10-K 1 doc1.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 (IRS Employer incorporation or organization) 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 26, 2002 was approximately $1,736,144,041. As of February 26, 2002 there were 34,385,899 common 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 29, 2002 are incorporated by reference in Part III.
TABLE OF CONTENTS ITEM NO. PAGE NO. -------- -------- PART I 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 16 4. Submission of Matters to a Vote of Shareholders . . . . . . . . 16 PART II 5. Market for Registrant's Common Shares of Beneficial Interest and Related Shareholder Matters. . . . . . . . . . . 17 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . 18 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . 19 7A. Quantitative and Qualitative Disclosures About Market Risk. . . 25 8. Financial Statements and Supplementary Data . . . . . . . . . . 26 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . 45 PART III 10. Trust Managers and Executive Officers of the Registrant . . . . 46 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . 46 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . . . . . . . . 46 13. Certain Relationships and Related Transactions. . . . . . . . . 46 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 46
PART I ITEM 1. BUSINESS General. Weingarten Realty Investors, a real estate investment 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. WRI is self-advised and self-managed. As of December 31, 2001, we owned or operated under long-term leases interests in 287 developed income-producing real estate projects. We owned 228 shopping centers located in the Houston metropolitan area and in other parts of Texas and in California, Louisiana, Arizona, Nevada, Tennessee, Florida, Arkansas, New Mexico, Kansas, Colorado, Oklahoma, Missouri, Illinois, North Carolina, Georgia, Mississippi and Maine. We also owned 57 industrial projects located in Tennessee, Nevada, Georgia, Florida and Houston, Austin and Dallas, Texas. Additionally, we owned one multi-family residential project and one office building, which serves, in part, as WRI's headquarters. Our interests in these projects aggregated approximately 35.7 million square feet of building area and 135.7 million square feet of land area. We also owned interests in 40 parcels of unimproved land under development or held for future development that aggregated approximately 13.6 million square feet. We currently employ 265 persons and our principal executive offices are located at 2600 Citadel Plaza Drive, Houston, Texas 77008, and our phone number is (713) 866-6000. Investment and Operating Strategy. WRI's investment strategy is to increase cash flow and the value of its portfolio through intensive, hands-on management of its existing portfolio of assets, selective remerchandising and renovation of properties and the acquisition and development of income-producing real estate assets where the returns on such investments exceed our blended long-term cost of capital. We will also pursue the disposition of selective non-core assets as circumstances warrant, and we believe the sales proceeds can be effectively redeployed into assets with higher growth potential. At December 31, 2001, neighborhood and community shopping centers represented 87.3% of total revenue, including our share of revenue from unconsolidated joint ventures and excluding our partners' share of revenue from consolidated joint ventures, industrial properties accounted for 10.5% and the remainder relates to one apartment complex and one office building, which serves in part as the company's corporate headquarters. We expect to continue to focus the future growth of the portfolio in neighborhood and community centers and bulk and office/service industrial properties, generally in a ratio similar to our current holdings. We expect this external growth to occur in the markets in which we currently operate as well as other markets in the southern half of the United States. While we do not anticipate investment in other classes of real estate such as multi-family or office assets, we remain open to opportunistic uses of our undeveloped land. WRI may either purchase or lease income-producing properties in the future, and may also participate with other entities in property ownership through partnerships, joint ventures or similar types of co-ownership. Equity investments may be subject to existing mortgage financing and other indebtedness or such financing or indebtedness may be incurred in connection with acquiring such investments. WRI may invest in mortgages; however, we currently have only invested in first mortgages to joint ventures or partnerships in which we own an equity interest. We may also invest in securities of other issuers, for the purpose, among others, of exercising control over such entities, subject to the gross income and asset tests necessary for REIT qualification. Our operating philosophy is based on intensive hands-on management and leasing of our properties. In acquiring and developing properties, we attempt to accumulate enough properties in a geographic area to allow for the establishment of a regional office, which enables us to obtain in-depth knowledge of the market from a leasing perspective and to have easy access to the property and our tenants from a management viewpoint. Page 1 Diversification from both a geographic and tenancy perspective is a critical component of our operating strategy. While over 60% of our properties are located in the State of Texas, we continue to expand our holdings outside the state. With respect to tenant diversification, our two largest merchants, Kroger and Safeway, accounted for 3.8% and 3.0% of our total revenue including our share of revenue from unconsolidated joint ventures and excluding our partners' share of revenue from consolidated joint ventures, as of December 31, 2001, respectively. No other tenant accounted for more than 1.3% of our total revenues. We finance the growth and working capital needs of the company in a conservative manner. With a credit rating of A/a3 from Standard & Poors and Moody's Investor Services, respectively, we have the highest unsecured credit rating of any public REIT. We intend to maintain this conservative approach to managing our balance sheet, which, in turn, gives us many options to raising debt or equity capital when needed. At December 31, 2001, our fixed charge coverage ratio was 2.6 to 1 and our debt to total market capitalization was 36%. WRI's policies with respect to the investment and operating philosophies discussed above are reviewed by our Board of Trust Managers periodically and may be modified without a vote of our shareholders. Location of Properties. Historically, WRI has emphasized investments in properties located primarily in the Houston area. Since 1987, we began actively acquiring properties outside Houston. Of our 327 properties that were owned or operated under long-term leases as of December 31, 2001, 105 of our 287 developed properties and 12 of our 40 parcels of unimproved land were located in the Houston metropolitan area. In addition to these properties, we owned 86 developed properties and nine parcels of unimproved land located in other parts of Texas. Because of our investments in the Houston area, as well as in other parts of Texas, the Houston and Texas economies affect, to a significant degree, the business and operations of WRI. Although the economies of Houston and Texas slowed in 2001, they continued to outperform the national average. The economy of the entire southwest United States, where we have our primary operations, also remained strong with respect to the overall national average. The Houston economy is highly diversified, with over 50% of base jobs in sectors that are affected marginally, if at all, by changing energy prices. In 2001, Houston posted a positive job growth rate, compared to a national net loss. Houston's growth is expected to continue in 2002, although at a more modest rate than previous years, despite instability in the energy market. As the national and global economies rebound, Houston's economy should regain momentum heading into 2003. Any downturn in the Houston or Texas economies could adversely affect us. However, our centers are generally anchored by supermarkets and drug stores, which deal in basic necessity-type items and tend to be less affected by economic change. Competition. WRI is among the five largest publicly-held owners and operators of neighborhood and community shopping centers in the nation based on revenues, number of properties and total market capitalization. There are numerous other developers and real estate companies (both public and private) financial institutions and other investors engaged in the development, acquisition and operation of shopping centers and commercial property who compete with us in our 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 WRI and its competitors develop, acquire and manage. We believe that the principal competitive factors in attracting tenants in our market areas are location, price, anchor tenants and maintenance of properties. We also believe that our competitive advantages include the favorable locations of our properties, our ability to provide a retailer with multiple locations with anchor tenants and the practice of continuous maintenance and renovation of our properties. Financial Information. Additional financial information concerning WRI is included in the Consolidated Financial Statements located on pages 27 through 45 herein. Page 2 ITEM 2. PROPERTIES At December 31, 2001, WRI's real estate properties consisted of 327 locations in eighteen states. A complete listing of these properties, including the name, location, building area and land area (in square feet), as applicable, is set forth below:
