . . 153,000 415,000
Markham Square, W. Markham at John Barrow, Little Rock. . . . . . . 134,000 535,000
Westgate, Cantrell at Bryant, Little Rock . . . . . . . . . . . . . 50,000 206,000
KANSAS, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 466,000 2,231,000
West State Plaza, State Ave. at 78th St., Kansas City . . . . . . . 94,000 401,000
Westbrooke Village, Quivira Road at 75th St., Shawnee . . . . . . . 237,000 1,269,000
Shawnee Village, Shawnee Mission Pkwy. at Quivera Rd., Shawnee. . . 135,000 561,000
COLORADO, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 211,000 867,000
Carefree, Academy Blvd. at N. Carefree Circle, Colorado Springs . . 127,000 460,000
Academy Place, Academy Blvd. at Union Blvd., Colorado Springs . . . 84,000 407,000
MISSOURI, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 135,000 448,000
PineTree Plaza, U.S. Hwy. 150 at Hwy. 291, Lee's Summit . . . . . . 135,000 448,000
Table continued on next page
Building
Name and Location Area Land Area
- -------------------------------------------------------------- --------- ---------
MAINE, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . 124,000 482,000
The Promenade, Essex at Summit, Lewiston . . . . . . . . . . . 124,000 * 482,000
TENNESSEE, TOTAL . . . . . . . . . . . . . . . . . . . . . . . 20,000 84,000
Highland Square, Summer at Highland, Memphis . . . . . . . . . 20,000 84,000
Building
INDUSTRIAL Area Land Area
--------- ---------
HOUSTON AND HARRIS COUNTY, TOTAL. . . . . . . . . . . . . . . 3,723,000 9,061,000
Brookhollow Business Center, Dacoma at Directors Row. . . . . 133,000 405,000
Cannon/So. Loop Business Park, Cannon Street (75%). . . . . . 221,000 * 362,000 *
Central Park North, W. Hardy Rd. at Kendrick Dr.. . . . . . . 155,000 465,000
Central Park Northwest VI, Central Pkwy. at Dacoma. . . . . . 175,000 518,000
Central Park Northwest VII, Central Pkwy. at Dacoma . . . . . 104,000 283,000
Jester Plaza, West T.C. Jester. . . . . . . . . . . . . . . . 101,000 244,000
Kempwood Industrial, Kempwood Dr. at Blankenship Dr.. . . . . 320,000 778,000
Lathrop Warehouse, Lathrop St. at Larimer St. . . . . . . . . 252,000 436,000
Little York Mini-Storage, West Little York. . . . . . . . . . 32,000 * 124,000 *
Navigation Business Park, Navigation At N. York . . . . . . . 238,000 555,000
Northway Park II, Loop 610 East at Homestead. . . . . . . . . 303,000 745,000
Park Southwest, Stancliff at Brooklet . . . . . . . . . . . . 52,000 159,000
Railwood Industrial Park, Mesa at U.S. 90 . . . . . . . . . . 805,000 2,070,000
South Loop Business Park, S. Loop at Long Dr. . . . . . . . . 46,000 * 103,000 *
Southwest Park II, Rockley Road . . . . . . . . . . . . . . . 68,000 216,000
Stonecrest Business Center, Wilcrest at Fallstone . . . . . . 111,000 308,000
West-10 Business Center, Wirt Rd. at I-10 . . . . . . . . . . 141,000 330,000
West-10 Business Center II, Wirt Rd. at I-10. . . . . . . . . 83,000 150,000
West Loop Commerce Center, W. Loop N. at I-10 . . . . . . . . 34,000 91,000
610 and 11th St. Warehouse, Loop 610 at 11th St.. . . . . . . 349,000 719,000
TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL . . . . . . . . 260,000 751,000
Corporate Center I & II, Putnam Dr. at Research Blvd., Austin 117,000 326,000
River Pointe Mini-Storage, I-45 at Hwy. 336, Conroe . . . . . 32,000 * 97,000 *
Nasa One Business Center, Nasa Road One at Hwy. 3, Webster. . 111,000 328,000
MULTI-FAMILY RESIDENTIAL
TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL . . . . . . . . 37,000 95,000
Summer Place Apartments, Hillcrest at Quill Dr., San Antonio. 37,000 * 95,000 *
OFFICE BUILDING
HOUSTON & HARRIS COUNTY, TOTAL. . . . . . . . . . . . . . . . 121,000 171,000
Citadel Plaza, N. Loop 610 at Citadel Plaza Dr. . . . . . . . 121,000 171,000
Table continued on next page
Building
Name and Location Area Land Area
- ------------------------------------------------------ -------- ---------
UNIMPROVED LAND
HOUSTON & HARRIS COUNTY, TOTAL . . . . . . . . . . . . . . . . . 4,970,000
Bissonnet at Wilcrest. . . . . . . . . . . . . . . . . . . . . . 773,000
Citadel Plaza at 610 N. Loop . . . . . . . . . . . . . . . . . . 137,000
East Orem. . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,000
Kirkwood at Dashwood Dr. . . . . . . . . . . . . . . . . . . . . 322,000
Lockwood at Navigation . . . . . . . . . . . . . . . . . . . . . 163,000
Louetta at Grant Rd. . . . . . . . . . . . . . . . . . . . . . . 37,000
Mesa Rd. at Tidwell. . . . . . . . . . . . . . . . . . . . . . . 901,000
Mesa Rd. at Spikewood. . . . . . . . . . . . . . . . . . . . . . 1,374,000
Mowery at Cullen . . . . . . . . . . . . . . . . . . . . . . . . 118,000
Northwest Fwy. at Gessner. . . . . . . . . . . . . . . . . . . . 484,000
Redman at W. Denham. . . . . . . . . . . . . . . . . . . . . . . 17,000
Renwick at Gulfton . . . . . . . . . . . . . . . . . . . . . . . 17,000
Sheldon at I-10. . . . . . . . . . . . . . . . . . . . . . . . . 19,000
W. Little York at I-45 . . . . . . . . . . . . . . . . . . . . . 322,000
W. Little York at N. Houston-Rosslyn.. . . . . . . . . . . . . . 19,000
W. Loop N. at I-10 . . . . . . . . . . . . . . . . . . . . . . . 145,000
TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL. . . . . . . . . . 1,200,000
US Hwy 380 (University Drive) and US Hwy 75, McKinney. . . . . . 265,000
River Pointe Dr. at I-45, Conroe . . . . . . . . . . . . . . . . 186,000
Hillcrest, Sunshine at Quill, San Antonio. . . . . . . . . . . . 171,000
Hwy. 3 at Hwy. 1765, Texas City. . . . . . . . . . . . . . . . . 184,000
Hwy 377 and Bursey Road, Watauga . . . . . . . . . . . . . . . . 394,000
LOUISIANA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . 1,284,000
U.S. Hwy. 171 at Parish, DeRidder. . . . . . . . . . . . . . . . 462,000
Woodland Hwy., Plaquemines Parish (5%) . . . . . . . . . . . . . 822,000 *
ARIZONA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . 157,000
75th Avenue ar W Bell Rd, Glendale . . . . . . . . . . . . . . . 157,000
ILLINOIS, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . 503,000
S.B.I. Rt. 159 at Matilda Rd., Fairview Heights (99%). . . . . . 503,000 *
Table continued on next page
Building
Area Land Area
---------- ----------
ALL PROPERTIES-BY LOCATION
GRAND TOTAL . . . . . . . . . . . . . . . 22,202,000 93,555,000
Houston & Harris County . . . . . . . . . 10,874,000 42,240,000
Texas (excluding Houston & Harris County) 5,358,000 24,084,000
Louisiana . . . . . . . . . . . . . . . . 1,337,000 6,788,000
Arizona . . . . . . . . . . . . . . . . . 1,026,000 4,702,000
Nevada. . . . . . . . . . . . . . . . . . 730,000 2,722,000
New Mexico. . . . . . . . . . . . . . . . 700,000 3,177,000
Oklahoma. . . . . . . . . . . . . . . . . 687,000 3,173,000
Arkansas. . . . . . . . . . . . . . . . . 534,000 2,054,000
Kansas. . . . . . . . . . . . . . . . . . 466,000 2,231,000
Colorado. . . . . . . . . . . . . . . . . 211,000 867,000
Missouri. . . . . . . . . . . . . . . . . 135,000 448,000
Maine . . . . . . . . . . . . . . . . . . 124,000 482,000
Tennessee . . . . . . . . . . . . . . . . 20,000 84,000
Illinois. . . . . . . . . . . . . . . . . 503,000
ALL PROPERTIES-BY CLASSIFICATION
GRAND TOTAL . . . . . . . . . . . . . . . 22,202,000 93,555,000
Shopping Centers. . . . . . . . . . . . . 18,061,000 75,363,000
Industrial . . . . . . . . . . . . . . . 3,983,000 9,812,000
Office Building . . . . . . . . . . . . . 121,000 171,000
Multi-Family Residential. . . . . . . . . 37,000 95,000
Unimproved Land . . . . . . . . . . . . . 8,114,000
Note: Total square footage includes 6,700,000 square feet of land leased
and 170,000 square feet of building leased from others.
* Denotes partial ownership. The Company's interest is 50% except
where noted. The square feet figures represent the Company's
proportionate ownership of the entire property.
General. In 1997, no single property accounted for more than 3.9% of the
Company's total assets or 3.4% of gross revenues. Four properties, in the
aggregate, represented approximately 11.4% of the Company's gross revenues for
the year ended December 31, 1997; otherwise, none of the remaining properties
accounted for more than 2.0% of the Company's gross revenues during the same
period. The occupancy rate for all of the Company's improved properties as of
December 31, 1997 was 92.0%.
Substantially all of the Company's properties are owned directly by the
Company (subject in certain cases to mortgages), although the Company's
interests in certain of its properties are held indirectly through its
interests in joint ventures or under long-term leases. In the opinion of
management of the Company, its properties are well maintained and in good
repair, suitable for their intended uses, and adequately covered by insurance.
Shopping Centers. As of December 31, 1997, the Company owned, either
directly or through its interests in joint ventures, 169 shopping centers with
approximately 18.1 million square feet of building area. The shopping centers
were located predominantly in Texas with other locations in Louisiana,
Oklahoma, Arkansas, Arizona, New Mexico, Maine, Tennessee, Nevada, Kansas,
Missouri and Colorado.
The Company's shopping centers are primarily community shopping centers
which range in size from 100,000 to 400,000 square feet, as distinguished from
small strip centers which generally contain 5,000 to 25,000 square feet and
from large regional enclosed malls which generally contain over 500,000 square
feet. Most of the centers do not have climatized common areas but are
designed to allow retail customers to park their automobiles in close
proximity to any retailer in the center. The Company's centers are
customarily constructed of masonry, steel and glass and all have lighted,
paved parking areas which are typically landscaped with berms, trees and
shrubs. They are generally located at major intersections in close proximity
to neighborhoods which have existing populations sufficient to support retail
activities of the types conducted in the Company's centers.
