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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, 1998
[ ] 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, $0.03 par value New York Stock Exchange
Series A Cumulative Redeemable Preferred Shares, $0.03 par value New York Stock Exchange
Series C Cumulative Redeemable Preferred Shares, $0.03 par value New York Stock 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
23, 1999 was approximately $1,120,950,474. As of February 23, 1999 there were
26,689,297 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 April 28, 1999 are incorporated by reference
in Part III.
Exhibit Index beginning on Page 40
TABLE OF CONTENTS
ITEM NO. PAGE NO.
- -------- --------
PART I
1. Business 1
2. Properties 3
3. Legal Proceedings 13
4. Submission of Matters to a Vote of Shareholders 13
Executive Officers of the Registrant 14
PART II
5. Market for Registrant's Common Shares of Beneficial
Interest and Related Shareholder Matters 15
6. Selected Financial Data 16
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
7A. Qualitative and Quantitative Disclosure about Market Risk 21
8. Financial Statements and Supplementary Data 22
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 39
PART III
10. Trust Managers and Executive Officers of the Registrant 40
11. Executive Compensation 40
12. Security Ownership of Certain Beneficial Owners and
Management 40
13. Certain Relationships and Related Transactions 40
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 40
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, 1998, owned or operated under long-term
leases interests in 217 developed income-producing real estate projects, 179 of
which were shopping centers, located in the Houston metropolitan area and in
other parts of Texas and in Louisiana, Nevada, Arizona, New Mexico, Oklahoma,
Arkansas, Kansas, Colorado, Missouri, Tennessee, Illinois and Maine. The
Company's other commercial real estate projects included 37 industrial projects
and one office building, which serves, in part, as the Company's headquarters.
The Company's interests in these projects aggregated approximately 26.1 million
square feet of building area and 96.6 million square feet of land area. The
Company also owned interests in 27 parcels of unimproved land under development
or held for future development which aggregated approximately 9.3 million square
feet.
The Company currently employs 188 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 4 of the Notes to Consolidated Financial Statements at
page 31.
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 244 properties which were owned or operated under long-term leases as
of December 31, 1998, 97 of its 217 developed properties and 16 of its 27
parcels of unimproved land were located in the Houston metropolitan area. In
addition to these properties, the Company owned 65 developed properties and 8
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 1998, the economies of Houston and Texas continued to grow, albeit at a
slower pace than 1997, but still 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. The Houston
economy, because of its strengths in energy and engineering and construction,
has become much more integrated into the international economy and is somewhat
affected by the international climate. Thus, Houston's expansion is expected to
pause in 1999 showing only modest growth but expand in 2000 and beyond. 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 23 through 38 herein.
ITEM 2. PROPERTIES
At December 31, 1998, the Company's real estate properties consisted of 244
locations in thirteen 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. . . . . . . . . . . . . . . . . . . 7,084,000 28,074,000
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 Wilcrest. . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . 25,000 134,000
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. . . . . . . . . . . . . . 118,000 486,000
Long Point, Long Point at Wirt (77%). . . . . . . . . . . . . . . . . 58,000 * 257,000 *
Lyons Avenue, Lyons at Shotwell . . . . . . . . . . . . . . . . . . . 68,000 179,000
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 . . . . . . . . . . . . . . . . . . 158,000 541,000
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 . . . . . . . . . . . . . . . . 71,000 206,000
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 . . . . . . . . . . . . 6,056,000 25,883,000
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. . . . . . . . 191,000 421,000
Brodie Oaks, South Lamar Blvd. at Loop 360, Austin. . . . . . . . . . 245,000 1,050,000
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 . . . . . . . . . . . . . . . 315,000 1,156,000
River Pointe, I-45 at Loop 336, Conroe. . . . . . . . . . . . . . . . 42,000 329,000
Moore Plaza, S. Padre Island Dr. at Staples, Corpus Christi . . . . . 360,000 1,491,000
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 *
Galveston Place, Central City Blvd. at 61st St., Galveston. . . . . . 206,000 828,000
Food King Place, 25th St. at Avenue P, Galveston. . . . . . . . . . . 28,000 78,000
Fiesta, Belt Line Rd. at Marshall Dr., Grand Prairie. . . . . . . . . 32,000 236,000
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
Central Plaza, Loop 289 at Slide Rd., Lubbock . . . . . . . . . . . . 152,000 529,000
Town & Country, 4th St. at University, Lubbock. . . . . . . . . . . . 134,000 339,000
Angelina Village, Hwy. 59 at Loop 287, Lufkin . . . . . . . . . . . . 254,000 1,835,000
Independence Plaza, Town East Blvd., Mesquite . . . . . . . . . . . . 179,000 787,000
McKinney Centre, US Hwy 380 at U.S Hwy 75, McKinney. . . . . . . . . 27,000 145,000
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
Watauga, Hwy. 377 at Bursey Rd., Watauga. . . . . . . . . . . . . . . 2,000 9,000
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
Table continued on next page
Building
Name and Location Area Land Area
- --------------------------------------------------------------------- ---------- -----------
LOUISIANA, (CONT'D.)
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
NEVADA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,091,000 4,398,000
Francisco Centre, E. Desert Inn Rd. at S. Eastern Ave., Las Vegas . . 116,000 639,000
Mission Center, Flamingo Rd. at Maryland Pkwy, Las Vegas. . . . . . . 152,000 570,000
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
College Park, E. Lake Mead Blvd. at Civic Ctr. Dr., North Las Vegas . 164,000 721,000
ARIZONA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,052,000 4,702,000
University Plaza, Plaza Way at Milton Rd., Flagstaff. . . . . . . . . 166,000 918,000
Arrowhead Festival, 75th Ave. and W. Bell Rd., Glendale . . . . . . . 26,000 157,000
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
NEW MEXICO, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 703,000 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. . . . . . . . 326,000 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 596,000 2,323,000
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
Markham West, 11400 W. Markham, Little Rock (35%) . . . . . . . . . . 62,000 * 269,000 *
Westgate, Cantrell at Bryant, Little Rock . . . . . . . . . . . . . . 50,000 206,000
Table continued on next page
Building
Name and Location Area Land Area
- --------------------------------------------------------------------- ---------- -----------
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
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
ILLINOIS, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 29,000
Lincoln Place Centre, Hwy. 59, Fairview Heights (99%) . . . . . . . . 7,000 * 29,000 *
Building
INDUSTRIAL Area Land Area
---------- -----------
HOUSTON AND HARRIS COUNTY, TOTAL. . . . . . . . . . . . . . . . . . . 4,503,000 11,066,000
Blankenship Building, Kempwood Drive. . . . . . . . . . . . . . . . . 59,000 175,000
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
Crosspoint Warehouse, Crosspoint. . . . . . . . . . . . . . . . . . . 73,000 179,000
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
Levitz Furniture Warehouse, Loop 610 South. . . . . . . . . . . . . . 184,000 450,000
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 . . . . . . . . . . . . . . 1,112,000 2,913,000
South Loop Business Park, S. Loop at Long Dr. . . . . . . . . . . . . 46,000 * 103,000 *
Southport Business Park 5, South Loop 610 . . . . . . . . . . . . . . 157,000 358,000
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
Table continued on next page
Building
Name and Location Area Land Area
- --------------------------------------------------------------------- ---------- -----------
TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL . . . . . . . . . . . . 1,194,000 2,505,000
Randol Mill Place, Randol Mill Road, Arlington. . . . . . . . . . . . 55,000 178,000
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 *
Northaven Business Center, Northaven Rd., Dallas. . . . . . . . . . . 151,000 178,000
Redbird Distribution Center, Joseph Hardin Drive, Dallas. . . . . . . 111,000 233,000
Regal Distribution Center, Leston Avenue, Dallas. . . . . . . . . . . 203,000 318,000
Space Center Industrial Park, Pulaski St. at Irving Blvd., Dallas . . 265,000 426,000
Walnut Trails Business Park, Walnut Hill Land, Dallas . . . . . . . . 103,000 311,000
DFW-Port America, Port America Place, Grapevine . . . . . . . . . . . 45,000 110,000
Nasa One Business Center, Nasa Road One at Hwy. 3, Webster. . . . . . 112,000 328,000
TENNESSEE, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 679,000 1.471,000
Southwide Warehouse # 2, Federal Compress Ind. Pk., Memphis . . . . . 124,000 302,000
Southwide Warehouse # 3, Federal Compress Ind. Pk., Memphis . . . . . 112,000 209,000
Southwide Warehouse # 4, Federal Compress Ind. Pk., Memphis . . . . . 120,000 220,000
Thomas Street Warehouse, N. Thomas Street, Memphis. . . . . . . . . . 164,000 423,000
Crowfarn Drive Warehouse, Crowfarn Dr. at Getwell Rd., Memphis. . . . 159,000 317,000
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. . . . . . . . . . . . . . . . . . . . 5,088,000
Beltway 8 at W. Belfort . . . . . . . . . . . . . . . . . . . . . . . 499,000
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
Mesa Rd. at Tidwell . . . . . . . . . . . . . . . . . . . . . . . . . 901,000
Mesa Rd. at Spikewood . . . . . . . . . . . . . . . . . . . . . . . . 1,030,000
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 . . . . . . . . . . . . 2,142,000
McDermott Drive at Custer Rd., Allen. . . . . . . . . . . . . . . . . 369,000
Phelan Blvd., Beaumont. . . . . . . . . . . . . . . . . . . . . . . . 63,000
US Hwy 380 (University Drive) and US Hwy 75, McKinney . . . . . . . . 189,000
River Pointe Dr. at I-45, Conroe. . . . . . . . . . . . . . . . . . . 186,000
River Pointe Dr. at I-45, Conroe. . . . . . . . . . . . . . . . . . . 595,000
Hillcrest, Sunshine at Quill, San Antonio . . . . . . . . . . . . . . 171,000
Hwy. 3 at Hwy. 1765, Texas City . . . . . . . . . . . . . . . . . . . 184,000
Hwy 377 at Bursey Road, Watauga . . . . . . . . . . . . . . . . . . . 385,000
LOUISIANA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,284,000
U.S. Hwy. 171 at Parish, DeRidder . . . . . . . . . . . . . . . . . . 462,000
Woodland Hwy., Plaquemines Parish (5%). . . . . . . . . . . . . . . . 822,000 *
ILLINOIS, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 474,000
Lincoln Place Ctr., SBI Rt. 159 at Matilda , Fairview Heights (99%) . 474,000 *
ARIZONA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 271,000
Dysart Rd. at McDowell Rd., Avondale. . . . . . . . . . . . . . . . . 271,000
Table continued on next page
Building
Area Land Area
---------- -----------
ALL PROPERTIES-BY LOCATION
GRAND TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,066,000 105,847,000
Houston & Harris County . . . . . . . . . . . . . . . . . . . . . . . 11,708,000 44,399,000
Texas (excluding Houston & Harris County) . . . . . . . . . . . . . . 7,250,000 30,530,000
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,337,000 6,788,000
Nevada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,091,000 4,398,000
Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,052,000 4,973,000
New Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703,000 3,177,000
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699,000 1,555,000
Oklahoma. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687,000 3,173,000
Arkansas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596,000 2,323,000
Kansas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466,000 2,231,000
Colorado. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211,000 867,000
Missouri. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,000 448,000
Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,000 482,000
Illinois. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 503,000
ALL PROPERTIES-BY CLASSIFICATION
GRAND TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,066,000 105,847,000
Shopping Centers. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,569,000 81,375,000
Industrial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,376,000 15,042,000
Office Building . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,000 171,000
Unimproved Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,259,000
Note: Total square footage includes 8,060,000 square feet of land leased and 450,000 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 1998, no single property accounted for more than 3.4% of the
Company's total assets or 3.1% of gross revenues. Four properties, in the
aggregate, represented approximately 10.6% of the Company's gross revenues for
the year ended December 31, 1998; otherwise, none of the remaining properties
accounted for more than 1.9% 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, 1998 was 93.1%.