SHOPPING CENTERS Building Name and Location Area Land Area -------------------------------------------------------------------- --------- ---------- HOUSTON AND HARRIS COUNTY, TOTAL. . . . . . . . . . . . . . . . . . 7,208,000 27,758,000 Alabama-Shepherd, S. Shepherd at W. Alabama . . . . . . . . . . . . 28,000 * 88,000 * Almeda Road, Almeda at Southmore. . . . . . . . . . . . . . . . . . 17,000 37,000 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 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 Champions Village, F.M. 1960 at Champions Forest Dr.. . . . . . . . 408,000 1,391,000 Copperfield Village, Hwy. 6 at F.M. 529 . . . . . . . . . . . . . . 163,000 712,000 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. . . . . . . . . . . . . . . . . 83,000 318,000 Cypress Pointe, F.M. 1960 at Cypress Station. . . . . . . . . . . . 191,000 737,000 Cypress Village, Louetta at Grant Road. . . . . . . . . . . . . . . 25,000 134,000 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 . . . . . . . . . 337,000 1,416,000 Fondren/West Airport, Fondren at W. Airport . . . . . . . . . . . . 62,000 223,000 Glenbrook Square, Telephone Road. . . . . . . . . . . . . . . . . . 76,000 320,000 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 . . . . . . . . . 178,000 819,000 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 Chestnut 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. . . . . . . . . . . . . 118,000 483,000 Long Point, Long Point at Wirt (77%). . . . . . . . . . . . . . . . 68,000 * 261,000 * Lyons Avenue, Lyons at Shotwell . . . . . . . . . . . . . . . . . . 68,000 179,000 Market at Westchase, Westheimer at Wilcrest . . . . . . . . . . . . 87,000 333,000 Miracle Corners, S. Shaver at Southmore . . . . . . . . . . . . . . 86,000 386,000 Northbrook, Northwest Fwy. at W. 34th . . . . . . . . . . . . . . . 175,000 656,000
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Building Name and Location Area Land Area -------------------------------------------------------------------- --------- ---------- HOUSTON AND HARRIS COUNTY, (CONT'D.) North Main Square, Pecore at N. Main. . . . . . . . . . . . . . . . 18,000 64,000 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 * Oak Forest, W. 43rd at Oak Forest . . . . . . . . . . . . . . . . . 164,000 541,000 Orchard Green, Gulfton at Renwick . . . . . . . . . . . . . . . . . 74,000 273,000 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. . . . . . . . . . . . . . . . 110,000 475,000 Richmond Square, Richmond Ave. at W. Loop 610 . . . . . . . . . . . 33,000 135,000 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%). . . . . 185,000 * 803,000 * Southgate, W. Fuqua at Hiram Clark. . . . . . . . . . . . . . . . . 126,000 533,000 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 * 158,000 * 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 . . . . . . . . . . . . . . 191,000 413,000 West Junction, Hwy. 6 at Keith 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 TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL . . . . . . . . . . . 6,553,000 28,129,000 McDermott Commons, McDermott at Custer Rd., Allen . . . . . . . . . 56,000 328,000 Bell Plaza, 45th Ave. at Bell St., Amarillo . . . . . . . . . . . . 129,000 682,000 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 Atkinsen 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
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Building Name and Location Area Land Area -------------------------------------------------------------------- --------- ---------- TEXAS (EXCLUDING HOUSTON & HARRIS CO.), (CONT'D.) 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 * Phelan, Phelan at 23rd St, Beaumont. . . . . . . . . . . . . . . . . 12,000 63,000 Southgate, Calder Ave. at 6th St., Beaumont. . . . . . . . . . . . . 34,000 118,000 Westmont, Dowlen at Phelan, Beaumont . . . . . . . . . . . . . . . . 98,000 507,000 Lone Star Pavilions, Texas at Lincoln Ave., College Station (30%). . 32,000 * 132,000 * Parkway Square, Southwest Pkwy at Texas Ave., College Station. . . . 158,000 685,000 Montgomery Plaza, Loop 336 West at I-45, Conroe. . . . . . . . . . . 317,000 1,179,000 River Pointe, I-45 at Loop 336, Conroe . . . . . . . . . . . . . . . 46,000 329,000 Moore Plaza, S. Padre Island Dr. at Staples, Corpus Christi. . . . . 355,000 1,492,000 Portairs, Ayers St. at Horne Rd., Corpus Christi . . . . . . . . . . 118,000 416,000 Dickinson, I-45 at F.M. 517, Dickinson (72%) . . . . . . . . . . . . 55,000 * 225,000 * Coronado Hills, Mesa at Balboa, El Paso. . . . . . . . . . . . . . . 127,000 575,000 Southcliff, I-20 at Grandbury Rd., Ft. Worth . . . . . . . . . . . . 116,000 568,000 Broadway, Broadway at 59th St., Galveston (77%). . . . . . . . . . . 58,000 * 170,000 * Galveston Place, Central City Blvd. at 61st St., Galveston . . . . . 210,000 828,000 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 Killeen Marketplace, 3200 E. Central Texas Expressway, Killeen . . . 115,000 512,000 Cedar Bayou, Bayou Rd., La Marque. . . . . . . . . . . . . . . . . . 15,000 51,000 Corum South, I-45 at F.M. 518, 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. . . . . . . . . . . . 257,000 1,835,000 Independence Plaza, Town East Blvd., Mesquite. . . . . . . . . . . . 179,000 787,000 McKinney Centre, US Hwy 380 at U.S.Hwy 75, McKinney. . . . . . . . . 34,000 199,000 Murphy Crossing, F.M. 544 at Murphy Rd., Murphy. . . . . . . . . . . 33,000 158,000 University Park Plaza, University Dr. at E. Austin St., Nacogdoches. 78,000 283,000 Custer Park, SWC Custer Road at Parker Road, Plano . . . . . . . . . 119,000 376,000 Gillham Circle, Gillham Circle at Thomas, Port Arthur. . . . . . . . 33,000 94,000 Village, 9th Ave. at 25th St., Port Arthur (77%) . . . . . . . . . . 40,000 * 187,000 * Porterwood, Eastex Fwy. at F.M. 1314, Porter . . . . . . . . . . . . 99,000 487,000 Rockwall, I-30 at Market Center Street, Rockwall (30%) . . . . . . . 66,000 * 280,000 * 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. . . . . . . . . . 90,000 341,000 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 . . . . . . . . 97,000 335,000 Island Market Place, 6th St. at 9th Ave., Texas City . . . . . . . . 27,000 90,000
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Building Name and Location Area Land Area ------------------------------------------------------------------------ --------- ---------- TEXAS (EXCLUDING HOUSTON & HARRIS CO.), (CONT'D.) Mainland, Hwy. 1765 at Hwy. 3, Texas City. . . . . . . . . . . . . . . . 56,000 279,000 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 * 200,000 * Crossroads, I-10 at N. Main, Vidor . . . . . . . . . . . . . . . . . . . 116,000 516,000 Watauga Towne Center, Hwy. 377 at Bursey Rd., Watauga. . . . . . . . . . 63,000 347,000 CALIFORNIA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,480,000 10,353,000 Centerwood Plaza, Lakewood Blvd. at Alondra Dr., Bellflower. . . . . . . 71,000 333,000 Southampton Center, IH-780 at Southampton Rd., Benecia . . . . . . . . . 162,000 596,000 580 Marketplace, E. Castro Valley at Hwy. I-580, Castro Valley . . . . . 102,000 444,000 Buena Vista Marketplace, Huntington Dr. at Buena Vista St., Duarte . . . 91,000 322,000 Fremont Gateway Plaza, Paseo Padre Pkwy. Walnut Ave., Fremont. . . . . . 195,000 650,000 Hallmark Town Center, W. Cleveland Ave. at Stephanie Ln., Madera . . . . 85,000 365,000 Menifee Town Center, Antelope Rd. at Newport Rd., Menifee. . . . . . . . 83,000 658,000 Prospectors Plaza, Missouri Flat Rd. at US Hwy. 50, Placerville. . . . . 219,000 873,000 Shasta Crossroads, Churn Creek Rd. at Dana Dr., Redding. . . . . . . . . 121,000 520,000 Ralph's Redondo, Hawthorne Blvd. at 182nd St., Redondo Beach . . . . . . 67,000 431,000 Arcade Square, Watt Ave. at Whitney Ave., Sacramento . . . . . . . . . . 76,000 234,000 Discovery Plaza, W. El Camino Ave. at Truxel Rd., Sacramento . . . . . . 93,000 417,000 Summerhill Plaza, Antelope Rd. at Lichen Dr., Sacramento . . . . . . . . 134,000 704,000 Silver Creek Plaza, E. Capital Expwy. at Silver Creek Rd., San Jose. . . 134,000 573,000 San Marcos Plaza, San Marcos Blvd. at Rancho Santa Fe Dr., San Marcos. . 36,000 116,000 Stony Point Plaza, Stony Point Rd. at Hwy, 12, Santa Rosa. . . . . . . . 199,000 619,000 Sunset Center, Sunset Avenue at State Hwy. 12, Suisun City . . . . . . . 85,000 359,000 Creekside Center, Alamo Dr. at Nut Creek Rd., Vacaville. . . . . . . . . 116,000 400,000 Westminster Center, Westminster Blvd. at Golden West St., Westminster. . 411,000 1,739,000 FLORIDA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,796,000 7,668,000 Boca Lyons, Glades Rd. at Lyons Rd., Boca Raton. . . . . . . . . . . . . 117,000 545,000 Sunset Point 19, US Hwy. 19 at Sunset Pointe Rd., Clearwater . . . . . . 273,000 1,078,000 Argyle Village, Blanding at Argyle Forest Blvd., Jacksonville. . . . . . 305,000 1,329,000 Colonial Plaza, Colonial Dr. at Primrose Dr., Orlando. . . . . . . . . . 488,000 2,009,000 Market at Southside, Michigan Ave. at Delaney Ave., Orlando. . . . . . . 97,000 348,000 Pembroke Commons, University at Pines Blvd., Pembroke Pines. . . . . . . 316,000 1,394,000 Venice Pines Plaza, Center Rd. at Jacaranda Blvd., Venice. . . . . . . . 97,000 565,000 Winter Park Corners, Aloma Ave. at Lakemont Ave., Winter Park. . . . . . 103,000 400,000 NEVADA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,610,000 7,322,000 Eastern Horizon, Eastern Ave. at Horizon Ridge Pkwy., Henderson . . . . 15,000 93,000 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. . . . . . . 410,000 1,548,000 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 Westland Fair, Charleston Blvd. At Decatur Blvd., Las Vegas. . . . . . . 374,000 2,346,000 College Park, E. Lake Mead Blvd. at Civic Ctr. Dr., North Las Vegas. . . 164,000 721,000