The Company has approximately 3,300 separate leases with 2,500 different
tenants in its portfolio, including national and regional supermarket chains,
other nationally or regionally known stores (including drug stores, discount
department stores, junior department stores and catalog stores) and a great
variety of other regional and local retailers. The large number of locations
offered by the Company and the types of traditional anchor tenants help
attract prospective new tenants. Some of the national and regional
supermarket chains which are tenants in the Company's centers include
Albertson's, Fiesta, Smith's, Fleming Foods, H.E.B., Kroger Company, Randall's
Food Markets, Fry's Food Stores and Super Value Holdings. In addition to
these supermarket chains, the Company's nationally and regionally known retail
store tenants include Eckerd, Walgreen and Osco drugstores; Kmart discount
stores; Bealls, Palais Royal and Weiner's junior department stores;
Marshall's, Office Depot, 50-Off, Office Max, Babies 'R' Us, Ross and T.J.
Maxx off-price specialty stores; Luby's, Piccadilly and Furr's cafeterias;
Academy sporting goods; Service Merchandise catalog stores; FAO Schwarz toy
store; Cost Plus Imports; Linens 'N Things; Barnes & Noble bookstore; Home
Depot; and the following restaurant chains: Arby's, Burger King, Champ's,
Church's Fried Chicken, Dairy Queen, Domino's, Jack-in-the-Box, CiCi Pizza,
Long John Silver's, McDonald's, Olive Garden, Outback Steakhouse, Pizza Hut,
Shoney's, Steak & Ale, Taco Bell and Whataburger. The Company also leases
space in 3,000 to 10,000 square foot areas to national chains such as the
Limited Store, The Gap, One Price Stores, Tempo, Eddie Bauer and Radio Shack.
The Company's shopping center leases have lease terms generally ranging
from three to five years for tenant space under 5,000 square feet and from 10
to 35 years for tenant space over 10,000 square feet. Leases with primary
lease terms in excess of 10 years, generally for anchor and out-parcels,
frequently contain renewal options which allow the tenant to extend the term
of the lease for one or more additional periods, each such period generally
being of a shorter duration than the primary lease term. The rental rates
paid during a renewal period are generally based upon the rental rate for the
primary term, sometimes adjusted for inflation or for the amount of the
tenant's sales during the primary term.
Most of the Company's leases provide for the monthly payment in advance
of fixed minimum rentals, the tenants' pro rata share of ad valorem taxes,
insurance (including fire and extended coverage, rent insurance and liability
insurance) and common area maintenance for the center (based on estimates of
the costs for such items) and for the payment of additional rentals based on a
percentage of the tenants' sales ("percentage rentals"). Utilities are
generally paid directly by tenants except where common metering exists with
respect to a center, in which case the Company makes the payments for the
utilities and is reimbursed by the tenants on a monthly basis. Generally, the
Company's leases prohibit the tenant from assigning or subletting its space
and require the tenant to use its space for the purpose designated in its
lease agreement and to operate its business on a continuous basis. Certain of
the lease agreements
with major tenants contain modifications of these basic provisions in view of
the financial condition, stability or desirability of such tenants. Where a
tenant is granted the right to assign its space, the lease agreement generally
provides that the original lessee will remain liable for the payment of the
lease obligations under such lease agreement.
During 1997, the Company added approximately 1.6 million square feet to
its portfolio of shopping center properties through the acquisition of
properties and another .2 million square feet of space through developmentThe
Company added two centers in the Arizona market totaling 169,000 square feet
and purchased its fourth property in the Kansas City area, a 94,000 square
foot shopping center. The Company purchased a 280,000 square foot shopping
center anchored by Home Depot in Las Vegas, its fifth property in this city
and added an 84,000 square foot center in Colorado Springs, its second center
in that market. The Company purchased a 126,000 square foot shopping center
in Houston and added an additional 336,000 square feet in other Texas markets.
Lastly, the Company purchased its joint venture partner's 85% interest in four
shopping centers, adding 478,000 square feet. These centers are located in
Mesquite and El Paso, Texas, Albuquerque, New Mexico and Tempe, Arizona.
Industrial Properties. The Company currently owns a total of 23
industrial projects. All of these projects are located in the greater Houston
area, except for a 117,000 square foot office/service center located in
Austin, Texas, which was purchased during 1997. Two additional properties
totaling 193,000 square feet located in Houston were also purchased during
1997. The industrial portfolio has a total of 4.0 million square feet of
building area situated on 9.8 million square feet of land. These figures
include the Company's interests in four joint ventures. Major tenants of the
Company's industrial properties include Advo (a leading direct mail
advertising company), Pepsico's PFS division, Stone Container Corporation and
Iron Mountain Records Storage.
During 1997, the Company completed the development of a 110,000 square
foot build-to-suit office/distribution on a tract of the Company's
undeveloped land. The Company also began construction on a 162,000 square
foot speculative bulk warehouse facility on a tract of undeveloped land
located in the Company's Railwood Industrial Park, a master-planned industrial
park in northeast Houston.
Office Building. The Company owns a seven-story, 121,000 square foot
masonry office building with a detached, covered, three-level parking garage
situated on 171,000 square feet of land fronting on North Loop 610 West in
Houston. The building serves as the Company's headquarters. Other than the
Company, the major tenant of the building is Nations Bank, which currently
occupies 12% of the office space.
Multi-family Residential Properties. At December 31, 1997, the Company
owned, through a joint venture interest, one apartment project located in San
Antonio, Texas. The Company's percentage ownership represents approximately
79 units of the project's aggregate 159 units. This project is a garden-type
project complemented by landscaping, recreational areas and adequate parking.
This project is managed by our joint venture partner, who is an experienced
apartment operator. Subsequent to year-end, the Company announced the
development of a 260-unit luxury apartment complex on land within a multi-use
master-planned project developed by the Company in a suburb north of Houston.
An unrelated Houston-based developer will build and lease the property on the
Company's behalf. Construction is scheduled for completion in the spring of
1999.
Unimproved Land. The Company owns, directly or through its interest in a
joint venture, 25 parcels of unimproved land aggregating approximately 8.1
million square feet of land area located in Texas, Arizona, Illinois and
Louisiana. These properties include approximately 4.0 million square feet of
land adjacent to certain of the Company's existing developed properties, which
may be used for expansion of these developments, as well as approximately 4.0
million square feet of land, which may be used for new development. Almost
all of these unimproved properties are served by roads and utilities and are
ready for development. Most of these parcels are suitable for development as
shopping centers or industrial projects, and the Company intends to emphasize
the development of these parcels for such purpose.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to its business, to which the Company is a party
or to which any of its properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers of the Company as of February 25, 1998. All executive
officers of the Company are elected annually by the Board of Trust Managers
and serve until the successors are elected and qualified.
Name Age Position
Stanford Alexander 69 Chairman/Chief Executive Officer
Martin Debrovner 61 Vice Chairman
Andrew M. Alexander 41 President
Joseph W. Robertson, Jr. 50 Executive Vice President/
Chief Financial Officer
Stephen C. Richter 43 Senior Vice President/Financial
Administration and Treasurer
Mr. S. Alexander is the Company's Chairman and its Chief Executive
Officer. He has been employed by the Company since 1955 and has served in his
present capacity since January 1, 1993. Prior to becoming Chairman, Mr.
Alexander served as President and Chief Executive Officer of the Company since
1962. Mr. Alexander is President, Chief Executive Officer and a Trust Manager
of Weingarten Properties Trust and a member of the Houston Regional Advisory
Board of Chase Bank of Texas, National Association, Houston, Texas.
Mr. Debrovner became Vice Chairman of the Company on February 25, 1997.
Prior to assuming such position Mr. Debrovner served as President and Chief
Operating Officer since January 1, 1993. Mr. Debrovner served as President of
Weingarten Realty Management Company (the "Management Company") since the
Company's reorganization in December 1984. Prior to such time, Mr. Debrovner
was an employee of the Company for 17 years, holding the positions of Senior
Vice President from 1980 until March 1984 and Executive Vice President until
December 1984. As Executive Vice President, Mr. Debrovner was generally
responsible for the Company's operations. Mr. Debrovner is also a Trust
Manager of Weingarten Properties Trust.
Mr. A. Alexander became President of the Company on February 25, 1997.
Prior to his present position, Mr. Alexander was Executive Vice
President/Asset Management of the Company and President of the Management
Company. Prior to such time, Mr. Alexander was Senior Vice President/Asset
Management of the Management Company. He also served as Vice President of the
Management Company and, prior to the Company's reorganization in December
1984, was Vice President and an employee of the Company since 1978. Mr.
Alexander has been primarily involved with leasing operations at both the
Company and the Management Company. Mr. Alexander is also a Trust Manager of
Weingarten Properties Trust.
Mr. Robertson became Executive Vice President of the Company and its
Chief Financial Officer on January 1, 1993. Prior to becoming Executive Vice
President, Mr. Robertson served as Senior Vice President and Chief Financial
Officer since 1980. He has been with the Company since 1971. Mr. Robertson
is also a Trust Manager of Weingarten Properties Trust.
Mr. Richter became Senior Vice President/Financial Administration and
Treasurer on January 1, 1997. Prior to his present position, Mr. Richter
served as Vice President/Financial Administration and Treasurer of the Company
since January 1, 1993. For the five years prior to that time, he served as
Vice President/Financial Administration and Treasurer of the Management
Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON SHARES OF BENEFICIAL INTEREST AND
RELATED SHAREHOLDER MATTERS
The Company's Common Shares are listed and traded on the New York Stock
Exchange under the symbol "WRI". The number of holders of record of the
Company's Common Shares as of February 25, 1998 was 3,221. The high and low
sale prices per share of the Company's Common Shares, as reported on the New
York Stock Exchange composite tape, and dividends per share paid for the
fiscal quarters indicated were as follows:
HIGH LOW DIVIDENDS
------ ------- ---------
1997:
Fourth $ 45 $ 38 7/8 $ 0.64
Third 44 1/8 39 7/16 0.64
Second 45 5/8 41 3/8 0.64
First 44 3/4 40 0.64
1996:
Fourth $ 40 3/4 $ 36 $ 0.62
Third. 40 1/2 37 3/8 0.62
Second 38 7/8 34 1/4 0.62
First. 38 7/8 35 5/8 0.62
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data with
respect to the Company and should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Consolidated Financial Statements and accompanying Notes in
"Item 8. Financial Statements and Supplementary Data" and the financial
schedules included elsewhere in this Form 10-K.