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, 1998, the Company owned or operated
under long-term leases, either directly or through its interests in joint
ventures, 179 shopping centers with approximately 19.6 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, Illinois 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 3,900 separate leases with 2,900 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,
H.E.B., Kroger Company, Randall's Food Markets, Fry's Food Stores and Safeway.
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, Stein Mart
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; Comp USA; 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, 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 1998, the Company added approximately 3.3 million square feet to its
portfolio of properties through acquisitions and another .2 million square feet
of space through development. Regarding the retail portfolio, the Company
purchased anchored shopping centers in Corpus Christi, Austin and Lubbock,
Texas, and a free-standing supermarket in the Dallas/Fort Worth area. The
Company also purchased the second phase of a center it already owned in Las
Vegas and bought adjoining buildings at two of its Houston-area shopping
centers. A partnership formed by the Company acquired an anchored shopping
center in Little Rock, Arkansas in exchange for operating partnership units and
the assumption of $9.1 million of debt. The Company has an effective ownership
interest of 35% in this partnership. These transactions increased the Company's
retail portfolio by 1.1 million square feet of building area and represent an
investment of $82.8 million. The Company also entered into long-term lease
agreements with purchase options for two anchored shopping centers in Las Vegas
totaling 280,000 square feet.
With respect to new development, construction was completed on retail space
adjacent to an occupant-owned supermarket at a newly developed shopping center
in Phoenix. The Company currently has four retail centers under development and
has investments in two additional retail centers under construction in the
Denver area in joint ventures with a Denver-based developer.
Industrial Properties. The Company currently owns a total of 37 industrial
projects and was expanded in 1998 through the purchase of fifteen facilities.
The Company purchased seven facilities in Dallas and three properties in
Memphis, its first industrial projects in both of these cities. The Company also
acquired five buildings in the Houston area, including a refrigerated storage
facility in Railwood, the Company's master planned industrial park. These
projects added 2.2 million square feet to the industrial portfolio and represent
an investment of $45.6 million.
During 1998, the Company completed the development of a 162,000 square foot
speculative bulk warehouse facility on a tract of undeveloped land located in
the Company's Railwood Industrial Park.
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 9% of the office space.
Multi-family Residential Properties. During 1998, the Company sold its
joint venture interest in the apartment project located in San Antonio, Texas.
The Company began 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, 27 parcels of unimproved land aggregating approximately 9.3
million square feet of land area located in Texas, Arizona, Illinois and
Louisiana. These properties include approximately 3.6 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 5.7
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 23, 1999. 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 . . . 70 Chairman/Chief Executive Officer
Martin Debrovner . . . . 62 Vice Chairman
Andrew M. Alexander. . . 42 President
Joseph W. Robertson, Jr. 51 Executive Vice President/Chief Financial Officer
Stephen C. Richter . . . 44 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, N.A. through January 27, 1999.
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 and a
Director of Academy Sports and Outdoors, Inc.
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 23, 1999 was 3,437. 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
---------- ---------- ---------
1998:
Fourth . . . . $ 46 7/8 $ 39 3/4 $ 0.67
Third. . . . . 43 35 15/16 0.67
Second . . . . 44 15/16 40 5/8 0.67
First. . . . . 45 5/8 43 7/8 0.67
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
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,
1998 1997 1996 1995 1994
----------- ----------- --------- --------- ---------
Revenues (primarily real estate rentals) $ 198,467 $ 174,512 $151,123 $134,197 $120,793
----------- ----------- --------- --------- ---------
Expenses:
Depreciation and amortization. . . . 41,946 37,976 33,769 30,060 26,842
Interest . . . . . . . . . . . . . . 33,654 30,009 21,975 16,707 10,694
Other. . . . . . . . . . . . . . . . 61,995 54,888 47,004 42,614 39,235
----------- ----------- --------- --------- ---------
Total. . . . . . . . . . . . . . 137,595 122,873 102,748 89,381 76,771
----------- ----------- --------- --------- ---------
Income from operations . . . . . . . . . 60,872 51,639 48,375 44,816 44,022
Gain (loss) on sales of property and
securities . . . . . . . . . . . . . . 885 3,327 5,563 (14) (234)
Extraordinary charge (early retirement
of debt) . . . . . . . . . . . . . . . (1,392)
----------- ----------- --------- --------- ---------
Net income . . . . . . . . . . . . . . . $ 60,365 $ 54,966 $ 53,938 $ 44,802 $ 43,788
=========== =========== ========= ========= =========
Net income available to common
shareholders . . . . . . . . . . . . . $ 54,484 $ 54,966 $ 53,938 $ 44,802 $ 43,788
=========== =========== ========= ========= =========
Cash flows from operations . . . . . . . $ 97,464 $ 89,902 $ 76,299 $ 72,498 $ 64,305
=========== =========== ========= ========= =========
Weighted average number of common
shares outstanding:
Basic. . . . . . . . . . . . . . . . 26,667 26,638 26,555 26,464 26,190
Diluted. . . . . . . . . . . . . . . 26,869 26,771 26,598 26,493 26,245
Net income per common share - basic. . . $ 2.04 $ 2.06 $ 2.03 $ 1.69 $ 1.67
Net income per common share - diluted. . $ 2.03 $ 2.05 $ 2.03 $ 1.69 $ 1.67
Cash dividends per common share. . . . . $ 2.68 $ 2.56 $ 2.48 $ 2.40 $ 2.28
Property (at cost) . . . . . . . . . . . $1,294,632 $1,118,758 $970,418 $849,894 $735,134
Total assets . . . . . . . . . . . . . . $1,107,043 $ 946,793 $831,097 $734,824 $682,037
Debt . . . . . . . . . . . . . . . . . . $ 516,366 $ 507,366 $389,225 $289,339 $229,597
Other data:
Funds from operations (1)
Net income available to common
shareholders. . . . . . . . . . . . $ 54,484 $ 54,966 $ 53,938 $ 44,802 $ 43,788
Depreciation and amortization (2). . 41,580 37,544 33,414 29,813 26,842
(Gain) loss on sales of property
and securities. . . . . . . . . . . (885) (3,327) (5,563) 14 234
Extraordinary charge . . . . . . . . 1,392
----------- ----------- --------- --------- ---------
Total. . . . . . . . . . . . . . $ 96,571 $ 89,183 $ 81,789 $ 74,629 $ 70,864
=========== =========== ========= ========= =========
(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 or operated under long-term leases 179
shopping centers, 37 industrial properties and one office building at December
31, 1998. Of the Company's 217 developed properties, 162 are located in Texas
(including 97 in Houston and Harris County). The Company's remaining properties
are located in Louisiana (11), Arizona (10), Nevada (7), New Mexico (5),
Oklahoma (4), Arkansas (6), Tennessee (4), Kansas (3), Colorado (2), Missouri
(1), Illinois (1) and Maine (1). The Company has nearly 3,900 leases and 2,900
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 $97.5 million for 1998 from
$89.9 million for 1997 and $76.3 million for 1996.
Common and preferred dividends increased to $77.3 million in 1998, compared to
$68.2 million in 1997 and $65.9 million in 1996. The Company satisfied its REIT
requirement of distributing at least 95% of ordinary taxable income for each of
the three years ended December 31, 1998, and, accordingly, federal income taxes
were not required to be paid in these years. The Company's dividend payout
ratio on common equity for 1998, 1997 and 1996 approximated 74.4%, 76.4% and
80.5%, respectively, based on funds from operations for the applicable year.
The Company invested $128.4 million in acquisitions in 1998, adding 3.3 million
square feet to its portfolio of properties. Regarding the retail portfolio, the
Company purchased anchored shopping centers in Corpus Christi, Austin and
Lubbock, Texas, and a free-standing supermarket in the Dallas/Fort Worth area.