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Building Name and Location Area Land Area -------------------------------------------------------------------- --------- ---------- LOUISIANA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . 1,558,000 6,606,000 Siegen Plaza, Siegen Lane at Honore Lane, Baton Rouge . . . . . . . 30,000 179,000 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 Ambassador Plaza, Ambassador Caffery at W. Congress, Lafayette. . . 29,000 173,000 Westwood Village, W. Congress at Bertrand, Lafayette. . . . . . . . 141,000 942,000 Conn's Building, Ryan at 17th St., Lake Charles . . . . . . . . . . 23,000 36,000 East Town, 3rd Ave. at 1st St., Lake Charles. . . . . . . . . . . . 33,000 * 117,000 * 14/Park Plaza, Hwy. 14 at General Doolittle, Lake Charles . . . . . 207,000 654,000 Kmart Plaza, Ryan St., Lake Charles . . . . . . . . . . . . . . . . 105,000 * 406,000 * Southgate, Ryan at Eddy, Lake Charles . . . . . . . . . . . . . . . 171,000 628,000 Danville Plaza, Louisville at 19th, Monroe. . . . . . . . . . . . . 143,000 539,000 Orleans Station, Paris, Robert E. Lee at Chatham, New Orleans . . . 5,000 31,000 Southgate, 70th at Mansfield, Shreveport t. . . . . . . . . . . . . 73,000 359,000 Westwood, Jewella at Greenwood, Shreveport. . . . . . . . . . . . . 113,000 393,000 University Place, 70th Street at Youree Dr., Shreveport . . . . . . 133,000 714,000 ARIZONA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,190,000 5,316,000 Palmilla Center, Dysart Rd. at McDowell Rd., Avondale . . . . . . . 45,000 226,000 University Plaza, Plaza Way at Milton Rd., Flagstaff. . . . . . . . 162,000 918,000 Val Vista Towne Center, Warner at Val Vista Rd., Gilbert. . . . . . 93,000 366,000 Arrowhead Festival, 75th Ave. at W. Bell Rd., Glendale. . . . . . . 26,000 157,000 Fry's Ellsworth Plaza, Broadway Rd. at Ellsworth Rd., Mesa. . . . . 5,000 22,000 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 Rancho Encanto, 35th Avenue at Greenway Rd., Phoenix. . . . . . . . 71,000 259,000 Fountain Plaza, 77th St. at McDowell, Scottsdale. . . . . . . . . . 112,000 460,000 Broadway Marketplace, Broadway at Rural, Tempe. . . . . . . . . . . 83,000 347,000 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 . . . . . 100,000 459,000 NEW MEXICO, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . 952,000 4,024,000 Eastdale, Candelaria Rd. at Eubank Blvd., Albuquerque . . . . . . . 111,000 601,000 North Towne Plaza, Academy Rd. at Wyoming Blvd., Albuquerque. . . . 103,000 607,000 Pavilions at San Mateo, I-40 at San Mateo, Albuquerque (30%). . . . 59,000 * 237,000 * 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. . . . . . . . 247,000 795,000 KANSAS, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 784,000 3,418,000 West State Plaza, State Ave. at 78th St., Kansas City . . . . . . . 94,000 401,000 Regency Park, 93rd St. at Metcalf Ave., Overland Park . . . . . . . 202,000 742,000 Westbrooke Village, Quivira Rd. at 75th St., Shawnee. . . . . . . . 237,000 1,270,000 Shawnee Village, Shawnee Mission Pkwy. at Quivera Rd., Shawnee. . . 135,000 561,000 Kohl's, Wanamaker Rd. at S.W. 17th St., Topeka. . . . . . . . . . . 116,000 444,000
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Building Name and Location Area Land Area -------------------------------------------------------------------- --------- ---------- OKLAHOMA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 702,000 3,173,000 Bryant Square, Bryant Ave. at 2nd St., Edmond. . . . . . . . . . . . 282,000 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. . . . . . 138,000 540,000 Windsor Hills Center, Meridian at Windsor Place, Oklahoma City . . . 246,000 1,232,000 ARKANSAS, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 597,000 2,568,000 Evelyn Hills, College Ave. at Abshier, Fayetteville. . . . . . . . . 125,000 750,000 Broadway Plaza, Broadway at W. Roosevelt, Little Rock. . . . . . . . 16,000 148,000 Geyer Springs, Geyer Springs at Baseline, Little Rock. . . . . . . . 153,000 414,000 Markham Square, W. Markham at John Barrow, Little Rock . . . . . . . 134,000 535,000 Markham West, 11400 W. Markham, Little Rock (67%). . . . . . . . . . 119,000 * 515,000 * Westgate, Cantrell at Bryant, Little Rock. . . . . . . . . . . . . . 50,000 206,000 TENNESSEE, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 520,000 2,089,000 Bartlett Towne Center, Bartlett Blvd. at Stage Rd., Bartlett . . . . 179,000 774,000 Commons at Dexter Lake, Dexter at N. Germantown, Memphis . . . . . . 167,000 671,000 Highland Square, Summer at Highland, Memphis . . . . . . . . . . . . 20,000 84,000 Summer Center, Summer Ave. at Waling Rd., Memphis. . . . . . . . . . 154,000 560,000 MISSOURI, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 338,000 1,101,000 Ballwin Plaza, Manchester Rd. at Vlasis Dr., Ballwin . . . . . . . . 203,000 653,000 PineTree Plaza, U.S. Hwy. 50 at Hwy. 291, Lee's Summit . . . . . . . 135,000 448,000 COLORADO, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 291,000 1,281,000 Bridges at Smoky Hill, Smoky Hill Rd. at S. Picadilly St., Aurora. . 6,000 * 28,000 * Carefree, Academy Blvd. at N. Carefree Circle, Colorado Springs. . . 127,000 460,000 Academy Place, Academy Blvd. at Union Blvd., Colorado Springs. . . . 84,000 404,000 Gold Creek Center, Hwy. 86 at Elizabeth St., Elizabeth . . . . . . . 14,000 * 55,000 * City Center Englewood, S. Santa Fe at Hampden Ave., Englewood. . . . 15,000 * 35,000 * Crossing at Stonegate, Jordon Rd. at Lincoln Ave., Parker (37.5%). . 45,000 * 299,000 * MAINE, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,000 482,000 The Promenade, Essex at Summit, Lewiston . . . . . . . . . . . . . . 124,000 * 482,000 * MISSISSIPPI, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . 117,000 581,000 Southaven Commons, Goodman Rd. at Swinnea Rd., Southaven . . . . . . 117,000 581,000 ILLINOIS, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 103,000 503,000 Lincoln Place Centre, Hwy. 59, Fairview Heights. . . . . . . . . . . 103,000 503,000 NORTH CAROLINA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . 80,000 461,000 Parkway Pointe, Cory Parkway and S. R. 1011, Cary. . . . . . . . . . 80,000 461,000
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Building Name and Location Area Land Area ---------------------------------------------------------------------- --------- --------- INDUSTRIAL HOUSTON AND HARRIS COUNTY, TOTAL . . . . . . . . . . . . . . . . . . . 3,404,000 9,746,000 Beltway 8 Business Park, Beltway 8 at Petersham Dr.. . . . . . . . . . 158,000 499,000 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 (20%) . . . . . . . . . . 59,000 * 96,000 * Central Park North, W. Hardy Rd. at Kendrick Dr. . . . . . . . . . . . 155,000 466,000 Central Park Northwest VI, Central Pkwy. at Dacoma . . . . . . . . . . 175,000 518,000 Central Park Northwest VII, Central Pkwy. at Dacoma. . . . . . . . . . 103,000 283,000 Claywood Industrial Park, Clay at Hollister. . . . . . . . . . . . . . 330,000 1,761,000 Crosspoint Warehouse, Crosspoint . . . . . . . . . . . . . . . . . . . 73,000 179,000 Jester Plaza, West T.C. Jester . . . . . . . . . . . . . . . . . . . . 101,000 244,000 Kempwood Industrial, Kempwood Dr. at Blankenship Dr. . . . . . . . . . 113,000 327,000 Kempwood Industrial, Kempwood Dr. at Blankenship Dr. (20%) . . . . . . 42,000 * 106,000 * Lathrop Warehouse, Lathrop St. at Larimer St. (20%). . . . . . . . . . 51,000 * 87,000 * Levitz Furniture Warehouse, Loop 610 South . . . . . . . . . . . . . . 184,000 450,000 Navigation Business Park, Navigation at N. York (20%). . . . . . . . . 47,000 * 111,000 * Northway Park II, Loop 610 East at Homestead (20%) . . . . . . . . . . 61,000 * 149,000 * Park Southwest, Stancliff at Brooklet. . . . . . . . . . . . . . . . . 52,000 160,000 Railwood Industrial Park, Mesa at U.S. 90. . . . . . . . . . . . . . . 616,000 1,651,000 Railwood Industrial Park, Mesa at U.S. 90 (20%). . . . . . . . . . . . 99,000 * 213,000 * 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. . . . . . . . . . . . . . . 141,000 331,000 West-10 Business Center II, Wirt Rd. at I-10 . . . . . . . . . . . . . 83,000 149,000 West Loop Commerce Center, W. Loop N. at I-10. . . . . . . . . . . . . 34,000 91,000 610 and 11th St. Warehouse, Loop 610 at 11th St. . . . . . . . . . . . 105,000 202,000 610 and 11th St. Warehouse, Loop 610 at 11th St. (20%) . . . . . . . . 48,000 * 108,000 * TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL. . . . . . . . . . . . . 2,783,000 6,999,000 Randol Mill Place, Randol Mill Road, Arlington . . . . . . . . . . . . 55,000 178,000 Braker 2 Business Center, Kramer Ln. at Metric Blvd., Austin . . . . . 27,000 93,000 Corporate Center I & II, Putnam Dr. at Research Blvd., Austin. . . . . 117,000 326,000 Oak Hills Industrial Park, Industrial Oaks Blvd., Austin . . . . . . . 90,000 340,000 Rutland 10 Business Center, Metric Blvd. At Centimeter Circle, Austin. 54,000 139,000 Southpark A,B,C., East St. Elmo Rd. at Woodward St., Austin. . . . . . 78,000 238,000 Southpoint Service Center, Burleson at Promontory Point Dr., Austin. . 54,000 234,000 Walnut Creek Office Park, Cameron Rd., Austin. . . . . . . . . . . . . 34,000 122,000 Wells Branch Corporate Center, Wells Branch Pkwy., Austin. . . . . . . 60,000 183,000 Midway Business Center, Midway at Boyington, Carrollton. . . . . . . . 142,000 309,000 Manana Office Center, I-35 at Manana, Dallas . . . . . . . . . . . . . 223,000 473,000 Newkirk Service Center, Newkirk near N.W. Hwy., Dallas . . . . . . . . 106,000 223,000