(Amounts in thousands, except per share amounts)
Years Ended December 31,
1997 1996 1995 1994 1993
Revenues (primarily real estate
rentals) $ 174,512 $151,123 $134,197 $120,793 $103,282
----------- --------- --------- --------- ---------
Expenses:
Depreciation and amortization . . . . 37,976 33,769 30,060 26,842 23,382
Interest. . . . . . . . . . . . . . . 30,009 21,975 16,707 10,694 10,046
Other . . . . . . . . . . . . . . . . 54,888 47,004 42,614 39,235 35,236
Total . . . . . . . . . . . . . . . . 122,873 102,748 89,381 76,771 68,664
----------- --------- --------- --------- ---------
Income from operations. . . . . . . . 51,639 48,375 44,816 44,022 34,618
Gain (loss) on sales of property and
securities. . . . . . . . . . . . . 3,327 5,563 (14) (234) 1,631
Net Income. . . . . . . . . . . . . . $ 54,966 $ 53,938 $ 44,802 $ 43,788 $ 36,249
=========== ========= ========= ========= =========
Weighted average number of common
shares outstanding. . . . . . . . . 26,638 26,555 26,464 26,190 24,211
Net income per common share . . . . . $ 2.06 $ 2.03 $ 1.69 $ 1.67 $ 1.50
Cash dividends per common share . . . $ 2.56 $ 2.48 $ 2.40 $ 2.28 $ 2.16
Property (at cost). . . . . . . . . . $1,118,758 $970,418 $849,894 $735,134 $634,814
Total assets. . . . . . . . . . . . . $ 946,793 $831,097 $734,824 $682,037 $602,042
Debt. . . . . . . . . . . . . . . . . $ 507,366 $389,225 $289,339 $229,597 $147,652
Other Data:
Funds from Operations (1)
Net income. . . . . . . . . . . . . . $ 54,966 $ 53,938 $ 44,802 $ 43,788 $ 36,249
Depreciation and amortization (2) . . 37,544 33,414 29,813 26,842 23,382
(Gain) loss on sales of property
and securities (3,327) (5,563) 14 234 (1,631)
Total . . . . . . . . . . . . . . . . $ 89,183 $ 81,789 $ 74,629 $ 70,864 $ 58,000
=========== ========= ========= ========= =========
Cash Flows from Operations. . . . . . $ 89,902 $ 76,299 $ 72,498 $ 64,305 $ 56,737
(1) Funds from operations does not represent cash flows from operations as defined by
generally accepted accounting principles and should not be considered as an alternative
to net income as an indicator of the Company's operating performance or to cash flows
as a measure of liquidity.
(2) In accordance with the NAREIT definition of funds from operations adopted during the
year ended December 31, 1995, debt cost amortization is not included beginning with that
year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the 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.
Weingarten Realty Investors owned and operated 169 shopping centers, 23
industrial properties, one multi-family residential project and one office
building at December 31, 1997. Of the Company's 194 developed properties, 147
are located in Texas (including 93 in Houston and Harris County). The
Company's remaining properties are located in Louisiana (11), Arizona (9),
Nevada (5), New Mexico (5), Oklahoma (4), Arkansas (5), Kansas (3), Colorado
(2), Missouri (1), Tennessee (1) and Maine (1). The Company has nearly 3,300
leases and 2,500 different tenants. Leases for the Company's properties range
from less than a year for smaller spaces to over 25 years for larger tenants;
leases generally include minimum lease payments and contingent rentals for
payment of taxes, insurance and maintenance and for an amount based on a
percentage of the tenants' sales. The majority of the Company's anchor
tenants are supermarkets, drugstores and other retailers which generally sell
basic necessity-type items.
CAPITAL RESOURCES AND LIQUIDITY
The Company anticipates that cash flows from operating activities will
continue to provide adequate capital for all dividend payments in accordance
with REIT requirements and that cash on hand, borrowings under its existing
credit facility, issuance of unsecured debt and the use of project financing,
as well as other debt and equity alternatives, will provide the necessary
capital to achieve growth. Cash flow from operating activities as reported in
the Statements of Consolidated Cash Flows increased to $89.9 million for 1997
from $76.3 million for 1996 and $72.5 million for 1995.
Cash dividends increased to $68.2 million in 1997, compared to $65.9 million
in 1996 and $63.5 million in 1995. The Company satisfied its REIT requirement
of distributing at least 95% of ordinary taxable income for each of the three
years ended December 31, 1997, and, accordingly, federal income taxes were not
provided in these years. The Company's dividend payout ratio for 1997, 1996
and 1995 approximated 76.4%, 80.5% and 85.1%, respectively, based on funds
from operations for the applicable year.
The Company continued to expand its portfolio of income-producing properties
in 1997. This growth resulted primarily from the acquisition of properties,
both shopping centers and industrial properties. During the year, the Company
purchased eight shopping centers, three industrial projects, and its joint
venture partner's interest in four other shopping centers. These acquisitions
added 1.9 million square feet to the Company's portfolio at a combined cost of
$111.0 million. The Company expanded its presence in many of its newer
markets, with purchases in Dallas/Fort Worth, Phoenix, Tucson, Las Vegas,
Kansas City and Colorado Springs. The Company completed the development of a
.1 million square foot build-to-suit office/distribution facility on a tract
of the Company's undeveloped land and also substantially completed development
of two shopping centers which added less than .1 million square feet.
Additionally, the Company has an ongoing program for maintaining and
renovating its existing portfolio of properties. Capitalized expenditures for
acquisitions, new development and additions to the existing portfolio were, in
millions, $152.6, $131.6 and $114.7 during 1997, 1996 and 1995, respectively.
All of the acquisitions and new development during 1997 were initially
financed under the Company's revolving credit facility. Capital expenditures
in 1998 are expected to equal, if not exceed, the total for 1997.
Total debt outstanding increased to $507.4 million at December 31, 1997 from
$389.2 million at December 31, 1996, primarily to fund acquisitions and new
development. The Company's ratio of debt to total market capitalization was
30% at December 31, 1997, as compared to 27% at year-end 1996.
During the year, the Company issued an additional $97 million in unsecured
Medium Term Notes ("MTNs"). These MTNs were issued with an average life of
8.7 years at an average interest rate of 6.8%, and the proceeds were used to
pay down balances outstanding under the Company's revolving credit facilities.
The Company also completed several financing transactions subsequent to
year-end. First, the Company entered into a forward Treasury lock in January
of 1998, whereby the Company locked a ten-year Treasury rate of 5.49% until
August of 1998 for a notional amount of $35 million. In February of 1998, the
Company issued $75 million of 7.44% cumulative preferred shares with a
liquidation preference of $25 per share in an underwritten public offering.
The shares are callable at the Company's option any time after March 31, 2003
and have no stated maturity. The proceeds of the offering were used to pay
down amounts outstanding under the Company's revolving credit facility and to
retire $35 million of 9.11% secured notes
payable to an insurance company. The early extinguishment of these notes that
were scheduled to mature in August of 2001 will result in an extraordinary
loss of $1.2 million in 1998. Continued growth through acquisitions and new
development will eventually necessitate the issuance of additional equity
securities; however, the Company's current capital structure should allow the
issuance of additional debt before this is required. In the interim, the
Company will continue to closely monitor both the debt and equity markets and
carefully consider its available alternatives, including both public and
private placements.
During 1996, the Company's $200 million unsecured revolving credit facility
was amended to improve the pricing and, effectively, extend the term of the
commitment. In addition, the Company executed an agreement with a bank for an
unsecured and uncommitted overnight credit facility totaling $20 million to be
used for cash management purposes. The Company will maintain adequate funds
available under the $200 million revolving credit facility at all times to
cover the outstanding balance under the $20 million facility.
At December 31, 1997, the Company had approximately $91 million of funds
available under the revolving credit facilities. In the third quarter of
1996, the Company filed a $250 million shelf registration statement with the
Securities and Exchange Commission (which includes $23.5 million from the
Company's prior shelf registration), which allows for the issuance of debt,
equity securities or warrants. At December 31, 1997, amounts available under
the shelf registration totaled $134 million, however this amount was reduced
by $75 million due to the issuance of perpetual preferred shares subsequent to
year-end. The Company expects to continue to issue debt or equity under its
shelf registration and to continually seek and evaluate other sources of
capital.
Subsequent to year-end, the Company sold its investment in U.S. government
agency guaranteed pass-through certificates for $12.2 million, resulting in a
gain of less than $.1 million. The proceeds from the sale were used primarily
to retire overnight repurchase agreements which were collateralized by these
marketable debt securities.
FUNDS FROM OPERATIONS
Funds from operations is an alternate measure of the performance of an
equity REIT since such measure does not recognize depreciation and
amortization of real estate assets as operating expenses. Management
believes that reductions for these charges are not meaningful in evaluating
income-producing real estate, which historically has not depreciated.
The National Association of Real Estate Investment Trusts defines funds
from operations as net income plus depreciation and amortization of real
estate assets, less gains and losses on sales of properties. Funds from
operations does not represent cash flows from operations as defined by
generally accepted accounting principles and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity.
Funds from operations increased to $89.2 million in 1997, as compared to $81.8
million in 1996 and $74.6 million in 1995. These increases relate primarily
to the impact of the Company's acquisitions and new developments and, to a
lesser degree, the activity at its existing properties. For further
information on changes between years, see "Results of Operations" below.
RESULTS OF OPERATIONS
Rental revenues increased 16.3% or $23.7 million from $145.3 million in 1996
to $169.0 million in 1997 and by 15.9% or $19.9 million from $125.4 million in
1995. These increases are primarily the result of the Company's acquisition
and new development programs. Occupancy of the Company's shopping centers and
total portfolio decreased to 92% at December 31, 1997 from 93% at the end of
1996. The Company's industrial portfolio occupancy decreased from 94% at
December 31, 1996 to 93% at the end of 1997. The Company completed 582
renewals or leases comprising 2.0 million square feet of retail space at an
average rental rate increase of 8.1%. Net of capital costs for tenant
improvements, the increase averaged 3.9%.
Interest income totaled $2.5 million in 1997, $3.1 million in 1996 and $5.3
million in 1995. This decrease in income is primarily the result of the
Company selling $31.8 million of its investment in marketable debt securities
during the fourth quarter of 1995. The sale resulted in a gain of $.1
million. Interest income recognized on the marketable debt securities sold by
the Company subsequent to year-end 1997 totaled $.8 million during 1997.
Equity in earnings of real estate joint ventures and partnerships totaled $1.0
million in 1997, $1.2 million in 1996 and $1.5 million in 1995. The decreases
in 1997 and 1996 are due to the sale in the third quarter of 1996 of the
Company's 26% interest in an apartment complex accounted for under the equity
method. This sale resulted in a gain of $4.2 million. The Company has
accounted for its 15% interest in a joint venture, which owned four shopping
centers, under the equity method. On December 31, 1997, the Company purchased
its joint venture partner's 85% interest and, accordingly, has consolidated
the operating results of these four centers since the date of acquisition.
Income recognized in 1997 related to this joint venture totaled $.6 million.
Direct costs and expenses of operating the Company's properties (i.e.,
operating and ad valorem tax expenses) increased to $49.2 million in 1997 from
$41.9 million in 1996 and $37.7 million in 1995. These increases are
primarily due to property acquired and developed during these periods.
Overall, direct operating costs and expenses as a percentage of rental
revenues were 30% in 1995 and 29% in 1996 and 1997. Depreciation and
amortization have increased to $38.0 million in 1997 from $33.8 million in
1996 and $30.1 million in 1995, also as a result of the properties acquired
and developed during these periods.
Gross interest costs, before capitalization of interest to development
projects, increased by $7.5 million from $23.3 million in 1996 to $30.8
million in 1997. This increase in interest cost was due mainly to the
increase in the average debt outstanding from $314.4 million for 1996 to
$422.9 million for 1997. The weighted-average interest rate decreased
slightly from 7.36% in 1996 to 7.27% in 1997. Interest expense, net of
amounts capitalized, increased $8.0 million from 1996. The amount of interest
capitalized decreased to $.8 million in 1997 from $1.3 million in 1996 due to
a decrease in the amount of development activity during the year. Included in
interest expense during 1997 was $.7 million related to repurchase agreements
which were collateralized by the Company's investment in marketable debt
securities which were sold subsequent to year-end. Comparing 1996 to 1995,
gross interest costs increased from $19.6 million in 1995 to $23.3 million in
1996. This was due to an increase in the average debt outstanding from $261.3
million in 1995 to $314.4 million in 1996. The weighted-average interest rate
decreased slightly between the two periods from 7.44% in 1995 to 7.36% in
1996. Interest expense, net of amounts capitalized, increased $5.3 million
from 1995 due to the decrease in interest capitalization from $2.9 million in
1995 to $1.3 million in 1996 as a result of the completion in 1996 of two of
the Company's significant development projects.