The Company also purchased the second phase of a center it already owned in Las
Vegas and bought adjoining buildings at two of its Houston-area shopping
centers. A partnership formed by the Company acquired an anchored shopping
center in Little Rock, Arkansas in exchange for operating partnership units and
the assumption of $9.1 million of debt. The Company has an effective ownership
interest of 35% in this partnership. These transactions increased the Company's
retail portfolio by 1.1 million square feet of building area and represent an
investment of $82.8 million. The Company also entered into long-term lease
agreements with purchase options for two anchored shopping centers in Las Vegas
totaling 280,000 square feet. The Company's industrial portfolio was expanded
in 1998 through the purchase of fifteen facilities. The Company purchased seven
facilities in Dallas and three properties in Memphis, its first industrial
projects in both of these cities. The Company also acquired five buildings in
the Houston area, including a refrigerated storage facility in Railwood, the
Company's master planned industrial park. These projects added 2.2 million
square feet to the industrial portfolio and represent an investment of $45.6
million.
With respect to new development, construction was completed on retail space
adjacent to an occupant-owned supermarket at a newly-developed shopping center
in Phoenix and on a bulk warehouse facility in the Company's Railwood Industrial
Park. The Company currently has several other facilities under development,
including four retail centers, an industrial office/service center and a
260-unit luxury apartment project. The Company also has investments in two
additional retail centers under construction in the Denver area in joint
ventures with a Denver-based developer. The projects under construction or
completed in 1998 represent an estimated investment by the Company of $58.4
million and will add .7 million square feet to our portfolio.
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, $176.5, $152.6 and $131.6 during 1998, 1997 and 1996, respectively.
All of the acquisitions and new development during 1998 were either initially
financed under the Company's revolving credit facility or funded with excess
cash balances. Capital expenditures in 1999 are expected to equal, if not
exceed, the total for 1998.
The Company issued $165 million of preferred shares in 1998 and $115 million
subsequent to year-end in underwritten public offerings. In February 1998, the
Company issued $75 million of 7.44% Series A Cumulative Redeemable Preferred
Shares with a liquidation preference of $25 per share. The shares are callable
at the Company's option any time after March 31, 2003 and have no stated
maturity. In October, the Company issued $90 million of 7.125% Series B
Cumulative Redeemable Preferred Shares with a liquidation preference of $25 per
share and no stated maturity. The Company can elect to redeem the shares
anytime after October 20, 2003. The Series B preferred shares are redeemable by
the holder only upon their death and are also redeemable in either cash or
common shares at the Company's option. There are limitations on the number of
shares per shareholder and in the aggregate that may be redeemed per year. In
January of 1999, the Company issued $115 million of 7.0% Series C Cumulative
Redeemable Preferred Shares with a liquidation preference of $50 per share and
no stated maturity. The Company can elect to redeem these shares anytime after
March 15, 2004. The redemption rights of the shareholders and the related
restrictions are effectively the same as for the Series B preferred shares. The
proceeds of these offerings were used to pay down variable-rate debt, to fund
acquisition and new development activity and to retire $35 million of 9.11%
secured notes payable to an insurance company. The early extinguishment of the
$35 million of secured notes in February of 1998 that were scheduled to mature
in August of 2001 resulted in an extraordinary loss of $1.4 million. Any
redemption of preferred shares initiated by the Company must be funded with
proceeds from an offering of additional common or preferred shares.
During 1998, the Company completed $54.5 million of the prospective transactions
through the sale of fixed-rate, unsecured Medium Term Notes with an average life
of seven years and an average interest rate of 6.3%. The Company also issued
$82 million of two-year, variable-rate Medium Term Notes during the year.
Interest on these Medium Term Notes accrues at a rate of LIBOR plus .17%, which
averaged 5.9% during 1998. The $82 million of Medium Term Notes were retired in
February of 1999 with the proceeds from the Series C preferred share offering.
The Company has three interest rate swap contracts with an aggregate notional
amount of $40 million which fix interest rates on variable-rate debt at 8.1% and
expire through 2004.
Total debt outstanding increased to $516.4 million at December 31, 1998 from
$507.4 million at December 31, 1997, primarily to fund acquisitions and new
development. Continued growth through acquisitions and new development will
eventually necessitate the need for additional capital. 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 1997, the Company's $200 million unsecured revolving credit facility was
amended to improve the pricing and, effectively, extend the term of the
commitment. The Company has an annual option to request a one-year extension of
the commitment, which currently expires in November of 2000. Additionally, the
Company has 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, 1998, the Company had approximately $175 million of funds
available under the revolving credit facilities in addition to $15 million of
proceeds from its Series B preferred share offering which were invested in
short-term instruments. In the second quarter of 1998, the Company filed a $400
million shelf registration statement with the Securities and Exchange Commission
(which includes $11.5 million from the Company's prior shelf registration) which
allows for the issuance of debt, equity securities or warrants. At December 31,
1998, amounts available under the shelf registration totaled $221 million,
however, this amount was reduced by $115 million due to the issuance of Series C
preferred shares subsequent to year-end. The Company intends to amend the shelf
registration in early 1999 to increase the amount available by $80 million.
During 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 from the sale were used primarily to retire
overnight repurchase agreements, which were collateralized by these marketable
debt securities.
MARKET RISK
The Company uses fixed- and floating-rate debt to finance its capital
requirements. These transactions expose the Company to market risk related to
changes in interest rates. Derivative financial instruments are used to manage
a portion of this risk. During 1998, the Company entered into and settled three
forward treasury lock agreements with a total notional amount of $85 million as
a hedge against potential changes in interest rates of prospective issuances of
fixed-rate debt. Amounts paid or received upon settlement of these contracts
are deferred and amortized as an adjustment to interest expense over the life of
the fixed-rate debt. At year-end, the Company had a deferred loss of $1.9
million which will be amortized over the life of the next $30.5 million of
fixed-rate debt issues. At December 31, 1998, the Company had fixed-rate debt
of $444.1 million and variable-rate debt of $72.3 million, after adjusting for
the effect of interest rate swaps. In the event that interest rates were to
increase 100 basis points, the fair value of fixed-rate debt would decrease by
$27.9 million and net income, funds from operations and future cash flows would
decrease $.7 million based upon the debt outstanding at December 31, 1998.
Following the issuance of the Series C preferred shares in January of 1999 and
the related retirement of the variable-rate Medium Term Notes, all variable-rate
debt other than that covered by the interest rate swaps was eliminated.
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 $96.6 million in 1998, as compared to $89.2
million in 1997 and $81.8 million in 1996. 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 15.1%, or $25.6 million, from $169.0 million in 1997
to $194.6 million in 1998 and by 16.3%, or $23.7 million, from $145.3 million in
1996. 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 increased to 93% at December 31, 1998 from 92% at the end of 1997.
The Company's industrial portfolio occupancy was 93% at December 31, 1998 and
1997. The Company completed 830 renewals or leases comprising 3.4 million
square feet at an average rental rate increase of 5.8%. Net of the amortized
portion of capital costs for tenant improvements, the increase averaged 3.2%.
Interest income totaled $2.1 million in 1998, $2.5 million in 1997 and $3.1
million in 1996. This decrease in income is primarily the result of the
Company selling $12.2 million of its marketable debt securities during the first
quarter of 1998 offset by interest earned on the investment of excess cash
balances resulting from the Company's preferred share offerings.
Equity in earnings of real estate joint ventures and partnerships totaled $.3
million in 1998, $1.0 million in 1997 and $1.2 million in 1996. The decrease in
1998 is due to the Company's purchase at December 31, 1997 of its joint venture
partner's 85% interest in four shopping centers.
Direct costs and expenses of operating the Company's properties (i.e., operating
and ad valorem tax expenses) increased to $54.8 million in 1998 from $49.2
million in 1997 and $41.9 million in 1996. 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 28% in 1998 and 29%
in 1997 and 1996. Depreciation and amortization have increased to $41.9 million
in 1998 from $38.0 million in 1997 and $33.8 million in 1996, also as a result
of the properties acquired and developed during these periods. General and
administrative expense have increased to $7.1 million in 1998 from $5.6 million
in 1997 and $5.1 million in 1996. The increase in 1998 results primarily from
the Company's adoption of a new Emerging Issues Task Force consensus decision
which provides that internal costs of identifying and acquiring operating
property incurred subsequent to March 19, 1998 should be expensed. The Company
realized an increase in expense of $1.1 million in 1998 due to the adoption of
this standard.
Gross interest costs, before capitalization of interest to development projects,
increased by $4.2 million from $30.8 million in 1997 to $35.0 million in 1998.
This increase in interest cost was due mainly to the increase in the average
debt outstanding from $422.9 million for 1997 to $492.2 million for 1998. The
weighted-average interest rate decreased from 7.27% in 1997 to 7.11% in 1998.
Interest expense, net of amounts capitalized, increased $3.6 million from 1997.
The amount of interest capitalized increased to $1.4 million in 1998 from $.8
million in 1997 due to an increase 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 during the first quarter of 1998.
Comparing 1997 to 1996, gross interest costs increased from $23.3 million in
1996 to $30.8 million in 1997. This was due to an increase in the average debt
outstanding from $314.4 million in 1996 to $422.9 million in 1997. The
weighted-average interest rate decreased slightly between the two periods from
7.36% in 1996 to 7.27% in 1997. Interest expense, net of amounts capitalized,
increased $8.0 million from 1996 due to an increase in the amount of development
activity during the year.
The gain on sale of $.9 million in 1998 was due primarily to the sale of its
joint venture interest in an apartment project located in San Antonio, Texas and
the sale of excess land associated with the Company's investment in the
development of a retail center in Denver, Colorado. The gain on sale of $3.3
million in 1997 was primarily due to the condemnation of a portion of a shopping
center by the State of Texas. The Company leased back the portion of the
shopping center purchased by the state, and continues to operate the center.
