Weingarten Realty Investors : BofA Securities 2020 Transcript

BofA Securities 2020 Global Real Estate Virtual Conference

Tuesday, September 15, 2020

Weingarten Realty Investors

CRAIG SCHMIDT: Welcome to the Weingarten Realty roundtable. From Weingarten, we have Drew Alexander, Chairman, CEO, and President, Steve Richter, Executive V.P. and CFO, and Michelle Wiggs, V.P. of Investor Relations.

I'm Craig Schmidt from the research group. We also have Alexander Pernokas, also from the retail REIT research team, who will be working to monitor the incoming questions.

Weingarten is a shopping center owner, manager and developer. The company owns and operates under long term leases a total of approximately 165 properties, which are located in 16 states.

We're going to begin with a short overview of the company, and keep in mind, if you do have a question you can enter and submit them through Veracast. Drew can you take us away?

DREW ALEXANDER: Thank you, Craig. Thank you and good morning. Good morning, everyone, and very good early morning to those of you out West and good day if appropriate to any of our international callers.

So we put out a press release yesterday and I just want to reiterate our thanks to all the first responders and best wishers, including those folks working in our supermarkets and other essential services through this, and best wishes to everybody in these challenging times.

We also declared another $0.18 per share quarterly dividend. This is consistent with what we had messaged before, that that number basically makes sense given our tax position largely from sales last year.

Dispositions for 2020, we announced around $152 million year to date, and about $64 million of that has come post June 30. We also restated in the press release that a special dividend, likely paid in December, is certainly possible, but it'd be premature to discuss any specifics on the amounts.

Cash collections remain pretty good, one of the strongest in the sector, our July cash collection is up to 88%. We were at 82% the last time that we announced, so some improvements there in July. And then August is also at 88%, so pleased with collections given this environment.

We've also done a number of deferrals and we feel we'll collect most of those and we had limited exposure to those tenants who still have very limited visibility going forward, like movie theaters.

Our tenant base is about 63% essential, that high essential, our great operations team, and our transformation is why our collections have been so strong. On our website we updated our presentation, it goes through all the categories. Again, we feel pretty good given the considerations out there in the world.

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BofA Securities 2020 Global Real Estate Virtual Conference

Tuesday, September 15, 2020

The balance sheet and liquidity position is in great shape. We've got about $34 million of excess cash and a $500 million line of credit that's fully available. We don't have any significant debt maturities until October of 2022, so a little over two years away.

A little bit more big picture on Weingarten Realty, grew out of a grocery company, was formed in 1948. Supermarkets are still a huge part of our business, about 80% of our rents come from shopping centers with a grocery component. Those retailers, those tenants average $709 a square foot in sales. So that's a strong number. It brings a lot of traffic to our centers.

As Craig mentioned, about 165 projects, 16 states. To think about the geography, we're basically in Seattle, and also in the District of Columbia. So we're in the southern and western United States from Washington to Washington. Major metros like Seattle, Portland, all through California in the major metros, Phoenix, Las Vegas, Denver, in Texas, Florida, Atlanta, Raleigh, and DC. So we're also in south Texas, which is basically, it's one of the only areas that we're in that's not a major metro but there's huge population in north Mexico and it's an opportunity to take advantage of very little shop space there under US law.

One of the things you need to appreciate about Weingarten is the very significant transformation that we undertook a few years back and it's a major change that over 10 years we've sold $3.5 billion worth of property, while adding $1.6 billion of quality property, strong properties. So we very much improved the portfolio quality and the balance sheet.

Craig and the B of A team recently updated their REIT [? memos ?] and notes the improvements. We are third in what we consider amongst our direct peer group. So very pleased with the improvement. All the details are on the web, but all the metrics are up, and just one example is our number of households is up 31%.

So we're in the states that have good growth prospects, generally lower taxes. We have shopping centers with barriers to entry that will benefit from the growth. One can see high rises from a lot of our shopping centers. We've got a very diversified tenant base, with supermarkets, value oriented retailers like T.J. Maxx and Ross, generally good names. Another part of the transformation is the focus on chains over mom and pops. So our credit profile was better going into this crisis than it was going into the global financial crisis.

The density of our portfolio gives us a lot of redevelopment opportunities, so that roadshow runs through a long term pipeline of some $2 billion, with numerous possible high rises. Again, over a long period of time, just giving flavor for the densification possibilities. Currently active in a number of small, more simple redevelopments, adding a multi-tenant building here and there. Investing about $55 million total on those projects.

We also have three large generally mixed use developments that represent about $485 million in total investment when complete. The vast majority of that is funded, and we're starting to see some revenue coming online. At our Centro project in DC, this is the one that's farthest along, the residential component is 94% leased, the retail 93% leased, and this project should be stabilized around year end, maybe a little bit into next year.