The gain on sale of $3.3 million in 1997 was primarily due to the condemnation
of a shopping center by the State of Texas during the third quarter. The
Company has leased back the portion of the shopping center purchased by the
state, and will continue to operate the center. The gain on sales of property
and securities of $5.6 million in 1996 is due primarily to the sale of two
properties and the receipt of insurance proceeds from fires which destroyed
parts of two shopping centers.
EFFECTS OF INFLATION
The rate of inflation was relatively unchanged in 1997. The Company has
structured its leases, however, in such a way as to remain largely unaffected
should significant inflation occur. Most of the leases contain percentage
rent provisions whereby the Company receives 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 the
Company's leases are for terms of less than ten years, which allows the
Company to adjust rentals to changing market conditions when the leases
expire. Most of the Company's leases 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
the Company's operating results.
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company will adopt Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This
statement requires the presentation of total nonowner changes in equity,
including items not currently reflected in net income. Also effective
January 1, 1998, the Company will adopt SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement requires
that segments of a business be disclosed in interim and annual financial
statements. The Company is currently evaluating the effect, if any, these
statements will have on the Company's financial presentation.
FORWARD-LOOKING STATEMENTS
This Annual Report includes certain forward-looking statements reflecting the
Company's expectations in the near term; however, many factors which may
affect the actual results, especially the everchanging retail environment, are
difficult to predict. Accordingly, there is no assurance that the Company's
expectations will be realized.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Trust Managers and Shareholders of
Weingarten Realty Investors:
We have audited the accompanying consolidated balance sheets of
Weingarten Realty Investors (the "Company") as of December 31, 1997 and 1996,
and the related statements of consolidated income, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
Our audits also included the financial statement schedules listed in the Index
at Item 14. These financial statements and financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Weingarten Realty Investors
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
February 20, 1998, except for Note 13, as to which the date is February 24,
1998
STATEMENTS OF CONSOLIDATED INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Years Ended December 31,
------------------------
1997 1996 1995
-------- -------- ---------
Revenues:
Rentals $169,041 $145,307 $125,400
Interest (including amounts from related parties of
$1,434 in 1997, $1,576 in 1996 and $2,304 in
1995) 2,487 3,148 5,338
Equity in earnings of real estate joint ventures
and partnerships 1,003 1,232 1,549
Other 1,981 1,436 1,910
-------- -------- ---------
Total 174,512 151,123 134,197
-------- -------- ---------
Expenses:
Depreciation and amortization 37,976 33,769 30,060
Interest 30,009 21,975 16,707
Operating 27,131 23,021 20,890
Ad valorem taxes 22,110 18,874 16,776
General and administrative 5,647 5,109 4,948
-------- -------- ---------
Total 122,873 102,748 89,381
-------- -------- ---------
Income from Operations 51,639 48,375 44,816
Gain (Loss) on Sales of Property and Securities 3,327 5,563 (14)
-------- -------- ---------
Net Income $ 54,966 $ 53,938 $ 44,802
Net Income Per Common Share $ 2.06 $ 2.03 $ 1.69
======== ======== =========
Net Income Per Common Share-
Assuming Dilution $ 2.05 $ 2.03 $ 1.69
======== ======== =========
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
December 31,
------------
1997 1996
----------- ----------
ASSETS
Property $1,118,758 $ 970,418
Accumulated Depreciation (262,551) (233,514)
----------- ----------
Property - net 856,207 736,904
Investment in Real Estate Joint Ventures and Partnerships 2,824 7,282
----------- ----------
Total 859,031 744,186
Mortgage Bonds and Notes Receivable from:
Affiliate (net of deferred gain of $4,487 in 1997 and 1996) 14,752 14,550
Real Estate Joint Ventures and Partnerships 15,250 15,235
Marketable Debt Securities 12,345 13,806
Unamortized Debt and Lease Costs 23,536 23,411
Accrued Rent and Accounts Receivable (net of allowance for doubtful
accounts of $1,000 in 1997 and $1,236 in 1996) 14,583 13,164
Cash and Cash Equivalents 2,754 169
Other 4,542 6,576
----------- ----------
Total $ 946,793 $ 831,097
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt $ 507,366 $ 389,225
Accounts Payable and Accrued Expenses 43,305 36,949
Other 6,136 3,925
----------- ----------
Total 556,807 430,099
----------- ----------
Commitments and Contingencies
Shareholders' Equity:
Preferred Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 10,000; shares issued and outstanding:
none
Common Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 150,000; shares issued and outstanding:
26,660 in 1997 and 26,576 in 1996 800 797
Capital Surplus 389,186 400,201
----------- ----------
Shareholders' Equity 389,986 400,998
----------- ----------
Total $ 946,793 $ 831,097
=========== ==========
See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(AMOUNTS IN THOUSANDS)
Years Ended December 31,
------------------------
1997 1996 1995
---------- ---------- ----------
Cash Flows from Operating Activities:
Net income $ 54,966 $ 53,938 $ 44,802
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 37,976 33,769 30,060
Equity in earnings of real estate joint ventures and
partnerships (1,003) (1,232) (1,549)
(Gain) loss on sales of property and securities (3,327) (5,563) 14
Amortization of direct financing leases 659 639 664
Changes in accrued rent and accounts receivable (2,462) (1,836) (526)
Changes in other assets (6,105) (7,507) (7,087)
Changes in accounts payable and accrued expenses 9,113 4,032 6,187
Other, net 85 59 (67)
---------- ---------- ----------
Net cash provided by operating activities 89,902 76,299 72,498
---------- ---------- ----------
Cash Flows from Investing Activities:
Investment in properties (136,632) (121,379) (105,438)
Mortgage bonds and notes receivable:
Advances (1,501) (3,151) (6,691)
Collections 2,090 6,188 12,468
Proceeds from sales and disposition of property 11,741 7,231 444
Proceeds from sales of marketable debt securities 31,836
Real estate joint ventures and partnerships:
Investments (59) (69) (66)
Distributions 808 1,032 1,337
Other, net 2,517 3,291 2,672
---------- ---------- ----------
Net cash used in investing activities (121,036) (106,857) (63,438)
---------- ---------- ----------
Cash Flows from Financing Activities:
Proceeds from issuance of:
Debt 104,526 95,770 144,500
Common shares of beneficial interest 1,325 231 398
Principal payments of debt (3,644) (2,350) (89,406)
Dividends paid (68,200) (65,851) (63,478)
Other, net (288) (428) (1,014)
---------- ---------- ----------
Net cash provided by (used in) financing activities 33,719 27,372 (9,000)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 2,585 (3,186) 60
Cash and cash equivalents at January 1 169 3,355 3,295
---------- ---------- ----------
Cash and cash equivalents at December 31 $ 2,754 $ 169 $ 3,355
========== ========== ==========
See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Years Ended December 31, 1997, 1996 and 1995
Common
Shares of
Beneficial Capital Retained
Interest Surplus Earnings
----------- --------- ----------
Balance, January 1, 1995 $ 791 $422,602
Net income $ 44,802
Shares exchanged for property 5 6,342
Shares issued under benefit plans 679
Unrealized loss on marketable securities transferred
to available for sale (144)
Cash dividends ($2.40 per share) (18,676) (44,802)
----------- --------- ----------
Balance, December 31, 1995 796 410,803 ----
Net income 53,938
Shares exchanged for property 1 968
Shares issued under benefit plans 469
Unrealized loss on marketable securities (125)
Cash dividends ($2.48 per share) (11,914) (53,938)
----------- --------- ----------
Balance, December 31, 1996 797 400,201 ----
Net income 54,966
Shares exchanged for property 1 275
Shares issued under benefit plans 2 1,733
Unrealized gain on marketable securities 211
Cash dividends ($2.56 per share) (13,234) (54,966)
----------- --------- ----------
Balance, December 31, 1997 $ 800 $389,186 $ ----
=========== ========= ==========
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Weingarten Realty Investors (the "Company"), a Texas real estate investment
trust, is engaged in the acquisition, development and management of real
estate, primarily anchored neighborhood and community shopping centers. Over
75% of the Company's properties are located in Texas, with the remainder
located throughout the southwestern part of the United States. The Company's
major tenants include supermarkets, drugstores and other retailers who
generally sell basic necessity-type commodities. The Company currently
operates and intends to operate in the future as a real estate investment
trust ("REIT").
Basis of Presentation
The consolidated financial statements include the accounts of the Company, its
subsidiaries and its interest in 50% or more-owned joint ventures and
partnerships over which the Company exercises control. All significant
intercompany balances and transactions have been eliminated. Investments in
less than 50%-owned joint ventures and partnerships are accounted for using
the equity method.
Revenue Recognition
Rental revenue is generally recognized on a straight-line basis over the life
of the lease for operating leases and over the lease terms using the interest
method for direct financing leases. Contingent rentals (payments for taxes,
maintenance and insurance by the lessees and for an amount based on a
percentage of the tenants' sales) are estimated and accrued over the lease
year.
Property
Real estate assets are stated at cost less accumulated depreciation, which, in
the opinion of management, is not in excess of the individual property's
estimated undiscounted future cash flows, including estimated proceeds from
disposition. Depreciation is computed using the straight-line method,
generally over estimated useful lives of 18-50 years for buildings and 10-20
years for parking lot surfacing and equipment. Major replacements are
capitalized and the replaced asset and corresponding accumulated depreciation
are removed from the accounts. All other maintenance and repair items are
charged to expense as incurred.
Capitalization
Carrying charges, principally interest and ad valorem taxes, on land under
development and buildings under construction are capitalized as part of land
under development and buildings and improvements.
Deferred Charges
Unamortized debt and lease costs are amortized primarily on a straight-line
basis over the terms of the debt and over the lives of leases, respectively.
Marketable Debt Securities
The Company's investment in marketable securities is classified as "available
for sale." The securities are carried at market with any unrealized gains or
losses included as a component of shareholders' equity. Premiums and
discounts are amortized (accreted) to operations over the estimated remaining
lives of the securities using the constant yield method.
Use of Estimates
The preparation of financial statements requires management to make use of
estimates and assumptions that affect amounts reported in the financial
statements as well as certain disclosures. Actual results could differ from
those estimates.
Per Share Data
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share" as of December 31, 1997, and amounts for 1996 and
1995 were restated to conform with such presentation. Net income per common
share ("Basic EPS") is computed using net income and the weighted average
shares outstanding. Net income
per common share-assuming dilution ("Diluted EPS") is also computed using net
income, however, the weighted average shares outstanding are adjusted for
potentially dilutive securities for the periods indicated, as follows (in
thousands):
Weighted Average Shares: . . . . . 1997 1996 1995
------ ------ ------
Basic EPS. . . . . . . . . . . . . 26,638 26,555 26,464
Effect of dilutive securities:
Employee share options . . . . . 132 43 29
Convertible partnership interest 1
------ ------ ------
Diluted EPS. . . . . . . . . . . . 26,771 26,598 26,493
====== ====== ======
Options to purchase 25,000 and 533,000 shares in 1996 and 1995, respectively,
were not included in the calculation of Diluted EPS as the exercise prices
were greater than the average market price for the year.