EFFECTS OF INFLATION
The rate of inflation was relatively unchanged in 1998. 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
rental rates 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
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" was issued. This statement
requires that an entity recognize all derivatives as either assets or
liabilities and measure the instruments at fair value. The accounting for
changes in fair value of a derivative depends upon its intended use. The
Company will adopt the provisions of this statement in the first quarter of
fiscal year 2000. The Company is still evaluating the effects of adopting this
statement.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. These date code fields
will need to be amended to allow the system to distinguish 21st century dates
from the 20th century dates. The use of software and computer systems that are
not Year 2000 compliant could result in system failures or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions or engage in normal business activities. As a
result, many companies' software and computer systems may need to be upgraded or
replaced in order to comply with Year 2000 requirements.
The Company has completed a review of its software and hardware and determined
that all mission-critical systems are Year 2000 compliant. Non-mission critical
software and hardware have also been reviewed and the Company has identified
certain personal computers, local area networks and file servers which are
scheduled for upgrades or replacement as part of the Company's ongoing
maintenance of its information system technology. The Company has also
completed a review of Year 2000 issues not related to information technology
including, but not limited to, the use of imbedded chips or internal clocks in
machinery or equipment. As the Company owns primarily single-story industrial
buildings and neighborhood retail centers without enclosed common areas, the use
of this technology is very limited and, accordingly, the Company believes that
it is Year 2000 compliant. The Company has no incremental costs in addressing
these Year 2000 issues.
The Company has communicated with its major tenants, financial institutions and
utility companies to determine the extent to which the Company is vulnerable to
third parties' failures to resolve their Year 2000 issues. Based on the
representations received from these third parties, the Company does not believe
this represents a material risk to the Company. Nevertheless, the Company has
no guarantee that such third party systems will operate as represented. In the
event significant systems of one of these third parties fails, the operating
results and financial condition of the Company could be adversely effected.
Based on the Company's assessment of the readiness of its own systems and those
of significant third parties, it has not deemed it necessary to develop a formal
contingency plan. In the event additional information comes to the Company's
attention which would change its current assessment, it will consider the need
for a contingency plan at that time.
FORWARD-LOOKING STATEMENTS
This Annual Report includes certain forward-looking statements reflecting the
Company's expectations in the near term that involve a number of risks and
uncertainties; however, many factors may materially affect the actual results,
including demand for our properties, changes in rental and occupancy rates,
changes in property operating costs, interest rate fluctuations, and changes in
local and general economic conditions. Accordingly, there is no assurance that
the Company's expectations will be realized.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
Reference is made to Item 7 of this Form 10-K under the caption "Market Risk".
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, 1998 and 1997, and the
related statements of consolidated income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 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 23, 1999
STATEMENTS OF CONSOLIDATED INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Years Ended December 31,
-----------------------------
1998 1997 1996
--------- -------- --------
Revenues:
Rentals . . . . . . . . . . . . . . . . . . . . $194,624 $169,041 $145,307
Interest
Securities and Other. . . . . . . . . . . . . 511 1,053 1,572
Affiliates. . . . . . . . . . . . . . . . . . 1,578 1,434 1,576
Equity in earnings of real estate joint
ventures and partnerships. . . . . . . . . . . 342 1,003 1,232
Other . . . . . . . . . . . . . . . . . . . . . 1,412 1,981 1,436
--------- -------- --------
Total . . . . . . . . . . . . . . . . . 198,467 174,512 151,123
--------- -------- --------
Expenses:
Depreciation and amortization . . . . . . . . . 41,946 37,976 33,769
Interest. . . . . . . . . . . . . . . . . . . . 33,654 30,009 21,975
Operating . . . . . . . . . . . . . . . . . . . 30,413 27,131 23,021
Ad valorem taxes. . . . . . . . . . . . . . . . 24,436 22,110 18,874
General and administrative. . . . . . . . . . . 7,146 5,647 5,109
--------- -------- --------
Total . . . . . . . . . . . . . . . . . 137,595 122,873 102,748
--------- -------- --------
Income from Operations. . . . . . . . . . . . . . 60,872 51,639 48,375
Gain on Sales of Property and Securities. . . . . 885 3,327 5,563
--------- -------- --------
Income Before Extraordinary Charge. . . . . . . . 61,757 54,966 53,938
Extraordinary Charge (early retirement of debt) . (1,392)
--------- -------- --------
Net Income. . . . . . . . . . . . . . . . . . . . $ 60,365 $ 54,966 $ 53,938
========= ======== ========
Net Income Available to Common Shareholders . . . $ 54,484 $ 54,966 $ 53,938
========= ======== ========
Net Income Per Common Share - Basic:
Income Before Extraordinary Charge. . . . . . $ 2.09 $ 2.06 $ 2.03
Extraordinary Charge. . . . . . . . . . . . . (.05)
--------- -------- --------
Net Income. . . . . . . . . . . . . . . . . $ 2.04 $ 2.06 $ 2.03
========= ======== ========
Net Income Per Common Share - Diluted:
Income Before Extraordinary Charge. . . . . . $ 2.08 $ 2.05 $ 2.03
Extraordinary Charge. . . . . . . . . . . . . (.05)
--------- -------- --------
Net Income. . . . . . . . . . . . . . . . . $ 2.03 $ 2.05 $ 2.03
========= ======== ========
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
December 31,
------------------------
1998 1997
----------- -----------
ASSETS
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,294,632 $1,118,758
Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . (296,989) (262,551)
----------- -----------
Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . 997,643 856,207
Investment in Real Estate Joint Ventures and Partnerships . . . . . . 2,741 2,824
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,384 859,031
Mortgage Bonds and Notes Receivable from:
Affiliate (net of deferred gain of $4,487 in 1998 and 1997) . . . 13,444 14,752
Real Estate Joint Ventures and Partnerships . . . . . . . . . . . 23,388 15,250
Marketable Debt Securities. . . . . . . . . . . . . . . . . . . . . . 14,951 12,345
Unamortized Debt and Lease Costs. . . . . . . . . . . . . . . . . . . 25,612 23,536
Accrued Rent and Accounts Receivable (net of allowance for doubtful
accounts of $888 in 1998 and $1,000 in 1997). . . . . . . . . . . . 15,197 14,583
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . 1,672 2,754
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,395 4,542
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . $1,107,043 $ 946,793
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 516,366 $ 507,366
Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . 49,269 43,305
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,229 6,136
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573,864 556,807
----------- -----------
Commitments and Contingencies
Shareholders' Equity:
Preferred Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 10,000
7.44% Series A cumulative redeemable preferred shares of
beneficial interest; 3,000 shares issued and outstanding;
liquidation preference $25 per share. . . . . . . . . . . . . 90
7.125% Series B cumulative redeemable preferred shares of
beneficial interest; 3,600 shares issued and outstanding;
liquidation preference $25 per share. . . . . . . . . . . . . 108
Common Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 150,000; shares issued and outstanding:
26,673 in 1998 and 26,660 in 1997 . . . . . . . . . . . . . . . . 800 800
Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . 532,254 389,186
Deferred Compensation Obligation. . . . . . . . . . . . . . . . . . (73)
----------- -----------
Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . . 533,179 389,986
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . $1,107,043 $ 946,793
=========== ===========
See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(AMOUNTS IN THOUSANDS)
Years Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
Cash Flows from Operating Activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . $ 60,365 $ 54,966 $ 53,938
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization . . . . . . . . . . . 41,946 37,976 33,769
Equity in earnings of real estate joint ventures
and partnerships. . . . . . . . . . . . . . . . . (342) (1,003) (1,232)
Gain on sales of property and securities. . . . . . (885) (3,327) (5,563)
Extraordinary charge (early retirement of debt) . . 1,392
Changes in accrued rent and accounts receivable . . (621) (2,462) (1,836)
Changes in other assets . . . . . . . . . . . . . . (12,662) (6,105) (7,507)
Changes in accounts payable and accrued expenses. . 7,614 9,113 4,032
Other, net. . . . . . . . . . . . . . . . . . . . . 657 744 698
---------- ---------- ----------
Net cash provided by operating activities. . . 97,464 89,902 76,299
---------- ---------- ----------
Cash Flows from Investing Activities:
Investment in properties. . . . . . . . . . . . . . . . (172,470) (136,632) (121,379)
Mortgage bonds and notes receivable:
Advances. . . . . . . . . . . . . . . . . . . . . (12,598) (1,501) (3,151)
Collections . . . . . . . . . . . . . . . . . . . 3,745 2,090 6,188
Proceeds from sales and disposition of property . . . . 1,109 11,741 7,231
Purchase of marketable debt securities. . . . . . . . . (14,951)
Proceeds from sales of marketable debt securities . . . 12,229
Real estate joint ventures and partnerships:
Investments . . . . . . . . . . . . . . . . . . . (453) (59) (69)
Distributions . . . . . . . . . . . . . . . . . . 345 808 1,032
Other, net. . . . . . . . . . . . . . . . . . . . . . . 241 2,517 3,291
---------- ---------- ----------
Net cash used in investing activities. . . . . (182,803) (121,036) (106,857)
---------- ---------- ----------
Cash Flows from Financing Activities:
Proceeds from issuance of:
Debt. . . . . . . . . . . . . . . . . . . . . . . 136,575 104,526 95,770
Common shares of beneficial interest. . . . . . . 301 1,325 231
Preferred shares of beneficial interest . . . . . 159,552
Principal payments of debt. . . . . . . . . . . . . . . (134,443) (3,644) (2,350)
Common and preferred dividends paid . . . . . . . . . . (77,347) (68,200) (65,851)
Other, net. . . . . . . . . . . . . . . . . . . . . . . (381) (288) (428)
---------- ---------- ----------
Net cash provided by financing activities . . . 84,257 33,719 27,372
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents. . . (1,082) 2,585 (3,186)
Cash and cash equivalents at January 1. . . . . . . . . . 2,754 169 3,355
---------- ---------- ----------
Cash and cash equivalents at December 31. . . . . . . . . $ 1,672 $ 2,754 $ 169
========== ========== ==========
See Notes to Consolidated Financial Statements.