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BofA Securities 2020 Global Real Estate Virtual Conference

Tuesday, September 15, 2020

At the West Alex project, also in DC, the resi is 33% leased, the retail is progressing, Harris Teeter is about to start construction of their supermarket and should be open in a year. Both of these projects are in northern Virginia, both very near Amazon HQ2, which will be coming on in a few years, so very good long term properties.

The third project is a 318 unit luxury high rise addition to our River Oaks Center. We're wrapping up construction there, leasing has just begun, so far so good. River Oaks is a great project, about 320,000 square feet in total between downtown Houston and the wealthy River Oaks area. So we're very pleased with the status of the three large developments.

So in summary, Weingarten Realty is well positioned to weather this storm, with supermarkets, basic goods and services, quality tenants in locations, markets that'll grow, and a great balance sheet. Conditions aren't great, but we are well positioned. So, Craig, Alex. I'd be happy to take your questions.

CRAIG SCHMIDT: Great. Before we get into with the phone questions, just are any of your West Coast properties impacted by the fires?

DREW ALEXANDER: A little bit. We have one in Santa Rosa in the Sonoma area that is close, there's definitely smoke in the air. It is a supermarket, so again, it's essential. They'll certainly try to keep it open, but it is something that we keep a very close watch on.

And then ironically, we have another one in San Jose that is definitely in a part of San Jose that you think of as pretty urban, but it is close enough that it does get a lot of smoke. So, fingers crossed we don't see anything that is likely to suffer directly from the fire, if you will, but smoke damage and air quality is a problem throughout California, and one of the centers is definitely subject to some preventative blackouts. We were talking before the call about so far we've been lucky on the hurricane season, and there's the fire season plus the pandemic. So there's a lot going on.

CRAIG SCHMIDT: OK, thank you. You touched on rent collection. Maybe you could just run through the experience with rent collections and what you are expecting in the coming months?

DREW ALEXANDER: Sure, I mean and I, if you want, can go through the web page that has it all, Michelle, if you remember that page number. But generally, what--

MICHELLE WIGGS: Page 9.

DREW ALEXANDER: Thanks, Michelle. What we've done, and this is on our website road show if folks want to go to it if that's convenient for them on page 9, goes through the breakdown by category and shows the different things. So when the pandemic started, I think like a lot of folks, we did not appreciate the severity of it, but we quickly pivoted and everybody in the company, myself included, went to collecting rent. So we engaged with all of our tenants and tried to do what we could. We do feel that chain tenants should pay rent and most of them did.

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BofA Securities 2020 Global Real Estate Virtual Conference

Tuesday, September 15, 2020

Certain categories as I alluded, like movie theaters, there's still not good visibility on what the futures look like. The movie theaters within I'd say, the last week or 10 days have opened in most of our portfolio. But there's still not a lot of new product and there's still some question as to how quickly people rush back. So still some issues there.

So when it comes to a mom and pop tenant that was in good standing before the crisis, we certainly have tried to work with them generally in deferrals but in some cases with abatements. And we think most folks will get through but a good example is dry cleaners, which was a business that at the beginning of the year had been a steady performer for Weingarten Realty for decades. And today with many people working from home, that business is under a lot of stress.

So we're pleased with our collections at 88%, and we've got deferrals that are money good if you will, for a good portion to add more but we will definitely be adjusting rents and working with some of the tenants that need it. So the definition of essential varies across the different geographies, but it's around 63% in terms of supermarkets, medical, the other things that are generally deemed essential.

CRAIG SCHMIDT: OK. And the retail industry is experiencing record high number of bankruptcies and store closings through mid-September. What do you expect the trajectory of store closings will be in the last three and a half months of the year?

DREW ALEXANDER: I think it'll get a little better, just because there's just not that much left to give. I mean, there will, as you say, there have been a lot of closings and generally speaking, the strip center industry, the basic goods and services industry, has been more sheltered from it than the malls.

So we did have a few Stein Mart stores and a few Stage Store concepts. These were tenants that we were worried about before the pandemic and obviously the pandemic made things worse. We started out the pandemic with six 24 Hour Fitnesses, they rejected three, so we have three remaining but again, that was a tenant that we were worried about before the pandemic. If you look at our top 10 tenants, generally speaking, we're in pretty good shape with good names, T.J. Maxx,

MICHELLE WIGGS: Page 21.

DREW ALEXANDER: Thank you, Michelle. Hear my pages flipping here as I go to try to find it. So page 21 in our road show, generally speaking good names. So some of the things that have actually benefited is a company like PetSmart, which has a lot of debt, but with the Chewys investment and other things, PetSmart, I probably feel a little bit better about than before.

Bed Bath and Beyond is our 10th largest tenant, they're about 1% of revenue. They are having their issues but I think their balance sheet is such that they survive. And again, with the transformation, generally we have good locations with them.

So there will be more issues to deal with, but the base of our tenants, the transformation, and the basic goods and services nature of our tenants, I feel pretty good that our diversified portfolio

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