Statements of Cash Flows
The Company considers all highly liquid investments with original maturities
of three months or less as cash equivalents. The Company issued .1 million, .1
million and .2 million common shares of beneficial interest valued at $.2
million, $1.0 million and $6.3 million in 1997, 1996 and 1995, respectively,
in connection with the purchases of property. The Company assumed debt and/or
capital lease obligations totaling $17.3 million, $6.6 million and $2.9
million in connection with the purchases of property during 1997, 1996 and
1995, respectively. During 1997, the Company issued a limited partnership
interest in exchange for property valued at $1.7 million.
New Accounting Pronouncements
Effective January 1, 1998, the Company will adopt SFAS No. 130, "Reporting
Comprehensive Income." This statement requires the presentation of total
non-owner changes in equity, including items not currently reflected in net
income. Also effective January 1, 1998, the Company will adopt SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement requires that segments of a business be disclosed in interim and
annual financial statements. The Company is currently evaluating the effect,
if any, these statements will have on the Company's financial presentation.
Reclassifications
Certain reclassifications of prior years' amounts have been made to conform
with the current year presentation.
NOTE 2. DEBT
The Company's debt consists of the following (in thousands):
DECEMBER 31,
------------
1997 1996
-------- --------
Fixed-rate debt payable to 2015 at 6.0% to 10.5% $379,749 $266,810
Notes payable under revolving credit agreements. . . . . 94,400 87,120
Obligations under capital leases . . . . . . . . . . . . 12,467 12,467
Repurchase agreements, due daily and collateralized by
$12.3 million of marketable debt securities 12,176 13,475
Industrial revenue bonds payable to 2015 at 4.7% to 6.8%
at December 31, 1997 7,437 7,558
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 1,137 1,795
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $507,366 $389,225
======== ========
The Company has an unsecured $200 million revolving credit agreement with a
bank syndicate. The agreement expires in November 2000, but the Company has
an annual option to request a one-year extension of the agreement. All
members of the bank syndicate must agree to the requested extension or the
agreement expires on the scheduled date, at which time all loans outstanding
under the credit agreement become payable over a two-year period. The Company
intends to request an extension of the agreement in 1998 and expects that the
bank syndicate will agree to its request. The Company also has an agreement
for an unsecured and uncommitted overnight credit facility totaling $20
million with a bank to be used for cash management purposes. The Company will
maintain adequate funds available under the $200 million revolving credit
facility at all times to cover the outstanding balance under the $20 million
facility. The Company also has letters of credit totaling $14.9 million
outstanding under the $200 million revolving credit facility at December 31,
1997. The revolving credit agreements are subject to normal banking terms and
conditions and do not adversely restrict the Company's operations or
liquidity.
At December 31, 1997, the variable interest rate for notes payable under the
$200 million revolving credit agreement, including the cost of the related
commitment fee, was 6.9% and the variable interest rates under the $20 million
revolving credit agreement and the repurchase agreements were 6.9% and 6.7%,
respectively. During 1997, the maximum balance and weighted-average balance
outstanding under these agreements were $125.7 million and $84.5 million,
respectively, at an average interest rate of 6.2%. The Company made cash
payments for interest on debt, net of amounts capitalized, of $27.4 million
in 1997, $21.3 million in 1996 and $13.9 million in 1995.
Certain debt is collateralized by various direct financing leases or other
property and current and future rentals from these leases and properties. At
December 31, 1997 and 1996, the carrying value of such property aggregated
$209 million and $173 million, respectively.
The Company has three interest rate swap contracts with an aggregate notional
amount of $40 million. Such contracts, which expire through 2004, have been
outstanding since their purchase in 1992. The Company intends to hold such
contracts through their expiration date and to use them as a means of managing
interest rate risk by fixing the interest rate on a portion of the Company's
variable-rate debt. The interest rate swaps have an effective interest rate
of 8.1%. The difference between the interest received and paid on the
interest rate swaps is recognized as interest expense as incurred. The
interest rate swaps increased interest expense and decreased net income as
follows, in millions: $.9 in 1997 and 1996 and $.8 in 1995. The interest
rate swaps increased the average interest rate for the Company's debt by the
following amounts: .2% for 1997, .3% for 1996 and .2% for 1995. The Company
could be exposed to credit losses in the event of non-performance by the
counterparty; however, the likelihood of such non-performance is remote.
The Company's debt can be summarized as follows (in thousands):
DECEMBER 31,
------------
1997 1996
-------- --------
As to interest rate:
Fixed-rate debt (including amounts fixed through interest
rate swaps) $419,792 $306,853
Variable-rate debt . . . . . . . . . . . . . . . . . . . . 87,574 82,372
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $507,366 $389,225
======== ========
DECEMBER 31,
------------
1997 1996
-------- --------
As to collateralization:
Secured debt . . . . . . $107,152 $ 91,334
Unsecured debt . . . . . 400,214 297,891
-------- --------
Total. . . . . . . . . . $507,366 $389,225
======== ========
Scheduled principal payments on the Company's debt (excluding $94.4 million
potentially due under the Company's revolving credit agreements in 1998 and
2000 and $12.2 million of repurchase agreements) are due during the following
years (in thousands):
1998. . . . . . . $ 6,135
1999. . . . . . . 1,861
2000. . . . . . . 29,430
2001. . . . . . . 50,061
2002. . . . . . . 26,695
2003 through 2007 206,995
2008 through 2012 71,183
Thereafter. . . . 8,430
Various debt agreements contain restrictive covenants, the most restrictive of
which requires the Company to produce annual consolidated distributable cash
flow, as defined by the agreements, of not less than 250% of interest
payments, to limit the payment of dividends to no more than 100% of the
Company's annual consolidated cash flow (as defined), to limit short-term debt
(as defined) to the greater of 33% of total debt or $200 million (exclusive of
repurchase agreements) and to maintain uncollateralized assets equal to at
least 150% of unsecured debt. Management believes that the Company is in
compliance with all restrictive covenants.
During 1997, the Company issued $97 million of unsecured Medium Term Notes
("MTNs") with an average life of 8.7 years at an average interest rate of
6.8%. As of December 31, 1997, the Company had issued a total of $292.5
million of MTNs. In the third quarter of 1996, the Company filed a $250
million shelf registration statement with the Securities and Exchange
Commission, which allows for the issuance of debt or equity securities or
warrants. At December 31, 1997, the unused portion of the shelf registration
totaled $134 million.
NOTE 3. PROPERTY
The Company's property consists of the following (in thousands):
DECEMBER 31,
------------
1997 1996
---------- --------
Land . . . . . . . . . . . . . . . . . $ 208,512 $183,431
Land held for development. . . . . . . 31,679 32,228
Land under development . . . . . . . . 5,958 912
Buildings and improvements . . . . . . 863,567 743,688
Construction in-progress . . . . . . . 1,940 1,897
Property under direct financing leases 7,102 8,262
---------- --------
Total. . . . . . . . . . . . . . . . . $1,118,758 $970,418
========== ========
The following carrying charges were capitalized (in thousands):
DECEMBER 31,
------------
1997 1996 1995
----- ------ ------
Interest . . . . $ 812 $1,285 $2,878
Ad valorem taxes 33 269 486
----- ------ ------
Total. . . . . . $ 845 $1,554 $3,364
===== ====== ======
In December 1997, the Company formed a limited partnership to acquire certain
property. The Company controls the partnership and consolidates its
operations in the accompanying consolidated financial statements. The
partnership agreement allows for the outside limited partner to put its
interest to the partnership after the second anniversary of the agreement for
the $1.7 million value of the original consideration, payable in cash or
39,200 common shares of the Company, at the option of the Company.
NOTE 4. LEASING OPERATIONS
The Company's lease terms range from less than one year for smaller tenant
spaces to over twenty-five years for larger tenant spaces. In addition to
minimum lease payments, most of the leases provide for contingent rentals.
Future minimum rental income from non-cancelable operating leases at December
31, 1997, in millions, is: $132.1 in 1998; $117.8 in 1999; $100.4 in 2000;
$86.0 in 2001; $71.5 in 2002 and $516.5 thereafter. The future minimum rental
amounts do not include estimates for contingent rentals. Such contingent
rentals, in millions, aggregated $36.2 in 1997, $31.2 in 1996 and $26.8 in
1995.
Property under Direct Financing Leases
Leases that are, in substance, the financing of an asset purchase by the party
leasing the property are recorded as property under direct financing leases.
The Company, in its capacity as lessor, has removed the leased property from
its books and recorded the future lease payments receivable using the
following components (in thousands):
DECEMBER 31,
------------
1997 1996
-------- --------
Total minimum lease payments to be received. $10,478 $13,052
Estimated residual values of leased property 1,951 1,984
Unearned income (5,327) (6,774)
-------- --------
Property under direct financing leases . . . $ 7,102 $ 8,262
======== ========
The Company recognized rental revenue from direct financing leases as follows,
in millions: $1.7 in 1997 and 1996 and $1.9 in 1995. At December 31, 1997,
minimum lease payments to be received in each of the five succeeding years, in
millions, are: $1.8 in 1998; $1.6 in 1999; $1.2 in 2000; $1.0 in 2001; $.9
in 2002 and $4.7 thereafter. The future minimum lease payments do not include
amounts for contingent rentals. Contingent rental income on properties leased
under direct financing leases, in millions, was $.6 in 1997, $.8 in 1996 and
$.7 in 1995.
NOTE 5. LEASE COMMITMENTS
The Company leases land and a shopping center from the owners and then
subleases these properties to other parties. Future minimum rental payments
under these operating leases, in millions, are: $1.6 in 1998; $1.5 in 1999,
2000 and 2001; $1.3 in 2002 and $19.6 thereafter.
Future minimum rental payments on these leases have not been reduced by future
minimum sublease rentals aggregating $15.4 million through 2017 that are due
under various non-cancelable subleases. Rental expense (including
insignificant amounts for contingent rentals) for operating leases aggregated,
in millions: $2.0 in 1997 and $1.8 in 1996 and 1995. Sublease rental revenue
(excluding amounts for improvements constructed by the Company on the leased
land) from these leased properties was as follows, in millions: $2.4 in 1997;
$2.0 in 1996 and $2.2 in 1995.
Property under capital leases, consisting of two shopping centers, aggregated
$12.3 million at December 31, 1997 and 1996 and is included in buildings and
improvements. Future minimum lease payments under these capital leases total
$18.7 million, with annual payments due of $.5 million in each of 1998 through
2002, and $16.0 million thereafter. The amount of these total payments
representing interest is $6.2 million. Accordingly, the present value of the
net minimum lease payments is $12.5 million at December 31, 1997.