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
Years Ended December 31, 1998, 1997 and 1996
Preferred Common
Shares of Shares of Deferred
Beneficial Beneficial Capital Retained Compensation
Interest Interest Surplus Earnings Obligation
----------- ----------- --------- ---------- --------------
Balance, January 1, 1996 . . . . . . . . . . . $ 796 $410,803
Net income . . . . . . . . . . . . . . . . . $ 53,938
Shares exchanged for property. . . . . . . . 1 968
Shares issued under benefit plans. . . . . . 469
Dividends declared - common shares . . . . . (11,914) (53,938)
Other. . . . . . . . . . . . . . . . . . . . (125)
----------- ----------- --------- ---------- --------------
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
Dividends declared - common shares . . . . . (13,234) (54,966)
Other. . . . . . . . . . . . . . . . . . . . 211
----------- ----------- --------- ---------- --------------
Balance, December 31, 1997 . . . . . . . . . . 800 389,186 ----
Net income. . . . . . . . . . . . . . . . . 60,365
Issuance of Series A preferred shares. . . . $ 90 72,422
Issuance of Series B preferred shares. . . . 108 86,932
Shares issued under benefit plans . . . . . 696
Dividends declared - common shares. . . . . (16,982) (54,484)
Dividends declared - preferred shares . . . (5,881)
Adjustment for cumulative effect of adopting
accounting for deferred compensation plan:
Common shares held in plan . . . . . . . . $ (3,531)
Deferred compensation obligation . . . . . 3,458
----------- ----------- --------- ---------- --------------
Balance, December 31, 1998 . . . . . . . . . . $ 198 $ 800 $532,254 $ ---- $ (73)
=========== =========== ========= ========== ==============
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 and, to a lesser
extent, industrial properties. Over 70% of the Company's properties are located
in Texas, with the remainder located primarily 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. Revenue from tenant reimbursements of taxes, maintenance expenses
and insurance is recognized in the period the related expense is recorded.
Revenue based on a percentage of tenants' sales is estimated and accrued ratably
over the year. If the Company recognized such revenue only after the tenant
exceeded their sales breakpoint, revenue for 1998 would be reduced by $.3
million.
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.
The Company had also capitalized the direct internal costs of identifying and
acquiring operating property. In March 1998, the Emerging Issues Task Force of
the Financial Accounting Standards Board reached a consensus decision on Issue
No. 97-11, "Accounting for Internal Costs Relating to Real Estate Property
Acquisitions" which provides that internal costs of identifying and acquiring
operating property incurred subsequent to March 19, 1998 should be expensed.
The Company realized an increase in expense of $1.1 million in 1998 due to the
adoption of this standard.
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
Net income per common share - basic is computed using net income available to
common shareholders and the weighted average shares outstanding. Net income per
common share - diluted includes the effect of potentially dilutive securities
for the periods indicated, as follows (in thousands):
1998 1997 1996
------- ------- -------
Numerator:
Net income available to common shareholders - basic . $54,484 $54,966 $53,938
Income attributable to operating partnership units. . 37
------- ------- -------
Net income available to common shareholders - diluted $54,521 $54,966 $53,938
======= ======= =======
Denominator:
Weighted average shares outstanding - basic . . . . . 26,667 26,638 26,555
Effect of dilutive securities:
Share options and awards. . . . . . . . . . . . . . 132 132 43
Operating partnership units . . . . . . . . . . . . 70 1
------- ------- -------
Weighted average shares outstanding - diluted . . . . 26,869 26,771 26,598
======= ======= =======
Options to purchase 13,200, 800 and 25,000 shares in 1998, 1997 and 1996,
respectively, were not included in the calculation of net income per common
share - diluted as the exercise prices were greater than the average market
price for the 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 common
shares of beneficial interest in 1997 and 1996 valued at $.2 million and $1.0
million in 1997 and 1996, respectively, in connection with purchases of
property. The Company assumed debt and/or capital lease obligations totaling
$6.7 million, $17.3 million and $6.6 million in connection with purchases of
property during 1998, 1997 and 1996, respectively. The Company issued limited
partnership interests in exchange for property valued at $4.0 million and $1.7
million in 1998 and 1997, respectively.
New Accounting Pronouncement
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" in 1998. The Company's net income differs from
comprehensive income by less than $50,000 in each year presented.
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,
------------------
1998 1997
-------- --------
Fixed-rate debt payable to 2015 at 6.0% to 10.5% . . . . $404,061 $379,749
Variable-rate unsecured notes payable to 2000. . . . . . 82,000
Notes payable under revolving credit agreements. . . . . 10,250 94,400
Obligations under capital leases . . . . . . . . . . . . 12,467 12,467
Repurchase agreements. . . . . . . . . . . . . . . . . . 12,176
Industrial revenue bonds payable to 2015 at 3.6% to 5.8% 6,262 7,437
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 1,326 1,137
-------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . $516,366 $507,366
======== ========
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 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 $15.1 million
outstanding under the $200 million revolving credit facility at December 31,
1998. 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, 1998, the variable interest rate for notes payable under the $20
million revolving credit agreement was 5.2%. During 1998, the maximum balance
and weighted average balance outstanding under both credit facilities were
$122.7 million and $65.8 million, respectively, at an average interest rate of
6.3%. The Company made cash payments for interest on debt, net of amounts
capitalized, of $32.6 million in 1998, $27.4 million in 1997 and $21.3 million
in 1996.
Certain debt is collateralized by various leases or other property and current
and future rentals from these leases and properties. At December 31, 1998 and
1997, the carrying value of such property aggregated $177 million and $209
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 by $.9 million in
1998, 1997 and 1996. The interest rate swaps increased the average interest
rate for the Company's debt by the following amounts: .2% for 1998 and 1997, and
.3% for 1996. 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.
During 1998, the Company entered into and settled three forward treasury lock
agreements with an aggregate notional amount of $85 million as a hedge against
potential changes in interest rates of prospective issues of fixed-rate debt.
Amounts paid or received upon settlement of these contracts are deferred and
amortized as an adjustment to interest expense over the life of the fixed-rate
debt. During 1998, the Company completed $54.5 million of the prospective
transactions through the sale of fixed-rate, unsecured Medium Term Notes
("MTNs") with an average life of seven years and an average interest rate of
6.3%. At year-end, the Company had a deferred loss of $1.9 million which will
be amortized over the life of the next $30.5 million of fixed-rate debt issues.
The Company also issued $82 million of two-year, variable-rate MTNs during the
year. Interest on these MTNs accrues at a rate of LIBOR plus .17%, which
averaged 5.9% during 1998. The $82 million of MTNs were retired in February of
1999 with the proceeds from the Series C preferred share offering.
The Company's debt can be summarized as follows (in thousands):
DECEMBER 31,
------------------
1998 1997
-------- --------
As to interest rate:
Fixed-rate debt (including amounts
fixed through interest rate swaps). . $444,060 $419,792
Variable-rate debt. . . . . . . . . . . 72,306 87,574
-------- --------
Total . . . . . . . . . . . . . . $516,366 $507,366
======== ========
As to collateralization:
Unsecured debt. . . . . . . . . . . . . $440,433 $400,214
Secured debt. . . . . . . . . . . . . 75,933 107,152
-------- --------
Total . . . . . . . . . . . . . . $516,366 $507,366
======== ========
Scheduled principal payments on the Company's debt (excluding $10.3 million
potentially due under the Company's revolving credit agreements in 1999 and 2002
and $82 million of variable-rate MTNs retired in February of 1999) are due
during the following years (in thousands):
1999. . . . . . . . . . . . . $ 6,196
2000. . . . . . . . . . . . . 28,499
2001. . . . . . . . . . . . . 30,851
2002. . . . . . . . . . . . . 30,729
2003. . . . . . . . . . . . . 27,759
2004 through 2008 . . . . . . 249,380
2009 through 2013 . . . . . . 45,077
Thereafter. . . . . . . . . . 5,750
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 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.
In the second quarter of 1998, the Company filed a $400 million shelf
registration statement with the Securities and Exchange Commission, which allows
for the issuance of debt or equity securities or warrants. Following the
Company's issuance of $115 million of Series C preferred shares in January of
1999, the unused portion of the shelf registration totaled $106 million.
NOTE 3. PROPERTY
The Company's property consists of the following (in thousands):
DECEMBER 31,
----------------------
1998 1997
---------- ----------
Land . . . . . . . . . . . . . . . $ 236,221 $ 208,512
Land held for development. . . . . 30,156 31,679
Land under development . . . . . . 13,024 5,958
Buildings and improvements . . . . 1,009,166 870,669
Construction in-progress . . . . . 6,065 1,940
---------- ----------
Total. . . . . . . . . . . . $1,294,632 $1,118,758
========== ==========
The following carrying charges were capitalized (in thousands):
DECEMBER 31,
---------------------
1998 1997 1996
------ ----- ------
Interest . . . . $1,375 $ 812 $1,285
Ad valorem taxes 50 33 269
------ ----- ------
Total. . . $1,425 $ 845 $1,554
====== ===== ======
In 1998 and 1997, the Company formed limited partnerships to acquire certain
property. The Company controls the partnerships and consolidates their
operations in the accompanying consolidated financial statements. The
partnership agreements allow for the outside limited partners to put their
interests to the partnership after the second anniversary of the agreement for
the original consideration of $4.0 million and $1.7 million in 1998 and 1997,
respectively, payable in cash or common shares of the Company, at the option of
the Company.
NOTE 4. RELATED PARTY TRANSACTIONS
The Company has mortgage bonds and notes receivable of $13.4 million and $14.8
million, net of deferred gain of $4.5 million, at December 31, 1998 and 1997,
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. The bonds and notes bear interest at rates of
16% and prime plus 1%, respectively. However, due to Holdings' poor financial
condition, the Company has limited the recognition of interest income for
financial statement purposes to the amount of cash payments received. The
Company did not receive any interest payments in 1998 and does not anticipate
receiving such payments going forward. Interest income recognized for financial
reporting purposes was $.1 million and $.3 million in 1997 and 1996,
respectively.