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Building Name and Location Area Land Area -------------------------------------------------------------------- --------- ---------- INDUSTRIAL (CONT'D) TEXAS (EXCLUDING HOUSTON & HARRIS CO.), (CONT'D.) Northaven Business Center, Northaven Rd., Dallas . . . . . . . . . . 151,000 178,000 Northeast Crossing Off/Svc Ctr., East N.W. Hwy. at Shiloh, Dallas. . 79,000 199,000 Northwest Crossing Off/Svc Ctr., N.W. Hwy. at Walton Walker, Dallas. 127,000 290,000 Redbird Distribution Center, Joseph Hardin Drive, Dallas . . . . . . 111,000 234,000 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 Lane, Dallas. . . . . . . . 103,000 311,000 DFW-Port America, Port America Place, Grapevine. . . . . . . . . . . 46,000 110,000 Jupiter Service Center, Jupiter near Plano Pkwy., Plano. . . . . . . 78,000 234,000 Sherman Plaza Business Park, Sherman at Phillips, Richardson . . . . 100,000 312,000 Interwest Business Park, Alamo Downs Parkway, San Antonio. . . . . . 218,000 742,000 O'Connor Road Business Park, O'Connor Road, San Antonio. . . . . . . 150,000 459,000 Nasa One Business Center, Nasa Road One at Hwy. 3, Webster . . . . . 112,000 328,000 TENNESSEE, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 1,086,000 2,684,000 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 . . . 159,000 316,000 Outland Business Center, Outland Center Dr., Memphis . . . . . . . . 407,000 1,214,000 FLORIDA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000 1,535,000 Lakeland Industrial Ctr., I-4 at County Rd., Lakeland. . . . . . . . 600,000 1,535,000 GEORGIA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,000 965,000 6485 Crescent Dr., I-85 at Jimmy Carter Blvd., Norcross. . . . . . . 363,000 965,000 NEVADA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,000 162,000 East Sahara Off/Svc Ctr., E. Sahara Blvd., Las Vegas . . . . . . . . 66,000 162,000 OFFICE BUILDING HOUSTON & HARRIS COUNTY, TOTAL . . . . . . . . . . . . . . . . . . . 121,000 171,000 Citadel Plaza, N. Loop 610 at Citadel Plaza Dr.. . . . . . . . . . . 121,000 171,000 MULTI-FAMILY RESIDENTIAL TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL. . . . . . . . . . . . 273,000 595,000 River Pointe Apartments, River Pointe Drive at I-45, Conroe. . . . . 273,000 595,000
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Building Name and Location Area Land Area -------------------------------------------------------------------- --------- ---------- UNIMPROVED LAND HOUSTON & HARRIS COUNTY, TOTAL . . . . . . . . . . . . . . . . . . . 3,158,000 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 Mowery at Cullen . . . . . . . . . . . . . . . . . . . . . . . . . . 118,000 Northwest Fwy. at Gessner. . . . . . . . . . . . . . . . . . . . . . 422,000 Redman at W. Denham. . . . . . . . . . . . . . . . . . . . . . . . . 17,000 Sheldon at I-10. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000 W. Little York at N. Houston-Rosslyn . . . . . . . . . . . . . . . . 19,000 W. Loop N. at I-10 . . . . . . . . . . . . . . . . . . . . . . . . . 145,000 TEXAS (EXCLUDING HOUSTON & HARRIS CO.), TOTAL. . . . . . . . . . . . 1,785,000 McDermott Drive at Custer Rd., Allen . . . . . . . . . . . . . . . . 41,000 River Pointe Dr. at I-45, Conroe . . . . . . . . . . . . . . . . . . 186,000 Beach St. at Golden Triangle Blvd., Fort Worth . . . . . . . . . . . 340,000 US Hwy 380 (University Drive) and US Hwy 75, McKinney. . . . . . . . 135,000 F.M. 544 at Murphy Rd., Murphy . . . . . . . . . . . . . . . . . . . 206,000 Dalrock Rd. at Lakeview Parkway, Rowlett . . . . . . . . . . . . . . 346,000 Highway 287 at Bailey Boswell Rd., Saginaw . . . . . . . . . . . . . 176,000 Hillcrest, Sunshine at Quill, San Antonio. . . . . . . . . . . . . . 171,000 Hwy. 3 at Hwy. 1765, Texas City. . . . . . . . . . . . . . . . . . . 184,000 LOUISIANA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 5,276,000 Siegen Lane at Honore Ln., Baton Rouge . . . . . . . . . . . . . . . 821,000 U.S. Hwy. 171 at Parish, DeRidder. . . . . . . . . . . . . . . . . . 462,000 Ambassador Caffery Pkwy. at Congress St., Lafayette. . . . . . . . . 23,000 Ambassador Caffery Pkwy. at Kaliste Saloom Rd., Lafayette. . . . . . 1,031,000 Prien Lake Plaza, Lake Charles . . . . . . . . . . . . . . . . . . . 860,000 Manhattan Blvd. at Gretna Blvd., Harvey. . . . . . . . . . . . . . . 894,000 Woodland Hwy., Plaquemines Parish (5%) . . . . . . . . . . . . . . . 822,000 * 70th. St. at Youree Dr., Shreveport. . . . . . . . . . . . . . . . . 363,000 COLORADO, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,183,000 E. Alameda at I-225, Aurora. . . . . . . . . . . . . . . . . . . . . 1,130,000 * Smoky Hill Rd. at S. Picadilly St., Aurora . . . . . . . . . . . . . 108,000 * 2nd Ave. at Lowry Ave., Denver . . . . . . . . . . . . . . . . . . . 123,000 * Hwy. 86 at Elizabeth St., Elizabeth. . . . . . . . . . . . . . . . . 24,000 * Hampton at Santa Fe, Englewood . . . . . . . . . . . . . . . . . . . 192,000 * Jordan Rd. at Lincoln Ave., Parker (38%) . . . . . . . . . . . . . . 28,000 * 120th at Washington, Thornton. . . . . . . . . . . . . . . . . . . . 578,000 *
Table continued on next page Page 11
Building Name and Location Area Land Area -------------------------------------------------------------------- --------- ---------- UNIMPROVED LAND (CONT'D) ARIZONA, TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 735,000 Dysart Rd. at Rancho Santa Fe Blvd., Avondale. . . . . . . . . . . . 309,000 Broadway Rd. and Ellsworth Rd., Mesa . . . . . . . . . . . . . . . . 36,000 Power Rd. at McKellips Rd., Mesa . . . . . . . . . . . . . . . . . . 390,000 NEVADA, TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 508,000 Eastern Ave. at Horizon Ridge Pkwy., Henderson . . . . . . . . . . . 508,000
Table continued on next page Page 12
Building Name and Location Area Land Area -------------------------------------------------------------------- ----------- ------------ ALL PROPERTIES-BY LOCATION GRAND TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,699,000 149,335,000 Houston & Harris County . . . . . . . . . . . . . . . . . . . . . . 10,733,000 40,833,000 Texas (excluding Houston & Harris County) . . . . . . . . . . . . . 9,609,000 37,508,000 California. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,480,000 10,353,000 Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,396,000 9,203,000 Nevada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,676,000 7,992,000 Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,606,000 4,773,000 Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,558,000 11,882,000 Arizona . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,190,000 6,051,000 New Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952,000 4,024,000 Kansas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784,000 3,418,000 Oklahoma. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702,000 3,173,000 Arkansas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597,000 2,568,000 Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,000 965,000 Missouri. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338,000 1,101,000 Colorado. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291,000 3,464,000 Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,000 482,000 Mississippi . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,000 581,000 Illinois. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,000 503,000 North Carolina. . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 461,000 ALL PROPERTIES-BY CLASSIFICATION GRAND TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,699,000 149,335,000 Shopping Centers. . . . . . . . . . . . . . . . . . . . . . . . . . 27,003,000 112,833,000 Industrial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,302,000 22,091,000 Multi-Family Residential. . . . . . . . . . . . . . . . . . . . . . 273,000 595,000 Office Building . . . . . . . . . . . . . . . . . . . . . . . . . . 121,000 171,000 Unimproved Land . . . . . . . . . . . . . . . . . . . . . . . . . . 13,645,000 __________ Note: Total square footage includes 7,847,000 square feet of land leased and 450,000 square feet of building leased from others. * Denotes partial ownership. WRI's interest is 50% except where noted. The square feet figures represent WRI's proportionate ownership of the entire property.