NOTE 6. RELATED PARTY TRANSACTIONS
The Company has mortgage bonds and notes receivable of $14.8 million and $14.6
million, net of deferred gain of $4.5 million, at December 31, 1997 and 1996,
respectively, from WRI Holdings, Inc. ("Holdings"). The Company and Holdings
share certain directors and are under common management. These receivables are
collateralized by unimproved land and an investment in a joint venture which
owns and manages a motor hotel ("Hospitality"). The bonds and notes bear
interest at rates of 16% and prime plus 1%, respectively. However, due to its
poor financial condition, Holdings reduced the payment of interest to the
Company in 1988 to the cash flow received from Hospitality and, accordingly,
the Company limited the recognition of interest income for financial statement
purposes to the same amount. The Company does not anticipate receiving
interest payments in excess of this cash flow in the near term. Interest
income recognized for financial reporting purposes was $.1 million, $.3
million and $1.2 million in 1997, 1996 and 1995, respectively.
In 1996, Hospitality obtained secured financing on its motor hotel. Proceeds
from the borrowings were used to repay $.6 million of the net investment in
the mortgage bonds and $1.3 million of notes receivable. The Company did not
recognize any of the previously deferred gain on this transaction.
The Company's unrecorded receivable for interest on the mortgage bonds was
$26.4 million and $22.4 million at December 31, 1997 and 1996, respectively.
Interest income not recognized by the Company for financial reporting purposes
aggregated, in millions, $4.0, $3.7 and $3.6 for 1997, 1996 and 1995,
respectively.
Management of the Company believes that the fair market value of the security
collateralizing debt from Holdings is greater than the net investment in such
debt and that there would not be a charge to operations if the Company were
to foreclose on the debt. If foreclosure were required, the net investment
in such debt would become the Company's basis of the repossessed assets.
However, the Company does not currently anticipate foreclosure on Holdings'
properties due to certain restrictions imposed on such assets in connection
with the Company's REIT status. The Company's management does not presently
believe that the net investment in the mortgage bonds and notes receivable
from Holdings has been impaired.
The Company owns interests in several joint ventures and partnerships. Notes
receivable from these entities bear interest at 8.5% to 10.5% at December 31,
1997 and are due at various dates through 2020. The Company recognized
interest income on these notes as follows, in millions: $1.4 in 1997; $1.3 in
1996 and $1.1 in 1995.
During 1997, the Company purchased its joint venture partner's 85% interest in
four shopping centers for $26 million.
Chase Bank of Texas, National Association ("Chase") is a significant
participant in and the agent for the banks that provide the Company's $200
million revolving credit agreement. The Company and Chase have two common
directors.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company has guaranteed $1.1 million of notes payable executed by various
joint ventures and partnerships at December 31, 1997.
The Company is involved in various matters of litigation arising in the normal
course of business. While the Company is unable to predict with certainty the
amounts involved, the Company's management and counsel are of the opinion
that, when such litigation is resolved, the Company's resulting liability, if
any, will not have a material effect on the Company's consolidated financial
statements.
In connection with the acquisition of a shopping center in 1996, the Company
was obligated to pay additional acquisition costs to the seller during 1997
upon the execution of new leases at the property and the satisfaction of other
conditions. All required additional payments were funded in 1997 and totaled
$11.3 million.
NOTE 8. FEDERAL INCOME TAX CONSIDERATIONS
Federal income taxes are not provided because the Company believes it
qualifies as a REIT under the provisions of the Internal Revenue Code.
Shareholders of the Company include their proportionate taxable income in
their individual tax returns. As a REIT, the Company must distribute at least
95% of its ordinary taxable income to its shareholders and meet certain income
source and investment restriction requirements.
Taxable income differs from net income for financial reporting purposes
principally because of differences in the timing of recognition of interest,
ad valorem taxes, depreciation, rental revenue, pension expense and
installment gains on sales of property. As a result of these differences, the
book value of the Company's net assets exceeds its tax basis by $49.8 million
at December 31, 1997.
For federal income tax purposes, the cash dividends distributed to
shareholders are characterized as follows:
1997 1996 1995
------ ------ ------
Ordinary income. . . . . 95.9% 87.1% 76.4%
Return of capital
(generally non-taxable) 2.9 4.0 20.1
Long-term capital gains 1.2 8.9 3.5
------ ------ ------
Total 100.0% 100.0% 100.0%
====== ====== ======
NOTE 9. SHARE OPTIONS AND AWARDS
The Company has an incentive Share Option Plan which provides for the issuance
of options and share awards up to a maximum of 700,000 common shares and
expires in December 1997. Options granted under this plan become exercisable
in equal increments over a three-year period. The Company has an additional
share option plan which grants 100 share options to every employee of the
Company, excluding officers, upon completion of each five-year interval of
service. This plan, which expires in 2002, provides options for a maximum of
100,000 common shares. Options granted under this plan are exercisable
immediately. For both of these share option plans, options are granted to
employees of the Company at an exercise price equal to the quoted fair market
value of the common shares on the date the options are granted and expire upon
termination of employment or ten years from the date of grant.
In January 1997, the Company issued 29,400 restricted shares and granted
314,200 share options under a compensatory Incentive Share Plan for key
officers of the Company. This plan, which expires in 2003, provides for the
issuance of up to 1,000,000 shares, either in the form of restricted shares or
share options. The restricted shares generally vest over a ten-year period,
with potential acceleration of vesting due to appreciation in the market value
of the Company's shares. The share options vest over a five-year period
beginning three years after the date of grant. Share options were granted at
the quoted fair market value on the date of grant. The Company recognized
compensation expense relating to restricted shares as follows, in millions:
$.3 in 1997 and $.2 in 1996 and 1995.
The Company does not recognize compensation cost for share options when the
option exercise price equals or exceeds the quoted fair market value on the
date of the grant. Had the Company determined compensation cost for its share
option and award plans based on the fair value of the options granted at the
grant dates, the Company's proforma net income would have been as follows, in
millions: $54.3, $53.9 and $44.8 in 1997, 1996 and 1995, respectively.
Proforma net income per common share would have been $2.04, $2.03 and $1.69
in 1997, 1996 and 1995, respectively.
The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option-pricing method with the following weighted-average
assumptions: dividend yield of 6.0% for both 1997 and 1996; expected
volatility of 18.0% and 18.3%; expected lives of 6.9 years and 7.1 years and
risk-free interest rates of 6.5% and 6.4% in 1997 and 1996, respectively.
Following is a summary of the option activity for the three years ended
December 31, 1997:
SHARES WEIGHTED
UNDER AVERAGE
OPTION EXERCISE PRICE
---------- ---------------
Outstanding, January 1, 1995 . 747,250 $ 35.10
Granted. . . . . . . . . . . . 3,510 35.75
Canceled . . . . . . . . . . . (26,500) 34.25
Exercised. . . . . . . . . . . (15,610) 29.25
----------
Outstanding, December 31,1995 708,650 35.25
Granted. . . . . . . . . . . . 24,260 38.10
Canceled . . . . . . . . . . . (34,300) 37.00
Exercised. . . . . . . . . . . (10,875) 27.00
----------
Outstanding, December 31,1996 687,735 35.40
Granted. . . . . . . . . . . . 558,600 40.25
Canceled . . . . . . . . . . . (9,400) 37.60
Exercised. . . . . . . . . . . (61,910) 32.00
----------
Outstanding, December 31, 1997 1,175,025 $ 37.85
==========
The number of share options exercisable at December 31, 1997, 1996 and 1995
were 296,000, 243,000 and 189,000, respectively. Options exercisable at
year-end 1997 had a weighted-average exercise price of $33.40. The
weighted-average fair value of share options granted during 1997 and 1996 were
$5.35 and $5.10, respectively. Share options outstanding at December 31, 1997
had exercise prices ranging from $25.00 to $43.50 and a weighted-average
remaining contractual life of 7.6 years. Approximately 88% of the options
outstanding at year-end 1997 have exercise prices between $37.00 and $40.25
and a weighted-average contractual life of 7.1 years. There were 235,000
common shares available for the future grant of options or awards at December
31, 1997.
NOTE 10. MARKETABLE SECURITIES
The Company's investment in marketable debt securities at December 31, 1997,
which is classified as "available for sale", consists of U.S. government
agency guaranteed pass-through certificates which mature through 2008. At
December 31, 1997 and 1996, the fair value of these investments totaled $12.3
million and $13.8 million, respectively. The amortized cost of the
investments at December 31, 1997 and 1996 was $12.4 million and $14.1 million,
respectively, and the related unrealized losses were $.1 million and $.3
million at December 31, 1997 and 1996, respectively. Subsequent to year-end,
the Company sold its investment in these securities for $12.2 million,
resulting in a gain of less than $.1 million.
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments was determined using
available market information and appropriate valuation methodologies as of
December 31, 1997. Unless otherwise described below, all other financial
instruments are carried at amounts which approximate their fair values.
Based on rates currently available to the Company for debt with similar terms
and average maturities, fixed-rate debt with carrying values of $419.8 million
and $306.9 million have fair values of approximately $437.9 million and $309.6
million at December 31, 1997 and 1996, respectively. The fair value of the
Company's variable-rate debt approximates its carrying values of $87.6 million
and $82.4 million at year-end 1997 and 1996, respectively.
The fair value of the interest rate swap agreements is based on the estimated
amounts the Company would receive or pay to terminate the contracts. If the
Company had terminated these agreements at December 31, 1997 and 1996, the
Company would have paid $3.1 million at each year-end.
The fair value of the mortgage bonds and notes receivable from Holdings was
not determined because it is not practical to reasonably assess the credit
adjustment that would be applied in the marketplace for such bonds and notes
receivable.
NOTE 12. EMPLOYEE BENEFIT PLANS
The Company has a Savings and Investment Plan to which eligible employees may
elect to contribute from 1% to 12% of their salaries. Employee contributions
are matched by the Company 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 six-year period. Compensation expense related to the plan was
$.2 million per year for 1997, 1996 and 1995.
The Company has a defined benefit pension plan covering substantially all of
its employees. The benefits are based on years of service and the employee's
compensation during the last five years of service. The Company's funding
policy is to make annual contributions as required by applicable regulations,
however, the Company has not been required to make contributions for any of
the past three years. The following table sets forth the plan's funded status
and amounts recognized in the Company's balance sheet (in thousands):
1997 1996
-------- --------
Actuarial present value of:
Vested benefit obligation. . . . . . . . . . . . . . . . . . $ 7,308 $ 6,263
Accumulated benefit obligation . . . . . . . . . . . . . . . $ 7,480 $ 6,368
======== ========
Projected benefit obligation . . . . . . . . . . . . . . . . $ 9,318 $ 7,943
Plan assets at fair value, primarily common stocks and bonds 10,348 8,677
-------- --------
Plan assets in excess of projected benefit obligation 1,030 734
Unrecognized prior service cost 55 102
Unrecognized net gain (2,447) (1,882)
Unrecognized net transition asset (53)
-------- --------
Pension liability. . . . . . . . . . . . . . . . . . . . . . $(1,362) $(1,099)
======== ========
The components of net periodic pension cost are as follows (in thousands):
1997 1996 1995
-------- -------- --------
Service cost of benefits earned during the year $ 430 $ 361 $ 300
Interest cost on projected benefit obligation 587 506 478
Actual return on plan assets (1,918) (1,295) (1,499)
Net amortization and deferral 1,164 688 1,047
-------- -------- --------
Total $ 263 $ 260 $ 326
======== ======== ========
Assumptions used to develop periodic expense and the actuarial present value
of projected benefit obligations were:
1997 1996 1995
----- ----- -----
Weighted average discount rate 7.0% 7.0% 7.0%
Expected long-term rate of return on plan assets 9.0% 8.0% 8.0%
Rate of increase in compensation levels 5.0% 5.0% 5.5%
NOTE 13. SUBSEQUENT EVENTS
On January 20, 1998, the Company sold its investment in U.S. government agency
guaranteed pass-through certificates for $12.2 million, resulting in a gain of
less than $.1 million. The proceeds were used to retire overnight repurchase
agreements which were collateralized by these marketable debt securities.