During the second quarter of 1998, the Company purchased 13.7 acres of
undeveloped land from Holdings to be used for the development of a luxury
apartment complex in Conroe, Texas. The purchase price was $2.2 million and was
based upon an independent third party appraisal. Holdings used the proceeds to
pay down amounts outstanding under mortgage bonds and notes receivable.
The Company's unrecorded receivable for interest on the mortgage bonds and notes
receivable was $30.5 million and $26.4 million at December 31, 1998 and 1997,
respectively. Interest income not recognized by the Company for financial
reporting purposes aggregated, in millions, $4.2, $4.0 and $3.7 for 1998, 1997
and 1996, 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 7.3% to 9.3% at December 31,
1998 and are due at various dates through 2020. The Company recognized interest
income on these notes as follows, in millions: $1.5 in 1998; $1.4 in 1997 and
$1.3 in 1996.
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 a common director.
NOTE 5. 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 the tax basis by $97.3 million at December 31,
1998.
For federal income tax purposes, the cash dividends distributed to common
shareholders are characterized as follows:
1998 1997 1996
------ ------ ------
Ordinary income . . . . . . . . . . . . . 97.0% 95.9% 87.1%
Return of capital (generally non-taxable) 2.1 2.9 4.0
Capital gain distributions. . . . . . . . .9 1.2 8.9
------ ------ ------
Total . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
====== ====== ======
NOTE 6. 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
(payments for taxes, maintenance and insurance by lessees and for an amount
based on a percentage of the tenants' sales). Future minimum rental income from
non-cancelable tenant leases at December 31, 1998, in millions, is: $153.9 in
1999; $134.0 in 2000; $114.9 in 2001; $95.8 in 2002; $80.6 in 2003 and $555.8
thereafter. The future minimum rental amounts do not include estimates for
contingent rentals. Such contingent rentals, in millions, aggregated $40.9 in
1998, $36.8 in 1997 and $31.9 in 1996.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company leases land and three shopping centers 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 1999; $1.5 in 2000 and
2001; $1.3 in 2002; $1.1 in 2003 and $38.5 thereafter. Future minimum rental
payments on these leases have not been reduced by future minimum sublease
rentals aggregating $18.0 million through 2036 that are due under various
non-cancelable subleases. Rental expense (including insignificant amounts for
contingent rentals) for operating leases aggregated, in millions: $2.6 in 1998
and $2.0 in 1997 and $1.8 in 1996. Sublease rental revenue (excluding amounts
for improvements constructed by the Company on the leased land) from these
leased properties was as follows, in millions: $2.9 in 1998; $2.4 in 1997 and
$2.0 in 1996.
Property under capital leases, consisting of two shopping centers, aggregated
$12.3 million at December 31, 1998 and 1997 and is included in buildings and
improvements. Future minimum lease payments under these capital leases total
$18.1 million, with annual payments due of $.5 million in each of 1999 through
2003, and $15.5 million thereafter. The amount of these total payments
representing interest is $5.7 million. Accordingly, the present value of the
net minimum lease payments is $12.4 million at December 31, 1998.
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.
NOTE 8. 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, 1998. 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 $444.1 million
and $419.8 million have fair values of approximately $443.9 million and $437.9
million at December 31, 1998 and 1997, respectively. The fair value of the
Company's variable-rate debt approximates its carrying values of $72.3 million
and $87.6 million at year-end 1998 and 1997, 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, 1998 and 1997, the
Company would have paid $3.8 million and $3.1 million at each year-end,
respectively.
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 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 that
expired 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 1998, the Company granted 13,000 share options under a compensatory incentive
share plan. This plan, which expires in 2002, 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 1998 and 1997,
and $.2 in 1996.
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 available to common shareholders
would have been as follows, in millions: $53.8, $54.3 and $53.9 in 1998, 1997
and 1996, respectively. Proforma net income per common share-basic would have
been $2.02, $2.04 and $2.03 in 1998, 1997 and 1996, 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 in 1998, 1997 and 1996, respectively: dividend yield of 6.5%, 6.0%
and 6.0%; expected volatility of 18.1%, 18.0% and 18.3%; expected lives of 6.9,
6.9 and 7.1 and risk-free interest rates of 4.8%, 6.5% and 6.4%.
Following is a summary of the option activity for the three years ended December
31, 1998:
SHARES WEIGHTED
UNDER AVERAGE
OPTION EXERCISE PRICE
---------- ---------------
Outstanding, January 1, 1996 . 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
Granted. . . . . . . . . . . . 14,900 42.99
Canceled . . . . . . . . . . . (7,802) 40.14
Exercised. . . . . . . . . . . (29,344) 34.01
----------
Outstanding, December 31, 1998 1,152,779 $ 37.99
==========
The number of share options exercisable at December 31, 1998, 1997 and 1996 was
432,000, 296,000 and 243,000, respectively. Options exercisable at year-end
1998 had a weighted average exercise price of $35.91. The weighted average fair
value of share options granted during 1998, 1997 and 1996 was $4.05, $5.35 and
$5.10, respectively. Share options outstanding at December 31, 1998 had
exercise prices ranging from $25.00 to $45.81 and a weighted average remaining
contractual life of 6.6 years. Approximately 88% of the options outstanding at
year-end 1998 have exercise prices between $37.00 and $40.25 and a weighted
average contractual life of 7.0 years. There were 277,000 common shares
available for the future grant of options or awards at December 31, 1998.
NOTE 10. 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 $.3
million in 1998 and $.2 million in 1997 and 1996.
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. Reconciliations of the benefit obligation, plan assets at
fair value and the funded status of the plan are as follows (in thousands):
1998 1997
-------- --------
Benefit obligation at beginning of year . . . . . $ 9,318 $ 7,943
Service cost. . . . . . . . . . . . . . . . . . . 457 430
Interest cost . . . . . . . . . . . . . . . . . . 663 587
Actuarial loss. . . . . . . . . . . . . . . . . . 245 527
Benefit payments. . . . . . . . . . . . . . . . . (198) (169)
-------- --------
Benefit obligation at end of year . . . . . . . . $10,485 $ 9,318
======== ========
Fair value of plan assets at beginning of year. . $10,348 $ 8,599
Actual return on plan assets. . . . . . . . . . . 526 1,918
Benefit payments. . . . . . . . . . . . . . . . . (198) (169)
-------- --------
Fair value of plan assets at end of year. . . . . $10,676 $10,348
======== ========
Plan assets at fair value less benefit obligation $ 191 $ 1,030
Unrecognized prior service cost . . . . . . . . . 8 55
Unrecognized gain . . . . . . . . . . . . . . . . (1,681) (2,447)
-------- --------
Pension liability . . . . . . . . . . . . . . . . $(1,482) $(1,362)
======== ========
The components of net periodic pension cost are as follows (in thousands):
------ ------ ------
1998 1997 1996
------ ------ ------
Service cost . . . . . . . . . . . . . . . . . . . $ 457 $ 430 $ 361
Interest cost. . . . . . . . . . . . . . . . . . . 663 587 506
Expected return on plan assets . . . . . . . . . . (923) (703) (539)
Amortization of transition asset . . . . . . . . . (54) (72)
Prior service cost . . . . . . . . . . . . . . . . 47 47 47
Recognized gains . . . . . . . . . . . . . . . . . (124) (44) (43)
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . $ 120 $ 263 $ 260
====== ====== ======
Assumptions used to develop periodic expense and the actuarial present
value of the benefit obligations were:
1998 1997 1996
----- ----- -----
Weighted average discount rate . . . . . . . . . 6.7% 7.0% 7.0%
Expected long-term rate of return on plan assets 9.0% 9.0% 8.0%
Rate of increase in compensation levels. . . . . 5.0% 5.0% 5.0%
The Company also has a non-qualified supplemental retirement plan for officers
of the Company which provides for benefits in excess of the statutory limits of
its defined benefit pension plan. The obligation is funded in a grantor trust
with common shares of the Company. The Company recognized expense as follows,
in millions: $.3 in 1998, 1997 and 1996.
NOTE 11. PREFERRED SHARES
In February, the Company issued $75 million of 7.44% Series A cumulative
redeemable preferred shares with a liquidation preference of $25 per share. The
shares are callable at the Company's option any time after March 31, 2003 and
have no stated maturity. In October, the Company issued $90 million of 7.125%
Series B cumulative redeemable preferred shares with a liquidation preference of
$25 per share and no stated maturity. The Company can elect to redeem the
shares anytime after October 20, 2003. The Series B shares are redeemable by
the holder only upon their death and are also redeemable in either cash or
common shares at the Company's option. There are limitations on the number of
shares per shareholder and in the aggregate that may be redeemed per year.
In January of 1999, the Company issued $115 million of 7.0% Series C cumulative
redeemable preferred shares with a liquidation preference of $50 per share and
no stated maturity. The Company can elect to redeem these shares anytime after
March 15, 2004. The redemption rights of the shareholders and the related
restrictions are effectively the same as for the Series B preferred shares.
The proceeds of these offerings were used to pay down amounts outstanding under
the Company's revolving credit facilities, to fund acquisition and new
development activity, to retire $35 million of 9.11% secured notes payable and
to retire $82 million of variable-rate MTN's due in 2000. Any redemption of
preferred shares initiated by the Company must be funded with proceeds from an
offering of additional common or preferred shares.
NOTE 12. MARKETABLE SECURITIES
The Company's investment in marketable debt securities at December 31, 1998
consists of short-term commercial paper that matured January 4, 1999. The
proceeds were used to pay down amounts outstanding under the Company's $20
million credit facility.
The Company's investment in marketable debt securities at December 31, 1997
consisted of U.S. government agency guaranteed pass-through certificates. At
December 31, 1997, the fair value of the investments totaled $12.3 million. The
amortized cost of the investments at December 31, 1997 was $12.4 million, and
the related unrealized loss was $.1 million, respectively. In January 1998, the
Company sold its investment in these securities for $12.2 million, resulting in
a gain of less than $.1 million.