Page 13 General. In 2001, no single property accounted for more than 2.7% of WRI's total assets or 2.0% of gross revenues. Four properties, in the aggregate, represented approximately 7.7% of our gross revenues for the year ended December 31, 2001; otherwise, none of the remaining properties accounted for more than 1.7% of our gross revenues during the same period. The weighted average occupancy rate for all of our improved properties as of December 31, 2001 was 92.2%. Substantially all of our properties are owned directly by WRI (subject in some cases to mortgages), although our interests in some properties are held indirectly through interests in joint ventures or under long-term leases. In our opinion, our properties are well maintained and in good repair, suitable for their intended uses, and adequately covered by insurance. Shopping Centers. As of December 31, 2001, WRI owned or operated under long-term leases, either directly or through its interests in joint ventures, 228 shopping centers with approximately 27.0 million square feet of building area. The shopping centers were located predominantly in Texas with other locations in California, Louisiana, Arizona, Nevada, Arkansas, New Mexico, Oklahoma, Tennessee, Kansas, Colorado, Missouri, Illinois, Florida, North Carolina, Georgia, Mississippi and Maine. WRI's shopping centers are primarily neighborhood and community shopping centers that 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 that 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. Our 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 that have existing populations sufficient to support retail activities of the types conducted in our centers. We have approximately 5,200 separate leases with 4,100 different tenants, including national and regional supermarket chains, drug stores, discount department stores, junior department stores, other nationally or regionally known stores and a great variety of other regional and local retailers. The large number of locations offered by WRI and the types of traditional anchor tenants help attract prospective new tenants. Some of the national and regional supermarket chains, which are tenants in our centers, include Albertson's, Fiesta, Smith's (Kroger), H.E.B., Kroger Company, Randall's Food Markets (Safeway), Fry's Food Stores (Kroger), Ralph's (Kroger), Raley's, Publix, King Soopers, Inc. (Kroger) and Safeway. In addition to these supermarket chains, WRI's nationally and regionally known retail store tenants include Eckerd, Walgreen and Osco (Albertson's) drugstores; Kmart discount stores; Bealls and Palais Royal junior department stores; Kohl's, Marshall's, Office Depot, Office Max, Staples, Babies 'R' Us, Ross, Stein Mart and T.J. Maxx off-price specialty stores; Luby's, Piccadilly and Furr's cafeterias; Academy sporting goods; CompUSA, Best Buy, Conn's and Circuit City electronics stores; FAO Schwarz toy store; Cost Plus Imports; Linens 'N Things; Barnes & Noble bookstore; Border's Books; Home Depot; Bed, Bath & Beyond; and the following restaurant chains: Arby's, Burger King, 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. We also lease space in 3,000 to 20,000 square foot areas to national chains such as the Limited Store, The Gap, One Price Stores, Old Navy, Eddie Bauer and Radio Shack. Other merchants in our portfolio include Al's Formal Wear, Anna's Linens, TGF Haircutters, Clothestime, Big Lots, Jason's Deli, Dollar General, Dress Barn, Family Dollar, Shoe Cents, Fashion Bug, Cloth World, Fox Photo, GNC, Goodyear Tire, Luther's Bar-B-Q, Mattress Firm, Fantastic Sam's, One Price Clothing Stores, Paper Warehouse, Rent-A-Center, Sally Beauty, Souper Salad, Black Eyed Pea, Men's Wearhouse and Tuesday Morning. The diversity of our tenant base is also evidenced in the fact that our largest tenant (Kroger) accounted for only 3.82% of rental revenue during 2001 including our share of revenue from unconsolidated joint ventures and excluding our partners share of revenue from consolidated joint ventures. WRI'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 25 years for tenant space over 10,000 square feet. Leases with primary lease terms in excess Page 14 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, with each of these periods 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 our 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 these items). They also provide for the payment of additional rentals based on a percentage of the tenants' sales. Utilities are generally paid directly by tenants except where common metering exists with respect to a center. In this case, WRI makes the payments for the utilities and is reimbursed by the tenants on a monthly basis. Generally, our leases prohibit the tenant from assigning or subletting its space. They also require the tenant to use its space for the purpose designated in its lease agreement and to operate its business on a continuous basis. Some of the lease agreements with major tenants contain modifications of these basic provisions in view of the financial condition, stability or desirability of those 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 that lease agreement. During 2001, WRI acquired 30 shopping centers for an aggregate purchase price of $479.3 million, which added 4.6 million square feet to our portfolio. In February, a community shopping center in Orlando, Florida was purchased for $54 million. Strategically located near downtown Orlando, Colonial Plaza contains 488,000 square feet of building area and is anchored by Barnes & Noble, Old Navy, Stein Mart, Linens 'N Things, Marshall's, Babies 'R' Us, Rhodes, Staples, Ross Dress For Less, Circuit City and Just For Feet. In April, we completed the acquisition of 19 supermarket-anchored shopping centers in California. Anchor merchants include the market's major supermarket companies such as Ralph's (Kroger), Albertson's, Safeway, Raley's and Food 4 Less (Fleming Company). Additionally, the properties include other well-known anchor retailers including Target, K-Mart, Home Depot and Walgreens. These properties added nearly 2.5 million square feet to the portfolio. In May, we acquired four supermarket-anchored shopping centers in the Memphis, Tennessee market area. Three of the centers are anchored by Kroger and the fourth is anchored by Seessel's (owned by Albertson's). Other anchor retailers include Walgreens and Stein Mart. These properties total nearly 617,000 square feet and were over 92% leased in the aggregate. In June, we purchased the Venice Pines Shopping Center in Venice, Florida. This 97,000 square foot center is anchored by Kash N Karry Supermarket and is 91% leased. Also in June, we purchased Parkway Pointe Shopping Center in Cary, North Carolina, a suburb of Raleigh. Anchored by Food Lion, Eckerd Drugs and Ace Hardware, the center was 95% leased upon acquisition. In August, we acquired the Boca Lyons Shopping Center in Boca Raton, Florida. This center is anchored by Ross Dress for Less and also includes Ethan Allen Furniture, Sun Trust Bank and World Savings. This 113,000 square foot center was 94% leased upon acquisition. In September, we purchased Winter Park Corners in Winter Park, Florida. This 103,000 square foot center is anchored by Whole Foods and includes Bank of America and Outback Steakhouse and is 100% leased. In October, we purchased the Sunset Point 19 Shopping Center in Clearwater, Florida. This 273,00 square foot shopping center is anchored by Publix, Bed, Bath & Beyond, Barnes & Noble, The Sports Authority and Staples. In November, Argyle Village, a 305,000 square foot shopping center was acquired in Jacksonville, Florida. This center is currently 97% leased and is anchored by Publix, JoAnn's Fabrics, T.J. Maxx and Baby Superstore, Inc. Page 15 In 2001, WRI acquired land at seven separate locations for the development of retail shopping centers. Two of these acquisitions were made in joint ventures with our development partner in Denver. These joint ventures are included in the consolidated financial statements of WRI as we exercise financial and operating control. Total expenditures on these seven projects during 2001 totaled $30.4 million. At the beginning of 2002, we have 20 retail developments underway which, upon completion, will represent an investment of approximately $223 million and will add 1.8 million square feet to the portfolio. These projects will come on-line beginning in early 2002 through mid 2003. Industrial Properties. At December 31, 2001, WRI owned 57 industrial projects. The acquisition of four industrial office service centers added 1.5 million square feet to our industrial portfolio and represented an investment of $39.3 million. We purchased one office/service facility in Austin, Texas, which added 90,000 square feet to the portfolio. With this acquisition, we now have eight industrial and two retail properties in Austin, comprising more than 902,000 square feet of building area. WRI also acquired three additional industrial properties totaling 1.4 million square feet. Office Building. We own 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 our headquarters. Other than WRI, the major tenant of the building is Bank of America, which currently occupies 9% of the office space. Multi-family Residential Properties. WRI completed development of a 300-unit luxury apartment complex within a multi-use master-planned project we developed in a suburb north of Houston. An unrelated Houston-based multi-family operator manages the property on our behalf. Unimproved Land. At December 31, 2001, WRI owned, directly or through its interest in a joint venture, 40 parcels of unimproved land aggregating approximately 13.6 million square feet of land area located in Texas, Louisiana, Arizona, Colorado, Illinois and Nevada. These properties include approximately 6.5 million square feet of land adjacent to certain of our existing developed properties, which may be used for expansion of these developments, as well as approximately 7.1 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 WRI intends to emphasize the development of these parcels for such purpose. ITEM 3. LEGAL PROCEEDINGS WRI is involved in various matters of litigation arising in the normal course of business. While WRI is unable to predict with certainty the amounts involved, WRI's management and counsel are of the opinion that, when such litigation is resolved, WRI's resulting liability, if any, will not have a material adverse effect on WRI's consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS None. Page 16 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON SHARES OF BENEFICIAL INTEREST AND RELATED SHAREHOLDER MATTERS WRI's common shares are listed and traded on the New York Stock Exchange under the symbol "WRI". The number of holders of record of our common shares as of February 26, 2002 was 3,313. The high and low sale prices per common share, 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 ------- ------- --------- 2001: Fourth . . . . . $ 50.40 $ 47.64 $ 0.79 Third. . . . . . 49.80 43.65 0.79 Second . . . . . 46.07 41.77 0.79 First. . . . . . 44.88 40.06 0.79 2000: Fourth . . . . . $ 45.00 $ 40.13 $ 0.75 Third. . . . . . 43.00 40.06 0.75 Second . . . . . 42.50 36.56 0.75 First. . . . . . 40.75 34.56 0.75