On February 23, 1998, the Company issued $75 million of 7.44% cumulative
preferred shares with no stated maturity and a liquidation preference of $25
per share, which are callable at the Company's option on or after March 31,
2003. Net proceeds of $72.5 million were used to pay down amounts outstanding
under the Company's revolving credit facilities and to retire $35 million of
9.11% secured notes payable to an insurance company. The early extinguishment
of these notes that were scheduled to mature in August of 2001 will result in
an extraordinary loss of $1.2 million in 1988. The issuance of the preferred
shares reduced the unused portion of the Company's shelf registration to $59
million.
NOTE 14. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
During the year ended December 31, 1997, the Company acquired eight retail
centers, three industrial projects and its joint venture partner's 85%
interest in four other retail centers for a total of $111 million. The pro
forma financial information for the years ended December 31, 1997 and 1996 is
based on the historical statements of the Company after giving effect to the
acquisitions as if such acquisitions took place on January 1, 1997 and 1996,
respectively.
The pro forma financial information shown below is presented for informational
purposes only and may not be indicative of results that would have actually
occurred if the acquisitions had been in effect at the dates indicated, nor
does it purport to be indicative of the results that may be achieved in the
future (in thousands, except per share amounts).
.
DECEMBER 31,
------------
1997 1996
-------- --------
Pro forma revenues $179,756 $160,267
======== ========
Pro forma net income $ 55,055 $ 54,636
======== ========
Pro forma net income per common share $ 2.07 $ 2.07
======== ========
NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 1997 and
1996 is as follows:
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
1997:
Revenues $41,673 $42,843 $44,000 $45,996
Net Income 12,776 12,755 16,177 (1) 13,258
Net Income per Common Share 0.48 0.48 0.61 (1) 0.50
1996:
Revenues $36,762 $37,178 $37,956 $39,227
Net Income 12,625 12,910 16,325 (1) 12,078
Net Income per Common Share 0.48 0.48 0.61 (1) 0.46
(1) Increase is primarily the result of a gain on the sale of property
during the quarter.
NOTE 16. PRICE RANGE OF COMMON SHARES (UNAUDITED)
The high and low sale prices per share of the Company's common shares, as
reported on the New York Stock Exchange composite tape, and dividends per
share paid for the fiscal quarters indicated were as follows:
HIGH LOW DIVIDENDS
------ ------- ---------
1997:
Fourth $ 45 $ 38 7/8 $ 0.64
Third 44 1/8 39 7/16 0.64
Second 45 5/8 41 3/8 0.64
First 44 3/4 40 0.64
1996:
Fourth $ 40 3/4 $ 36 $ 0.62
Third. 40 1/2 37 3/8 0.62
Second 38 7/8 34 1/4 0.62
First. 38 7/8 35 5/8 0.62
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. TRUST MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Information with respect to the Company's Trust Managers is
incorporated herein by reference to the "Election of Trust Managers" section
of the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held May 8, 1998.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the "Executive Compensation" and
"Pension Plan" sections of the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held May 8, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the "Election of Trust Managers"
section of the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held May 8, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the "Compensation Committee
Interlocks and Insider Participation" section of the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held May 8, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules: PAGE
----
(1) (A) Independent Auditors' Report 19
(B) Financial Statements
(i) Statements of Consolidated Income for the years
ended December 31, 1997, 1996 and 1995 20
(ii) Consolidated Balance Sheets as of
December 31, 1997 and 1996 21
(iii) Statements of Consolidated Cash Flows for the years
ended December 31, 1997, 1996 and 1995 22
(iv) Statements of Consolidated Shareholders' Equity for
the years ended December 31, 1997, 1996 and 1995. 23
(v) Notes to Consolidated Financial Statements 24
(2) Financial Statement Schedules:
SCHEDULE PAGE
-------- ----
II Valuation and Qualifying Accounts 40
III Real Estate and Accumulated Depreciation 41
IV Mortgage Loans on Real Estate 43
All other schedules are omitted since the required information is not present
or is not present in amounts sufficient to require submission of the schedule
or because the information required is included in the consolidated financial
statements and notes hereto.
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this annual report.
(c) Exhibits:
3.1 - Restated Declaration of Trust, with all amendments thereto (filed as Exhibit 3.1 to
the Company's Registration Statement on Form S-3 (No. 33-49206) and
incorporated herein by reference).
3.2 - Bylaws of the Company (filed as Exhibit 3.2 to the Company's Registration
Statement on Form S-3 (No. 33-49206) and incorporated herein by reference).
10.1 - 1988 Share Option Plan of the Company, as amended (filed as Exhibit 10.1 to
the Company's Annual Report on Form 10-K for the year ended December 31,
1990 and incorporated herein by reference).
10.2**- Weingarten Realty Investors Supplemental Retirement Account Plan, as
amended and restated (filed as Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1992 and incorporated herein by
reference).
10.3 - 16% Mortgage Bonds Due 1994 of WRI Holdings, Inc. dated December 28,
1984, payable to the Company in the original principal amount of $3,150,000
(filed as Exhibit 10.8 to the Company's Registration Statement on Form S-4 (No.
33-19730) and incorporated herein by reference).
10.3.1* - Fourth Bonds Renewal and Extension Agreement, effective December 28, 1997,
for the 16% Mortgage Bonds of WRI Holdings, Inc., payable to the Company in
the original principal amount of $3,150,000.
10.4 - Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and
Texas Commerce Bank National Association, as Trustee, relating to the 16%
Mortgage Bonds Due 1994 of WRI Holdings, Inc. in the original principal amount
of $3,150,000 (filed as Exhibit 10.9 to the Company's Registration Statement on
Form S-4 (No. 33-19730) and incorporated herein by reference).
10.4.1 - Supplemental Indenture of Trust, dated February 22, 1995, between WRI
Holdings, Inc. and Texas Commerce Bank National Association relating to the
16% Mortgage Bonds due December 28, 1994 of WRI Holdings, Inc. in the
original principal amount of $3,150,000 (filed as exhibit 10.4.1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.5* - Fourth Supplemental Indenture of Trust between WRI Holdings, Inc. and Texas
Commerce Trust Company of New York, as Trustee, amending Trust Indenture,
dated December 28, 1984, between WRI Holdings, Inc. and Texas Commerce
Bank National Association, as Trustee, relating to the 16% Mortgage Bonds Due
1994 of WRI Holdings, Inc. in the original principal amount of $3,150,000
10.6 - 16% Mortgage Bonds Due 2004 of WRI Holdings, Inc., dated December 28,
1984, payable to the Company in the original principal amount of $16,682,000
(filed as Exhibit 10.10 to the Company's Registration Statement on Form S-4
(No. 33-19730) and incorporated herein by reference).
10.7 - Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and
Texas Commerce Bank National Association, as Trustee, relating to the 16%
Mortgage Bonds Due 2004 of WRI Holdings, Inc. in the original principal amount
of $16,682,000 (filed as Exhibit 10.11 to the Company's Registration Statement
on Form S-4 (No. 33-19730) and incorporated herein by reference).
10.7.1 - First Supplemental Indenture of Trust between WRI Holdings, Inc. and Texas
Commerce Trust Company of New York, as Trustee, amending Trust Indenture,
dated December 28, 1984, between WRI Holdings, Inc. and Texas Commerce
Bank National Association, as Trustee, relating to the 16% Mortgage Bonds Due
2004 of WRI Holdings, Inc. in the original principal amount of $16,682,000 (filed
as Exhibit 10.7.1 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989 and incorporated herein by reference).
10.8 - Third Amended Promissory Note, as restated, effective as of January 1, 1992,
executed by WRI Holdings, Inc., pursuant to which it may borrow up to the
principal sum of $40,000,000 from the Company.
10.9 - 16% Mortgage Bonds Due 2004 of WRI Holdings, Inc., dated December 28,
1984, payable to the Company in the original principal amount of $7,000,000
(filed as Exhibit 10.13 to the Company's Registration Statement on Form S-4
(No. 33-19730) and incorporated herein by reference).
10.10 - Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and
Texas Commerce Bank National Association, as Trustee, relating to the 16%
Mortgage Bonds Due 2004 of WRI Holdings, Inc. in the original principal amount
of $7,000,000 (filed as Exhibit 10.14 to the Company's Registration Statement on
Form S-4 (No. 33-19730) and incorporated herein by reference).
10.10.1 - First Supplemental Indenture of Trust between WRI Holdings, Inc. and Texas
Commerce Trust Company of New York, as Trustee, amending Trust Indenture,
dated December 28, 1984, between WRI Holdings, Inc. and Texas Commerce
Bank National Association, as Trustee, relating to the 16% Mortgage Bonds Due
2004 of WRI Holdings, Inc. in the original principal amount of $7,000,000 (filed as
Exhibit 10.10.1 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989 and incorporated herein by reference).
10.11 - Agreement Correcting Trust Indenture, dated February 11, 1985, relating to 16%
Mortgage Bonds Due 2004 of WRI Holdings, Inc. in the original principal amount
of $7,000,000 (filed as Exhibit 10.15 to the Company's Registration Statement on
Form S-4 (No. 33-19730) and incorporated herein by reference).
10.12 - Amendment to Note Purchase Agreement, dated March 31, 1991, amending
loan agreement, dated August 6, 1987, Life and Accident Insurance Company for
5,000,000, American General Life Insurance Company of Delaware for
5,000,000, Republic National Life Insurance Company for $3,000,000 and
American Amicable Life Insurance Company of Texas for $2,000,000 (filed as
Exhibit 10.15.1 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992 and incorporated herein by reference).
10.13**- The Savings and Investment Plan for Employees of the Company, as amended
(filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No.
33-25581) and incorporated herein by reference).
10.14**- The Fifth Amendment to Savings and Investment Plan for Employees of the
Company (filed as Exhibit 4.1.1 to the Company's Post-Effective Amendment No.
1 to Registration Statement on Form S-8 (No. 33-25581) and incorporated herein
by reference).
10.15 - Promissory Note in the amount of $12,000,000 between the Company, as payee,
and Plaza Construction, Inc., as maker (filed as Exhibit 10.23 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference).
10.15.1* - Ninth Renewal and Extension of Promissory Note in the amount of $12,000,000,
effective as of December 1, 1997, between the Company, as payee, and Plaza
Construction, Inc., as maker.
10.16 - Amended and Restated Master Swap Agreement dated as of January 29, 1992,
between the Company and Texas Commerce Bank National Association, (filed
as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992 and incorporated herein by reference).
10.16.1 - Rate Swap Transaction, dated as of May 15, 1992, between the Company and
Texas Commerce Bank National Association (filed as Exhibit 10.24.1 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992
and incorporated herein by reference).
10.16.2 - Rate Swap Transaction, dated as of June 24, 1992, between the Company and
Texas Commerce Bank National Association (filed as Exhibit 10.24.2 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992
and incorporated herein by reference).