NOTE 13. SEGMENT INFORMATION
The Company has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" that
requires disclosure of financial and descriptive information about the Company's
reportable operating segments. The operating segments presented are the
segments of the Company for which separate financial information is available
and operating performance is evaluated regularly by senior management in
deciding how to allocate resources and in assessing performance. The Company
evaluates the performance of its operating segments based on net operating
income that is defined as total revenues less operating expenses and ad valorem
taxes.
The shopping center segment is engaged in the acquisition, development and
management of real estate, primarily anchored neighborhood and community
shopping centers located in Texas, Louisiana, Arizona, Nevada, New Mexico,
Oklahoma, Arkansas, Kansas, Colorado, Missouri, Illinois, Maine and Tennessee.
The customer base includes supermarkets, drugstores and other retailers who
generally sell basic necessity-type commodities. The industrial segment is
engaged in the acquisition, development and management of bulk warehouses and
office/service centers. Its properties are located in Texas, Nevada and
Tennessee, and the customer base is diverse. Included in "Other" are
corporate-related items, insignificant operations and costs that are not
allocated to the reportable segments.
Information concerning the Company's reportable segments is as follows (in
thousands):
SHOPPING
CENTER INDUSTRIAL OTHER TOTAL
--------- ----------- ------- ----------
1998:
Revenues . . . . . . $ 176,269 $ 18,574 $ 3,624 $ 198,467
Net operating income 125,949 13,342 4,327 143,618
Total assets . . . . 898,805 133,379 74,859 1,107,043
Capital expenditures 117,190 54,790 7,607 179,587
1997:
Revenues . . . . . . $ 154,979 $ 14,912 $ 4,621 $ 174,512
Net operating income 109,776 10,855 4,640 125,271
Total assets . . . . 816,852 88,091 41,850 946,793
Capital expenditures 138,365 16,908 2,985 158,258
1996:
Revenues . . . . . . $ 135,375 $ 11,294 $ 4,454 $ 151,123
Net operating income 96,527 8,078 4,623 109,228
Total assets . . . . 707,133 73,025 50,939 831,097
Capital expenditures 113,626 17,017 1,466 132,109
Net operating income reconciles to income from operations as shown
on the Statements of Consolidated Income as follows (in thousands):
----------------------------
1998 1997 1996
-------- -------- --------
Total segment net operating income. . $143,618 $125,271 $109,228
Less:
Depreciation and amortization. . . 41,946 37,976 33,769
Interest . . . . . . . . . . . . . 33,654 30,009 21,975
General and administrative . . . . 7,146 5,647 5,109
-------- -------- --------
Income from operations . . . . . . . . $ 60,872 $ 51,639 $ 48,375
======== ======== ========
Equity in earnings of real estate joint ventures and partnerships as shown on
the Statements of Consolidated Income are included in net operating income of
the shopping center segment, with the exception of $.2 million included in
"Other" in 1996. The corresponding investment balances relate exclusively to
the shopping center segment.
NOTE 14. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
During the year ended December 31, 1998, the Company acquired eight retail
centers and fifteen industrial projects for a total of $128 million. The pro
forma financial information for the years ended December 31, 1998 and 1997 is
based on the historical statements of the Company after giving effect to the
acquisitions as if such acquisitions took place on January 1, 1998 and 1997,
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,
------------------
1998 1997
-------- --------
Pro forma revenues. . . . . . . . . . . . . . . . . . $208,869 $192,903
======== ========
Pro forma net income available to common shareholders $ 56,518 $ 57,915
======== ========
Pro forma net income per common share - basic . . . . $ 2.12 $ 2.17
======== ========
Pro forma net income per common share - diluted . . . $ 2.10 $ 2.16
======== ========
NOTE 15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 1998 and
1997 is as follows:
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
1998:
Revenues. . . . . . . . . . . . . . . . . . $46,962 $48,808 $49,955 $52,742
Net income available to common shareholders 12,329 13,682 14,304 14,169
Net income per common share - basic . . . . 0.46 0.51 0.54 0.53
Net income per common share - diluted . . . 0.46 0.51 0.53 0.53
1997:
Revenues. . . . . . . . . . . . . . . . . . $41,673 $42,843 $44,000 $45,996
Net income available to common shareholders 12,776 12,755 16,177 (1) 13,258
Net income per common share - basic . . . . 0.48 0.48 0.61 (1) 0.50
Net income per common share - diluted . . . 0.48 0.48 0.60 (1) 0.50
(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
---------- ---------- ---------
1998:
Fourth . . . . $ 46 7/8 $ 39 3/4 $ 0.67
Third. . . . . 43 35 15/16 0.67
Second . . . . 44 15/16 40 5/8 0.67
First. . . . . 45 5/8 43 7/8 0.67
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
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 April 28, 1999.
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 April 28, 1999.
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 April 28, 1999.
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 April 28, 1999.
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. . . . . . . . . . . . . 22
(B) Financial Statements
(i) Statements of Consolidated Income for the years
ended December 31, 1998, 1997 and 1996. . . . . 23
(ii) Consolidated Balance Sheets as of December 31,
1998 and 1997 . . . . . . . . . . . . . . . . . 24
(iii) Statements of Consolidated Cash Flows for the years
ended December 31, 1998, 1997 and 1996. . . . . 25
(iv) Statements of Consolidated Shareholders' Equity for
the years ended December 31, 1998, 1997 and 1996 26
(v) Notes to Consolidated Financial Statements . . 27
(2) Financial Statement Schedules:
SCHEDULE PAGE
-------- ----
II Valuation and Qualifying Accounts. . . . . . . . 46
III Real Estate and Accumulated Depreciation. . . . 47
IV Mortgage Loans on Real Estate . . . . . . . . . 49
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 (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 ---- Amendment of the Restated Declaration of Trust (filed as Exhibit 3.2 to the Company's
Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by
reference).
3.3 ---- Second Amendment of the Restated Declaration of Trust (filed as Exhibit 3.3 to the Company's
Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by
reference).
3.4 ---- Third Amendment of the Restated Declaration of Trust (filed as Exhibit 3.4 to the Company's
Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by
reference).
3.5 ---- Amended and Restated 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).
4.1 ---- 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).
4.2 ---- 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).
4.2.1* ---- Fifth Bonds Renewal and Extension Agreement, effective December 28, 1998, for the 16%
Mortgage Bonds of WRI Holdings, Inc., payable to the Company in the original principal amount
of $3,150,000.
4.3 ---- Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and Chase Bank of
Texas, National Association (formerly, 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).
4.3.1 ---- Supplemental Indenture of Trust, dated February 22, 1995, between WRI Holdings, Inc. and
Chase Bank of Texas, National Association (formerly, 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).
4.4* ---- Fifth Supplemental Indenture of Trust between WRI Holdings, Inc. and Chase Bank of Texas,
National Association (formerly, Texas Commerce Trust Company of New York), as Trustee,
amending Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and Chase
Bank of Texas, National Association (formerly, 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.
4.5 ---- Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and Chase Bank of
Texas, National Association (formerly, 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).
4.5.1 ---- First Supplemental Indenture of Trust between WRI Holdings, Inc. and Chase Bank of Texas,
National Association (formerly, Texas Commerce Trust Company of New York), as Trustee,
amending Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and Chase
Bank of Texas, National Association (formerly, 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).
4.6 ---- 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 (filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference).
4.7 ---- 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).
4.8 ---- Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and Chase Bank of
Texas, National Association (formerly, 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).
4.8.1 ---- First Supplemental Indenture of Trust between WRI Holdings, Inc. and Chase Bank of Texas,
National Association (formerly, Texas Commerce Trust Company of New York), as Trustee,
amending Trust Indenture, dated December 28, 1984, between WRI Holdings, Inc. and Chase
Bank of Texas, National Association (formerly, 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).
4.9 ---- 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).
4.10 ---- 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).
4.11 ---- 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).
4.11.1* ---- Tenth Renewal and Extension of Promissory Note in the amount of $12,000,000, effective as of
December 1, 1998, between the Company, as payee, and Plaza Construction, Inc., as maker.
4.12 ---- Amended and Restated Master Swap Agreement dated as of January 29, 1992, between the
Company and Chase Bank of Texas, National Association (formerly, 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).
4.12.1 ---- Rate Swap Transaction, dated as of May 15, 1992, between the Company and Chase Bank of
Texas, National Association (formerly, 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).
4.12.2 ---- Rate Swap Transaction, dated as of June 24, 1992, between the Company and Chase Bank of
Texas, National Association (formerly, 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).
4.12.3 ---- Rate Swap Transaction, dated as of July 2, 1992, between the Company and Chase Bank of
Texas, National Association (formerly, 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).
4.13 ---- Amended and Restated Credit Agreement dated as of November 21, 1996 between the
Company and Chase Bank of Texas, National Association (formerly, Texas Commerce Bank
National Association), as Agent, and individually as a Bank, and the Banks defined therein
(filed as Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference).
4.13.1 ---- First, Second and Third Amendments to the Amended and Restated Credit Agreement dated
November 21, 1996 between the Company and Chase Bank of Texas, National Association
(formerly, Texas Commerce Bank National Association) (filed as Exhibit 10.17.1 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 and
incorporated herein by reference).
4.14 ---- 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).
4.15* ---- Master Promissory Note in the amount of $20,000,000 between the Company, as payee, and
Chase Bank of Texas, National Association (formerly, Texas Commerce Bank National
Association), as maker, effective December 30, 1998.
4.16 ---- Distribution Agreement among the Company and the Agents dated November 15, 1996 relating
to the Medium Term Notes (filed as Exhibit 1.1 to the Company's Current Report of Form 8-K
dated November 15, 1996 and incorporated herein by reference).
4.17 ---- Senior Indenture dated as of May 1, 1995 between the Company and Chase Bank of Texas,
National Association (formerly, 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).