Page 17 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected consolidated financial data with respect to WRI 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, 2001 2000 1999 1998 1997 ----------- ----------- ----------- ----------- ----------- Revenues (primarily real estate rentals) . . . $ 314,892 $ 250,234 $ 224,095 $ 192,339 $ 167,856 ----------- ----------- ----------- ----------- ----------- Expenses: Depreciation and amortization. . . . . . . 68,316 54,597 48,668 41,051 36,995 Interest . . . . . . . . . . . . . . . . . 54,473 43,190 32,792 33,338 29,695 Other. . . . . . . . . . . . . . . . . . . 96,972 77,341 69,774 60,384 53,254 ----------- ----------- ----------- ----------- ----------- Total. . . . . . . . . . . . . . . . . 219,761 175,128 151,234 134,773 119,944 ----------- ----------- ----------- ----------- ----------- Income from operations . . . . . . . . . . . . 95,131 75,106 72,861 57,566 47,912 Equity in earnings of joint ventures . . . . . 5,547 4,143 3,654 4,469 4,249 Minority interest in income of partnerships. . (475) (630) (789) (606) (522) Gain on sales of property and securities . . . 8,339 382 20,594 328 3,327 Extraordinary charge (190) (1,392) ----------- ----------- ----------- ----------- ----------- Net income . . . . . . . . . . . . . . . . . . $ 108,542 $ 79,001 $ 96,130 $ 60,365 $ 54,966 =========== =========== =========== =========== =========== Net income available to common shareholders . . . . . . . . . . . . . . . . $ 88,839 $ 58,961 $ 76,537 $ 54,484 $ 54,966 =========== =========== =========== =========== =========== Cash flows from operations . . . . . . . . . . $ 146,659 $ 119,043 $ 113,351 $ 93,054 $ 85,846 =========== =========== =========== =========== =========== Per share data - basic: Income before extraordinary charge . . . . $ 2.77 $ 2.20 $ 2.88 $ 2.09 $ 2.06 Net income . . . . . . . . . . . . . . . . $ 2.77 $ 2.20 $ 2.87 $ 2.04 $ 2.06 Weighted average number of shares. . . . . 32,069 26,775 26,690 26,667 26,638 Per share data - diluted: Income before extraordinary charge . . . . $ 2.76 $ 2.19 $ 2.86 $ 2.08 $ 2.05 Net income . . . . . . . . . . . . . . . . $ 2.76 $ 2.19 $ 2.85 $ 2.03 $ 2.05 Weighted average number of shares. . . . . 32,246 26,931 26,890 26,869 26,771 Cash dividends per common share. . . . . . . . $ 3.16 $ 3.00 $ 2.84 $ 2.68 $ 2.56 Property (at cost) . . . . . . . . . . . . . . $2,352,393 $1,728,414 $1,486,224 $1,278,466 $1,092,869 Total assets . . . . . . . . . . . . . . . . . $2,095,747 $1,498,477 $1,312,746 $1,107,077 $ 943,486 Debt . . . . . . . . . . . . . . . . . . . . . $1,070,835 $ 792,353 $ 592,978 $ 513,361 $ 503,287 Other data: Funds from operations (1) Net income available to common shareholders . . . . . . . . . . . . . $ 88,839 $ 58,961 $ 76,537 $ 54,484 $ 54,966 Depreciation and amortization. . . . . . 67,803 55,344 49,256 41,580 37,544 Gain on sales of property and securities . . . . . . . . . . . . (9,795) (382) (20,596) (885) (3,327) Extraordinary charge . . . . . . . . . . 190 1,392 ----------- ----------- ----------- ----------- ----------- Total. . . . . . . . . . . . . . . . . $ 146,847 $ 113,923 $ 105,387 $ 96,571 $ 89,183 =========== =========== =========== =========== =========== __________ (1) The Board of Governors of the National Association of Real Estate Investment Trusts defines funds from operations as net income (loss) computed in accordance with generally accepted accounting principles, excluding gains or losses from sales of property, plus real estate related depreciation Page 18 and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In addition, NAREIT recommends that extraordinary items not be considered in arriving at FFO. We calculate FFO in a manner consistent with the NAREIT definition. Most industry analysts and equity REITs, including WRI, believe FFO is an alternative measure of performance relative to other REITs. There can be no assurance that FFO presented by WRI is comparable to similarly titled measures of other REITs. FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing, or financing activities as a measure of liquidity. FFO does not reflect working capital changes, cash expenditures for capital improvements, or principal payments on indebtedness.
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. The results of operations and financial condition of the company, as reflected in the accompanying statements and related footnotes, is subject to managements' evaluation and interpretation of business conditions, retailer performance, changing capital market conditions and other factors which could affect the ongoing viability of the company's tenancy. Management believes the most critical accounting policies in this regard are the estimation of an allowance for doubtful receivables (more specifically the allowance for straight-line receivables) and the determination of reserves for self-insured general liability insurance. Both of these issues require management to make judgments that are subjective in nature, however, management is able to consider and assess a significant amount of historical data and current market data in arriving at reasonable estimates. Weingarten Realty Investors owned or operated under long-term leases, either directly or through its interest in joint ventures, 228 shopping centers, 57 industrial properties, one multi-family residential project and one office building at December 31, 2001. Of our 287 developed properties, 179 are located in Texas (including 93 in Houston and Harris County). Our remaining properties are located in California (19), Louisiana (15), Arizona (13), Nevada (10), Florida (9), Tennessee (8), Arkansas (6), New Mexico (6), Colorado (6), Kansas (5), Oklahoma (4), Missouri (2), Illinois (1), North Carolina (1), Georgia (1), Mississippi (1) and Maine (1). WRI has nearly 5,200 leases and 4,100 different tenants. Leases for our properties range from less than a year for smaller spaces to over 25 years for larger tenants; leases generally include minimum lease payments and reimbursements of property operating expenses and for an amount based on a percentage of the tenants' sales. The majority of our anchor tenants are supermarkets, drugstores, value-oriented apparel and discount stores and other retailers, which generally sell basic necessity-type items. CAPITAL RESOURCES AND LIQUIDITY WRI anticipates that cash flows from operating activities will continue to provide adequate capital for all dividend payments in accordance with REIT requirements. Cash on hand, internally-generated cash flow, borrowings under our existing credit facilities, issuance of unsecured debt and the use of project financing, as well as other debt and equity alternatives, will provide the necessary capital to maintain and operate our properties, refinance debt maturities and achieve planned growth. Cash flow from operating activities as reported in the Statements of Consolidated Cash Flows increased to $146.7 million in 2001 from $119.0 million in 2000 and $113.4 million for 1999. During 2001, WRI invested $518.6 million through the acquisition of operating properties. We acquired 30 shopping centers, adding 4.6 million square feet to our portfolio and representing an investment of $479.3 million. The acquisition of four industrial properties added 1.5 million square feet to our industrial portfolio and represented an investment of $39.3 million. In 2001, WRI acquired land at seven separate locations for the development of retail shopping centers. Two of these acquisitions were made in joint ventures with our development partner in Denver. These joint ventures are included in the consolidated financial statements of WRI as we exercise financial and operating control. We also had 13 projects which were under development at the beginning of 2001. We invested $76.9 million in these projects during 2001. At the beginning of 2002, we have 20 retail developments underway which, upon completion, will represent an investment of approximately $223 million and will add 1.8 million square feet to the portfolio. These projects will come on-line beginning in early 2002 through mid 2003. We expect to invest approximately $89 million in these properties during 2002 and 2003. Page 19 Capitalized expenditures for acquisitions, new development and additions to the existing portfolio were, in millions, $632.2, $240.0 and $213.2 during 2001, 2000 and 1999, respectively. All of the acquisitions and new development during 2001 were either initially financed under WRI's revolving credit facilities or funded with excess cash flow from our existing portfolio of properties. WRI's share of capitalized expenditures for unconsolidated joint ventures or partnerships, including the purchase of properties by newly-formed joint ventures or partnerships, were, in millions: $.7, $20.2 and $11.1 during 2001, 2000 and 1999. Common and preferred dividends increased to $123.0 million in 2001, compared to $100.4 million in 2000 and $95.4 million in 1999. WRI satisfied its REIT requirement of distributing at least 90% (95% in 2000 and 1999) of ordinary taxable income for the year ended December 31, 2001. Our dividend payout ratio on common equity for 2001, 2000 and 1999 approximated 70.4%, 70.5% and 71.9%, respectively, based on funds from operations for the applicable year. In January 2001, WRI sold 4.5 million common shares of beneficial interest in a secondary public offering. In February, the underwriters exercised their over-allotment option and purchased an additional 200,000 shares. Net proceeds to WRI totaled $188.1 million based on a price of $42.19 per share. In May 2001, we issued 690,000 common shares of beneficial interest in a secondary public offering. Net proceeds totaled $27.9 million based on a price of $42.85 per share. In November 2001, we issued 1.8 million common shares of beneficial interest. Net proceeds totaled $86.0 million based on a price of $50.20 per share. Proceeds from these offerings were used to pay down amounts outstanding under our $350 million revolving credit facility. In February 2002, we issued 198,098 common shares of beneficial interest. Net proceeds to WRI totaled $9.5 million based on a price of $50.48 per share and will be used to pay down amounts outstanding under our $350 million revolving credit facility. In February 2002, a three-for-two stock split was declared for shareholders of record on April 1, 2002, payable April 15, 2002. WRI has a $350 million unsecured revolving credit facility with a syndicate of banks. This facility will mature in November of 2003 and contains a one-year extension, at our sole option. The facility bears interest at a rate of LIBOR plus 50 basis points. Additionally, the facility includes a competitive bid option that allows WRI to hold auctions at lower pricing for short-term funds for up to $175 million. WRI also has an unsecured and uncommitted overnight credit facility totaling $20 million to be used for cash management purposes. WRI has two interest rate swap contracts with an aggregate notional amount of $20 million which expire in June 2004 and fix interest rates on a like amount of the $350 million revolver at 7.7%. We have determined these swap agreements are highly effective in offsetting future variable interest cash flows of the revolving credit