10.16.3 - Rate Swap Transaction, dated as of July 2, 1992, between the Company and
Texas Commerce Bank National Association (filed as Exhibit 10.24.3 to the
Company's Annual Report on Form 10 K for the year ended December 31, 1992
and incorporated herein by reference).
10.17 - Amended and Restated Credit Agreement dated as of November 21, 1996
between the Company and Texas Commerce Bank National Association, as
Agent, and individually as a Bank, and the Banks defined therein.
10.17.1* - First, Second and Third Amendments to the Amended and Restated Credit
Agreement dated November 21, 1996 between the Company and Texas
Commerce Bank National Association.
10.18 - Note Purchase Agreement, dated April 1, 1994, between The Variable Annuity
Life Insurance Company, American General Life Insurance Company and the
Company in the amount of $30,000,000 (filed as Exhibit 10.25 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.19** - The 1993 Incentive Share Plan of the Company (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-8 (No. 33-52437) and
incorporated herein by reference).
10.20* - Master Promissory Note in the amount of $20,000,000 between the Company, as
payee, and Texas Commerce Bank National Association, as maker, effective
December 30, 1997.
10.21 - Distribution Agreement among the Company and the Agents dated November
15, 1996 relating to the MTN's (filed as Exhibit 1.1 to the Company's Current
Report of Form 8-K dated November 15, 1996 and incorporated herein by
reference).
10.22 - Senior Indenture dated as of May 1, 1995 between the Company and Texas
Commerce Bank, National Association, as trustee (filed as Exhibit 4(a) to the
Company's Registration Statement on Form S-3 (No. 33-57659) and
incorporated herein by reference).
10.23 - Subordinated Indenture dated as of May 1, 1995 between the Company and
Texas Commerce Bank, National Association (filed as Exhibit 4(b) to the
Company's Registration Statement on Form S-3 (No. 33-57659) and
incorporated herein by reference).
12.1* - Computation of Fixed Charges Ratios.
21.1* - Subsidiaries of the Registrant.
23.1* - Consent of Deloitte & Touche llp.
27.1* - Financial Data Schedule.
* Filed with this report.
** Management contract or compensatory plan or arrangement.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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
By: Stanford Alexander
-------------------
Stanford Alexander
Chairman/Chief Executive Officer
Date: March 9, 1998
Pursuant to the requirement of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
By: Stanford Alexander Chairman and Trust Manager March 9, 1998
------------------------
Stanford Alexander (Chief Executive Officer)
By: Andrew M. Alexander President March 9, 1998
------------------------
Andrew M. Alexander and Trust Manager
By: Robert J. Cruikshank Trust Manager March 9, 1998
------------------------
Robert J. Cruikshank
By: Martin Debrovner Vice Chairman March 9, 1998
------------------------
Martin Debrovner and Trust Manager
By: Melvin Dow Trust Manager March 9, 1998
------------------------
Melvin Dow
By: Stephen A. Lasher Trust Manager March 9, 1998
------------------------
Stephen A. Lasher
By: Joseph W. Robertson, Jr. Executive Vice President and March 9, 1998
------------------------
Joseph W. Robertson, Jr. Trust Manager (Chief Financial Officer)
By: Douglas W. Schnitzer Trust Manager March 9, 1998
------------------------
Douglas W. Schnitzer
By: Marc J. Shapiro Trust Manager March 9, 1998
------------------------
Marc J. Shapiro
By: J.T. Trotter Trust Manager March 9, 1998
------------------------
J.T. Trotter
By: Stephen C. Richter Senior Vice President/ March 9, 1998
------------------------
Stephen C. Richter Financial Administration
and Treasurer
(Principal Accounting Officer)
SCHEDULE II
WEINGARTEN REALTY INVESTORS
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER DEDUCTIONS AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS (A) PERIOD
- ------------------------------- ----------- --------- -------- ------------ ----------
1997:
Allowance for Doubtful Accounts $ 1,236 $ 877 $ 1,113 $ 1,000
1996:
Allowance for Doubtful Accounts 1,436 1,014 1,214 1,236
1995:
Allowance for Doubtful Accounts 1,007 1,126 697 1,436
- -------
Note A -- Write-offs of accounts receivable previously reserved.
SCHEDULE III
WEINGARTEN REALTY INVESTORS
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
Total Cost
---------------------------------------------------
Property
Under
Buildings Projects Direct
and Under Financing Total
Land Improvements Development Leases Cost
-------- ------------- ------------ ---------- ----------
SHOPPING CENTERS:
Texas. . . . . . . . . . . . . . . . . . . . . . $141,170 $ 518,228 $ 5,136 $ 664,534
Other States . . . . . . . . . . . . . . . . . . 49,073 239,549 1,966 290,588
-------- ------------- ------------ ---------- ----------
Total Shopping Centers . . . . . . . . . . . . . 190,243 757,777 7,102 955,122
INDUSTRIAL PROPERTIES:
Texas. . . . . . . . . . . . . . . . . . . . . . 17,336 84,873 102,209
OFFICE BUILDING:
Texas. . . . . . . . . . . . . . . . . . . . . . 534 13,429 13,963
MULTI-FAMILY RESIDENTIAL
PROPERTIES:
Texas. . . . . . . . . . . . . . . . . . . . . . 399 1,098 1,497
-------- ------------- ------------ ---------- ----------
Total Improved
Properties. . . . . . . . . . . . . . . . . . . 208,512 857,177 7,102 1,072,791
-------- ------------- ------------ ---------- ----------
LAND UNDER DEVELOPMENT OR HELD FOR DEVELOPMENT:
Texas $ 31,228 $ 31,228
Other States 6,409 6,409
-------- ------------- ------------ ---------- ----------
Total Land Under
Development 37,637 37,637
-------- ------------- ------------ ---------- ----------
LEASED PROPERTY
(SHOPPING CENTER)
UNDER CAPITAL LEASE:
Louisiana 6,390 6,390
-------- ------------- ------------ ---------- ----------
CONSTRUCTION IN
PROGRESS:
Texas 1,424 1,424
Other States 516 516
-------- ------------- ------------ ---------- ----------
Total Construction in
Progress 1,940 1,940
TOTAL OF ALL
PROPERTIES . . . . . . . . . . . . . . . . . . . $208,512 $ 863,567 $ 39,577 $ 7,102 $1,118,758
-------- ------------- ------------ ---------- ----------
Accumulated Encumbrances
Depreciation (A)
-------------- --------------
SHOPPING CENTERS:
Texas. . . . . . . . . . . . . . . . . . . . . . $ 188,418 $ 4,830
Other States . . . . . . . . . . . . . . . . . . 42,796 25,173
-------------- --------------
Total Shopping Centers . . . . . . . . . . . . . 231,214 30,003
INDUSTRIAL PROPERTIES:
Texas. . . . . . . . . . . . . . . . . . . . . . 22,276 3,369
OFFICE BUILDING:
Texas. . . . . . . . . . . . . . . . . . . . . . 5,262
MULTI-FAMILY RESIDENTIAL
PROPERTIES:
Texas. . . . . . . . . . . . . . . . . . . . . . 716 1,065
-------------- --------------
Total Improved
Properties. . . . . . . . . . . . . . . . . . . 259,468 34,437
-------------- --------------
LAND UNDER DEVELOPMENT OR HELD FOR DEVELOPMENT:
Texas
Other States
Total Land Under
Development
LEASED PROPERTY
(SHOPPING CENTER)
UNDER CAPITAL LEASE:
Louisiana . . . . . . . . . . . . . . . . . . . 3,083 5,857
-------------- --------------
CONSTRUCTION IN
PROGRESS:
Texas
Other States
Total Construction in
Progress
TOTAL OF ALL
PROPERTIES . . . . . . . . . . . . . . . . . . . $ 262,551 $ 40,294
============== ==============
Note -- A -Encumbrances do not include $61.4 million outstanding under a
$35 million 14-year term loan and a $30 million 20-year term
loan, both payable to a group of insurance companies secured
by a property collateral pool including all or part of eight
shopping centers.
SCHEDULE III
(CONTINUED)
The changes in total cost of the properties for the years ended
December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995
----------- --------- ---------
Balance at beginning of year $ 970,418 $849,894 $735,134
Additions at cost 157,757 131,814 115,687
Retirements or sales (9,918) (11,585) (1,433)
Other changes (B) 501 295 506
----------- --------- ---------
Balance at end of year $1,118,758 $970,418 $849,894
=========== ========= =========
The changes in accumulated depreciation for the years ended
December 31, 1997, 1996 and 1995 were as follows:
1997 1996 1995
--------- --------- ---------
Balance at beginning of year $233,514 $216,657 $191,427
Additions at cost 32,226 27,732 25,541
Retirements or sales (3,189) (10,875) (311)
--------- --------- ---------
Balance at end of year $262,551 $233,514 $216,657
========= ========= =========
Note B - Transferred from net investment in direct financing leases.
SCHEDULE IV
WEINGARTEN REALTY INVESTORS
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
FINAL PERIODIC FACE CARRYING
INTEREST MATURITY PAYMENT AMOUNT OF AMOUNT OF
RATE DATE TERMS MORTGAGES MORTGAGES(B)
--------- -------- ---------------- ---------- -------------
SHOPPING CENTERS:
FIRST MORTGAGES:
Phelan Boulevard
Beaumont, TX Prime 06-01-98 Varying ($32 $ 733 $ 32
+2% balloon)
Eastex Venture
Beaumont, TX Prime 12-31-98 Varying 3,500 2,338
+1 ($2,338
balloon)
Main/O.S.T., Ltd.
Houston, TX 9.3% 02-01-20 $476 4,800 4,620
Annual
P & I
($1,241
balloon)
INDUSTRIAL:
FIRST MORTGAGES:
Railwood
Houston, TX 10% 12-28-04 Varying 7,000 6,223
($6,223
balloon)
River Pointe, Conroe,TX
(Note C) 9% 11-30-03 Varying 2,133 1,891
Little York, Houston, TX
(Note C) 9% 12-31-03 Varying 1,922 1,760
SCHEDULE IV
(CONTINUED)
WEINGARTEN REALTY INVESTORS
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
FINAL PERIODIC FACE CARRYING
INTEREST MATURITY PAYMENT AMOUNT OF AMOUNT OF
RATE DATE TERMS MORTGAGES MORTGAGES(B)
--------- -------- --------- ---------- -------------
UNIMPROVED LAND:
SECOND MORTGAGE:
River Pointe
Conroe, TX Prime 12-01-98 Varying 12,000 8,789
+1% ($8,789
balloon)
---------- -------------
TOTAL MORTGAGE LOANS ON
REAL ESTATE (Note A) $ 32,088 $ 25,653
========== =============
Note A - Changes in mortgage loans for the years ended December 31,
1997, 1996 and 1995 are summarized below:
1997 1996 1995
-------- -------- --------
Balance, Beginning of year $27,157 $31,292 $28,719
New Mortgage Loans 3,500
Additions to Existing Loans 589 1,075 1,041
Collections of Principal (2,093) (5,210) (1,968)
-------- -------- --------
Balance, End of Year $25,653 $27,157 $31,292
======== ======== ========
Note B - The aggregate cost at December 31, 1997 for federal income tax
purposes is $25,189.
Note C - Principal payments are due monthly to the extent of cash flow
generated by the underlying property.