4.18 ---- Subordinated Indenture dated as of May 1, 1995 between the Company and Chase Bank of
Texas, National Association (formerly, 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).
4.19* ---- Form of Fixed Rate Senior Medium Term Note.
4.20* ---- Form of Floating Rate Senior Medium Term Note.
4.21* ---- Form of Fixed Rate Subordinated Medium Term Note.
4.22* ---- Form of Floating Rate Subordinated Medium Term Note.
4.23 ---- Statement of Designation of 7.44% Series A Cumulative Redeemable Preferred Shares (filed as
Exhibit 99 to the Company's Current Report on Form 8-A dated February 18, 1998 and
incorporated herein by reference).
4.24 ---- Statement of Designation of 7.125% Series B Cumulative Redeemable Preferred Shares (filed
as Exhibit 4.2 to the Company's Current Report on Form 8-K dated October 28, 1998 and
incorporated herein by reference).
4.25 ---- Statement of Designation of 7.00% Series C Cumulative Redeemable Preferred Shares (filed as
Exhibit 4.1 to the Company's Registration Statement on Form 8-A dated January 19, 1999 and
incorporated herein by reference).
4.26 ---- 7.44% Series A Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4 to the
Company's Current Report on Form 8-K dated February 23, 1998 and incorporated herein by
reference).
4.27 ---- 7.125% Series B Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K dated October 28, 1998 and incorporated herein by
reference).
4.28 ---- 7.00% Series C Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4.2 to the
Company's Registration Statement on Form 8-A dated January 19, 1999 and incorporated
herein by reference).
4.29 ---- Distribution Agreement among the Company and the Agents dated August 10, 1998 relating to
the Medium Term Notes (filed as Exhibit 1.1 to the Company's current report on Form 8-K dated
August 12, 1998 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** ---- 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).
10.4** ---- 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).
10.5** ---- The 1993 Incentive Share Plan of the Company (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (No. 33-52473) 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 12, 1999
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 12, 1999
------------------------
Stanford Alexander (Chief Executive Officer)
By: Andrew M. Alexander President March 12, 1999
------------------------
Andrew M. Alexander and Trust Manager
By: Robert J. Cruikshank Trust Manager March 12, 1999
------------------------
Robert J. Cruikshank
By: Martin Debrovner Vice Chairman March 12, 1999
------------------------
Martin Debrovner and Trust Manager
By: Melvin Dow Trust Manager March 12, 1999
------------------------
Melvin Dow
By: Stephen A. Lasher Trust Manager March 12, 1999
------------------------
Stephen A. Lasher
By: Joseph W. Robertson, Jr. Executive Vice President and March 12, 1999
------------------------
Joseph W. Robertson, Jr. Trust Manager (Chief Financial Officer)
By: Douglas W. Schnitzer Trust Manager March 12, 1999
------------------------
Douglas W. Schnitzer
By: Marc J. Shapiro Trust Manager March 12, 1999
------------------------
Marc J. Shapiro
By: J.T. Trotter Trust Manager March 12, 1999
------------------------
J.T. Trotter
By: Stephen C. Richter Senior Vice President/ March 12, 1999
------------------------
Stephen C. Richter Financial Administration
and Treasurer
(Principal Accounting Officer)
SCHEDULE II
WEINGARTEN REALTY INVESTORS
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1998, 1997 AND 1996
(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
- ----------------------------------- ----------- --------- -------- ------------ ----------
1998:
Allowance for Doubtful Accounts $ 1,000 $ 683 $ 795 $ 888
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
Note A -- Write-offs of accounts receivable previously reserved.
SCHEDULE III
WEINGARTEN REALTY INVESTORS
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
Total Cost
-------------------------------------
Buildings Projects
and Under Total Accumulated Encumbrances
Land Improvements Development Cost Depreciation (A)
-------- ------------- ------------ ---------- ------------ --------------
SHOPPING CENTERS:
Texas . . . . . . . . . . . $156,679 $ 596,365 $ 753,044 $ 206,043 $ 8,800
Other States. . . . . . . . 52,350 257,560 309,910 50,591 24,637
-------- ------------- ------------ ---------- ------------ --------------
Total Shopping Centers. . 209,029 853,925 1,062,954 256,634 33,437
INDUSTRIAL PROPERTIES:
Texas . . . . . . . . . . . 24,908 120,794 145,702 26,748 5,711
Other States. . . . . . . . 1,750 7,002 8,752 44
-------- ------------- ------------ ---------- ------------ --------------
Total Shopping Centers. . 26,658 127,796 154,454 26,792 5,711
OFFICE BUILDING:
Texas . . . . . . . . . . . 534 15,191 15,725 9,964
-------- ------------- ------------ ---------- ------------ --------------
Total Improved
Properties. . . . . . . 236,221 996,912 1,233,133 293,390 39,148
-------- ------------- ------------ ---------- ------------ --------------
LAND UNDER DEVELOPMENT
OR HELD FOR DEVELOPMENT:
Texas . . . . . . . . . . . $ 35,347 35,347
Other States. . . . . . . . 7,833 7,833
-------- ------------- ------------ ---------- ------------ --------------
Total Land Under
Development. . . . . . 43,180 43,180
-------- ------------- ------------ ---------- ------------ --------------
LEASED PROPERTY
(SHOPPING CENTER)
UNDER CAPITAL LEASE:
Other States . . . . . . 12,254 12,254 3,599 5,857
-------- ------------- ------------ ---------- ------------ --------------
CONSTRUCTION IN
PROGRESS:
Texas . . . . . . . . . . . 4,575 4,575
Other States. . . . . . . . 1,490 1,490
-------- ------------- ------------ ---------- ------------ --------------
Total Construction in
Progress . . . . . . . . 6,065 6,065
-------- ------------- ------------ ---------- ------------ --------------
TOTAL OF ALL
PROPERTIES. . . . . . . . $236,221 $ 1,009,166 $ 49,245 $1,294,632 $ 296,989 $ 45,005
======== ============= ============ ========== ============ ==============
Note A -- Encumbrances do not include $25.6 million outstanding under a $30
million 20-year term loan, payable to a group of insurance companies
secured by a property collateral pool including all or part of
three shopping centers.
SCHEDULE III
(CONTINUED)
The changes in total cost of the properties for the years ended December
31, 1998, 1997 and 1996 were as follows:
1998 1997 1996
----------- ----------- ---------
Balance at beginning of year $1,118,758 $ 970,418 $849,894
Additions at cost. . . . . . 179,587 158,258 132,109
Retirements or sales . . . . (3,713) (9,918) (11,585)
----------- ----------- ---------
Balance at end of year . . . $1,294,632 $1,118,758 $970,418
=========== =========== =========
The changes in accumulated depreciation for the years ended December 31,
1998, 1997 and 1996 were as follows:
1998 1997 1996
--------- --------- ---------
Balance at beginning of year $262,551 $233,514 $216,657
Additions at cost. . . . . . 35,678 32,226 27,732
Retirements or sales . . . . (1,240) (3,189) (10,875)
--------- --------- ---------
Balance at end of year . . . $296,989 $262,551 $233,514
========= ========= =========
SCHEDULE IV
WEINGARTEN REALTY INVESTORS
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
FINAL PERIODIC FACE CARRYING
INTEREST MATURITY PAYMENT AMOUNT OF AMOUNT OF
RATE DATE TERMS MORTGAGES MORTGAGES(C)
--------- -------- ---------- --------- ------------
SHOPPING CENTERS:
FIRST MORTGAGES:
Eastex Venture
Beaumont, TX (Note A) . Prime 12-31-98 Varying 3,500 2,243
+1 1/2 ($2,243
balloon)
Main/O.S.T., Ltd.
Houston, TX . . . . 9.3% 02-01-20 $476 4,800 4,572
Annual
P & I
($1,241
balloon)
Markham West
Shopping Center L.P.
Little Rock, AK . . 10% 12-31-28 Varying 3,104 3,116
($3,116
balloon)
INDUSTRIAL:
FIRST MORTGAGES:
Railwood
Houston, TX . . . . 10% 12-28-04 Varying 7,000 6,223
($6,223
balloon)
River Pointe, Conroe,TX
(Note D). . . . . . 9% 11-30-03 Varying 2,133 1,890
Little York, Houston, TX
(Note D). . . . . . Prime 12-31-03 Varying 1,922 1,758
+2%
Schedule continued on next page
SCHEDULE IV
(CONTINUED)
WEINGARTEN REALTY INVESTORS
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
FINAL PERIODIC FACE CARRYING
INTEREST MATURITY PAYMENT AMOUNT OF AMOUNT OF
RATE DATE TERMS MORTGAGES MORTGAGES(C)
--------- -------- --------- ---------- -------------
UNIMPROVED LAND:
SECOND MORTGAGE:
River Pointe
Conroe, TX . . . . Prime 12-01-99 Varying 12,000 8,557
+1% ($8,557
balloon)
TOTAL MORTGAGE LOANS ON ---------- -------------
REAL ESTATE (Note B) $ 34,459 $ 28,359
========== =============
Note A -- Mortgage Loan was amended effective January 1, 1999 as follows:
The maturity date was extended to October 31, 2009, and
The interest rate was modified to 6% through October 31, 1999
and to 8% commencing November 1, 1999 through the maturity date.
Note B -- Changes in mortgage loans for the years ended December 31, 1998, 1997
and 1996 are summarized below:
1998 1997 1996
-------- -------- --------
Balance, Beginning of year $25,653 $27,157 $31,292
New Mortgage Loans. . . . . 3,116
Additions to Existing Loans 1,560 589 1,075
Collections of Principal. . (1,970) (2,093) (5,210)
-------- -------- --------
Balance, End of Year . . . $28,359 $25,653 $27,157
======== ======== ========
Note C -- The aggregate cost at December 31, 1998 for federal income tax
purposes is $27,895.
Note D -- Principal payments are due monthly to the extent of cash flow
generated by the underlying property.