debt and, accordingly, they have been designated as cash flow hedges. An additional interest rate swap contract with a notional amount of $20 million expired in May of 2001. On July 5, 2001, we entered into a $50 million unsecured term loan with two banks that also participate in our $350 million revolving credit facility. The terms of the $50 million loan, including pricing, are substantially identical to those of our $350 million revolving credit facility, and it matures on the same date. On July 12, 2001, we sold $200 million of unsecured notes with a coupon of 7%. Net proceeds from the offering totaled $198.3 million and were used to pay down amounts outstanding under our $350 revolving credit facility. Concurrent with the sale of the 7% notes, we settled our $188.7 million forward-starting interest rate swap contracts, resulting in a gain of $1.6 million. These swap contracts, which we entered into on June 25, 2001, had been designated as a cash flow hedge of forecasted interest payments for fixed-rate notes to be issued in future periods, and accordingly, the gain is being amortized over the life of the 7% notes. In July 2000, the Company issued a two-year $25 million variable-rate, unsecured medium term note that bears interest at 50 basis points over LIBOR and a three-year $25 million variable-rate note that bears interest at 60 basis points over LIBOR. At the time of issuance, the interest rates were 7.23% and 7.33%, respectively. During November and December of 2000, we entered into interest rate swap agreements which fixed the interest rates on these notes. Page 20 On July 26, 2001, the Company entered into eleven interest rate swaps with an aggregate notional amount of $107.5 million that convert fixed interest payments at rates from 6.35% to 7.35% to variable interest payments. These interest rate swaps have been designated as fair value hedges. We have determined that these contracts will be highly effective in limiting our risk of changes in the fair value of the fixed-rate notes attributable to changes in variable interest rates. Subsequent to year end, we completed two medium term note transactions totaling $65 million which included a twelve-year $35 million note bearing interest at 6.7% and a twelve-year $30 million note bearing interest at 6.5%. Total debt outstanding increased to $1.1 billion at December 31, 2001 from $792.4 million at December 31, 2000, primarily to fund acquisitions and new development. Total debt at December 31, 2001 includes $780.5 million on which interest rates are fixed, including the net effect of our $177.5 million of interest rate swaps, and $290.3 million which bears interest at variable rates. Additionally, debt totaling $272.3 million is secured by operating properties while the remaining $798.5 million is unsecured. In conjunction with acquisitions completed during 2001, we assumed $165.0 million of non-recourse debt secured by the related properties. The weighted average interest rate on this debt is 8.22%, and the average remaining life is 7.8 years. Additionally, non-recourse debt secured by retail properties held by joint ventures in which we participate was issued during 2001, our share of which totaled $5.4 million. The weighted average interest rate on our share of this debt is 7.3%. We have a $400 million shelf registration statement on file under which $18.0 million was available after the sale of $65 million medium term notes in early 2002. In March 2001, we filed a $500 million shelf registration statement, of which $398.9 million is currently available. WRI will continue to closely monitor both the debt and equity markets and carefully consider its available alternatives, including both public and private placements. Numerous retailer bankruptcies across the country have been announced. WRI has four Service Merchandise and seven Kmart stores. The communication and timing of store closings varies by retailer, however, we believe the effect of these bankruptcies and other known retailer failures will reduce our net operating income in 2002 by approximately $1.7 million. With the significant diversification of WRI's tenant base, we would not expect further retailer bankruptcies to have a significant effect on the liquidity of our company. RESULTS OF OPERATIONS Rental revenues increased 27.0%, or $65.8 million, from $243.6 million in 2000 to $309.5 million in 2001 and by 10.5%, or $23.1 million, from $220.6 million in 1999. Of these increases, property acquisitions and new development contributed $61.1 million in 2001 and $21.5 million in 2000. The remaining portion of these increases is due to activity at our existing properties. Occupancy of our shopping centers decreased to 92.8% at December 31, 2001 from 93.4% at the end of 2000. Occupancy of our industrial portfolio decreased from 91.2% at the end of 2000 to 90.1% at December 31, 2001, and occupancy of the total portfolio decreased from 93.0% to 92.2% at year-end. In 2001, we completed 966 renewals or new leases comprising 4.9 million square feet at an average rental rate increase of 10.4%. Net of the amortized portion of capital costs for tenant improvements, the increase averaged 7.8%. Occupancy of our total portfolio increased from 91.3% at the end of 1999 to 93.0% at the end of 2000. In 2000, we completed 1,008 renewals or new leases comprising 4.9 million square feet at an average rental rate increase of 10.0%. Net of the amortized portion of capital costs for tenant improvements, the increase averaged 6.4%. Interest income totaled $1.2 million in 2001, $3.5 million in 2000 and $1.8 million in 1999. The increase in interest income from 1999 to 2000 was due to the funding of interim loans to our unconsolidated joint ventures, pending the completion of permanent financing with third parties. Interest income decreased in 2001 as a significant amount of permanent financing was finalized during 2000. Page 21 Direct costs and expenses of operating our properties (i.e., operating and ad valorem tax expenses) increased to $87.4 million in 2001 from $69.1 million in 2000 and $62.3 million in 1999. 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 2001, 2000 and 1999. Bad debt expense increased from $.2 million in 1999 and $.9 million in 2000 to $2.6 million in 2001 due to tenant bankruptcies in 2000 and 2001, primarily Kmart, Service Merchandise, Weiners and Stage Stores. As a result of these bankruptcies, the allowance for doubtful accounts increased from $1.9 million in 2000 to $2.9 million in 2001. Depreciation and amortization have increased to $68.3 million in 2001 from $54.6 million in 2000 and $48.7 million in 1999, also as a result of the properties acquired and developed during these periods. General and administrative expense has increased to $9.6 million in 2001 from $8.2 million in 2000 and $7.5 million in 1999. These increases are due to normal compensation increases as well as increases in staffing necessitated by the growth in the portfolio. Gross interest costs, before capitalization of interest to development projects, increased from $47.4 million in 2000 to $64.2 million in 2001. This increase in interest cost was due mainly to an increase in the average debt outstanding from $652.9 million for 2000 to $927.6 million for 2001. The weighted-average interest rate decreased from 7.23% in 2000 to 6.89% in 2001. Interest expense, net of amounts capitalized, increased $11.3 million from 2000. The amount of interest capitalized increased to $9.7 million in 2001 from $4.2 million in 2000 due to an increase in the amount of development activity during the year. Comparing 2000 to 1999, gross interest costs increased from $35.8 million in 1999 to $47.4 million in 2000. This was due to an increase in the average debt outstanding from $499.7 million in 1999 to $652.9 million in 2000. The weighted-average interest rate increased between the two periods from 7.14% in 1999 to 7.23% in 2000. Interest expense, net of amounts capitalized, increased $10.4 million from 1999. The amount of interest capitalized increased to $4.2 million in 2000 from $3.0 million in 1999 due to an increase in the amount of development activity during the year. The gain on sale of $8.3 million in 2001 was due primarily to the sale of nine properties. The gain on sale of $20.6 million in 1999 was due primarily to the sale of 28.5 acres of undeveloped land and an 80% interest in certain industrial properties. FUNDS FROM OPERATIONS The Board of Governors of the National Association of Real Estate Investment Trusts defines funds from operations as net income (loss) computed in accordance with generally accepted accounting principles, excluding gains or losses from sales of property, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In addition, NAREIT recommends that extraordinary items not be considered in arriving at FFO. We calculate FFO in a manner consistent with the NAREIT definition. Most industry analysts and equity REITs, including WRI, believe FFO is an alternative measure of performance relative to other REITs. There can be no assurance that FFO presented by WRI is comparable to similarly titled measures of other REITs. FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing, or financing activities as a measure of liquidity. FFO does not reflect working capital changes, cash expenditures for capital improvements, or principal payments on indebtedness. Page 22 Funds from operations is calculated as follows (in thousands):
2001 2000 1999 ---------- ---------- ---------- Net income available to common shareholders . . . . . . . . . . . . . . . $ 88,839 $ 58,961 $ 76,537 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 65,940 53,624 48,099 Depreciation and amortization of unconsolidated joint ventures. . . . . . 1,863 1,720 1,157 Gain on sales of property . . . . . . . . . . . . . . . . . . . . . . . . (8,368) (382) (20,594) Gain on sales of property of unconsolidated joint ventures. . . . . . . . (1,427) (2) Extraordinary charge - early retirement of debt . . . . . . . . . . . . . 190 ---------- ---------- ---------- Funds from operations . . . . . . . . . . . . . . . . . . . 146,847 113,923 105,387 Funds from operations attributable to operating partnership units . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 305 318 ---------- ---------- ---------- Funds from operations assuming conversion of OP units . . . $ 147,027 $ 114,228 $ 105,705 ========== ========== ========== Weighted average shares outstanding - basic . . . . . . . . . . . . . . . 32,069 26,775 26,690 Effect of dilutive securities: Share options and awards. . . . . . . . . . . . . . . . . . . . . . 126 52 58 Operating partnership units . . . . . . . . . . . . . . . . . . . . 51 104 142 ---------- ---------- ---------- Weighted average shares outstanding - diluted . . . . . . . . . . . . . . 32,246 26,931 26,890 ========== ========== ==========
EFFECTS OF INFLATION The rate of inflation was relatively unchanged in 2001. WRI 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 WRI 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 WRI's leases are for terms of less than ten years, which allows WRI to adjust rental rates to changing market conditions when the leases expire. Most of WRI'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 WRI's operating results. NEW ACCOUNTING PRONOUNCEMENTS On January 1, 2001, WRI adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments. Specifically, SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either shareholders' equity or net income depending on whether the derivative instruments qualify as a hedge for accounting purposes and, if so, the nature of the hedging activity. WRI hedges the future cash flows of debt transactions principally through interest rate swaps with major financial institutions. WRI has four interest rate swap contracts with an aggregate notional amount of $70 million that convert variable interest payments to fixed interest payments at rates from 6.80% to 7.87%. These swaps have been designated and qualify as cash flow hedges. We have determined these swap agreements are highly effective in offsetting future variable interest cash flows of the related debt instruments. As of January 1, 2001, the adoption of the new standard resulted in a cumulative transition adjustment of $1.9 million to accumulated other comprehensive loss, a component of shareholders' equity, and a corresponding liability of the same amount. For the year ended December 31, 2001, the decrease in fair market value of our interest rate swaps was $2.6 million and was recorded in accumulated other comprehensive loss and other liabilities. Page 23 On June 25, 2001, WRI entered into two forward-starting interest rate swap contracts with a notional amount of $188.7 million. These contracts were designated as a cash flow hedge of forecasted interest payments for $200 million of unsecured notes with a coupon of 7% that were sold on July 12, 2001. Concurrent with the sale of the 7% notes, we settled our $188.7 million forward-starting interest rate swap contracts, resulting in a gain of $1.6 million recorded in accumulated other comprehensive income. This $1.6 million gain is being amortized to earnings over the life of the 7% notes. On July 26, 2001, the Company entered into eleven interest rate swap contracts with an aggregate notional amount of $107.5 million that convert fixed interest payments at rates from 6.35% to 7.35% to variable interest payments. These interest rate swaps have been designated as fair value hedges. We have determined that these contracts will be highly effective in limiting our risk of changes in the fair value of the fixed-rate notes attributable to changes in variable interest rates. For the year ended December 31, 2001, the increase in fair market value of the eleven interest rate swaps was $1.0 million and was recorded in other assets and fixed-rate debt. Within the next twelve months, the Company expects to reclassify to earnings as interest expense approximately $2.6 million of the current balance held in accumulated other comprehensive loss. With respect to fair value hedges, both changes in fair market value of the derivative hedging instrument and changes in the fair value of the hedged item will be recorded in earnings each reporting period. These amounts should completely offset with no impact to earnings, except for the portion of the hedge that proves to be ineffective, if any. In July 2000, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on EITF Issue No. 00-1,"Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures." This consensus requires that the proportionate share method of presenting balance sheet and income statement information for partnerships and other ventures in which entities have joint interest and control be discontinued, except in limited circumstances. WRI was required to conform to the guidance provided in this Issue effective December 31, 2000. Accordingly, the consolidated financial statements for all periods prior to December 31, 2000 presented in this Form 10-K have been restated to conform to the revised presentation. In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of SFAS No. 143 will not have a material impact on our financial position, results of operations, or cash flows. In August 2001, FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 addresses accounting and reporting for the impairment or disposal of a segment of a business. The adoption of SFAS No. 144 will not have a material impact on our financial position, results of operations, or cash flows. FORWARD-LOOKING STATEMENTS This Annual Report includes certain forward-looking statements reflecting WRI'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 WRI's expectations will be realized. Page 24 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK WRI uses fixed and floating-rate debt to finance its capital requirements. These transactions expose WRI to market risk related to changes in interest rates. Derivative financial instruments are used to manage a portion of this risk, primarily interest rate swap agreements with major financial institutions. These swap agreements expose WRI to credit risk in the event of non-performance by the counter-parties to the swaps. We do not engage in the trading of derivative financial instruments in the normal course of business. At December 31, 2001, WRI had fixed-rate debt of $780.5 million and variable-rate debt of $290.3 million, after adjusting for the effect of interest rate swaps. We also had variable-rate notes receivable from joint venture partners totaling $32.4 million at year-end. In the event interest rates were to increase 100 basis points, net income, funds from operations and future cash flows would decrease $2.9 million based upon the variable-rate debt and notes receivable outstanding at December 31, 2001. Page 25 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, 2001 and 2000, and the related statements of consolidated income and comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. 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, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. 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 March 1, 2002 Page 26
STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Years Ended December 31, ---------------------------------- 2001 2000 1999 ---------- ---------- ---------- Revenues: Rentals. . . . . . . . . . . . . . . . . . . . . . . $ 309,457 $ 243,633 $ 220,552 Interest income .. . . . . . . . . . . . . . . . . . 1,167 3,538 1,776 Other. . . . . . . . . . . . . . . . . . . . . . . . 4,268 3,063 1,767 ---------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . 314,892 250,234 224,095 ---------- ---------- ---------- Expenses: Depreciation and amortization. . . . . . . . . . . . 68,316 54,597 48,668 Interest . . . . . . . . . . . . . . . . . . . . . . 54,473 43,190 32,792 Operating. . . . . . . . . . . . . . . . . . . . . . 48,459 37,689 34,480 Ad valorem taxes . . . . . . . . . . . . . . . . . . 38,943 31,439 27,781 General and administrative . . . . . . . . . . . . . 9,570 8,213 7,513 ---------- ---------- ---------- Total. . . . . . . . . . . . . . . . . . 219,761 175,128 151,234 ---------- ---------- ---------- Income Before Equity in Earnings of Joint Ventures, Minority Interest in Income of Partnerships, Gain on Sales of Property and Extraordinary Charge. . . 95,131 75,106 72,861 Equity in Earnings of Joint Ventures . . . . . . . . . 5,547 4,143 3,654 Minority Interest in Income of Partnerships. . . . . . (475) (630) (789) Gain on Sales of Property. . . . . . . . . . . . . . . 8,339 382 20,594 ---------- ---------- ---------- Income Before Extraordinary Charge . . . . . . . . . . 108,542 79,001 96,320 Extraordinary Charge (early retirement of debt). . . . (190) ---------- ---------- ---------- Net Income . . . . . . . . . . . . . . . . . . . . . . $ 108,542 $ 79,001 $ 96,130 ========== ========== ========== Net Income Available to Common Shareholders. . . . . . $ 88,839 $ 58,961 $ 76,537 ========== ========== ========== Net Income Per Common Share - Basic: Income Before Extraordinary Charge . . . . . . . $ 2.77 $ 2.20 $ 2.88 Extraordinary Charge . . . . . . . . . . . . . . (.01) ---------- ---------- ---------- Net Income . . . . . . . . . . . . . . . . . . . $ 2.77 $ 2.20 $ 2.87 ========== ========== ========== Net Income Per Common Share - Diluted: Income Before Extraordinary Charge . . . . . . . $ 2.76 $ 2.19 $ 2.86 Extraordinary Charge . . . . . . . . . . . . . . (.01) ---------- ---------- ---------- Net Income . . . . . . . . . . . . . . . . . . . $ 2.76 $ 2.19 $ 2.85 ========== ========== ========== Net Income . . . . . . . . . . . . . . . . . . . . . . $ 108,542 $ 79,001 $ 96,130 Other Comprehensive Loss: Cumulative effect of change in accounting principle (SFAS 133) on other comprehensive loss . . . . . . (1,877) Unrealized derivative loss on interest rate swaps. . (2,579) Unrealized derivative gain on forward-starting interest rate swaps. . . . . . . . . . . . . . . . 1,520 ---------- ---------- ---------- Other Comprehensive Loss . . . . . . . . . . . . . . . (2,936) ---------- ---------- ---------- Comprehensive Income . . . . . . . . . . . . . . . . . $ 105,606 $ 79,001 $ 96,130 ========== ========== ==========
See Notes to Consolidated Financial Statements. Page 27
CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) December 31, ------------- ------------ 2001 2000 ------------ ------------ ASSETS Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,352,393 $ 1,728,414 Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . (402,958) (362,267) ------------ ------------ Property - net. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,949,435 1,366,147 Investment in Real Estate Joint Ventures. . . . . . . . . . . . . . . . . 25,742 26,848 ------------ ------------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,975,177 1,392,995 ------------ ------------ Notes Receivable from Real Estate Joint Ventures and Partnerships . . . . 6,068 15,772 Unamortized Debt and Lease Costs. . . . . . . . . . . . . . . . . . . . . 42,755 36,970 Accrued Rent and Accounts Receivable (net of allowance for doubtful accounts of $2,926 in 2001 and $1,884 in 2000). . . . . . . . . . . . . 32,382 24,145 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . 12,434 7,321 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,931 21,274 ------------ ------------ Total. . . . . . . . . . . . . . . . . . . . . $ 2,095,747 $ 1,498,477 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,070,835 $ 792,353 Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . . 80,412 63,742 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,542 8,146 ------------ ------------ Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,170,789 864,241 ------------ ------------ Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,886 4,369 ------------ ------------ 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 90 7.125% Series B cumulative redeemable preferred shares of beneficial interest; 3,600 shares issued and 3,526 and 3,552 shares outstanding in 2001 and 2000; liquidation preference $25 per share. . . . . . . . . . . . . . . . . . . . 106 107 7.0% Series C cumulative redeemable preferred shares of beneficial interest; 2,300 shares issued and 2,256 and 2,266 shares outstanding in 2001 and 2000; liquidation preference $50 per share. . . . . . . . . . . . . . . . . . . . 67 68 Common Shares of Beneficial Interest - par value, $.03 per share; shares authorized: 150,000; shares issued and outstanding: 34,347 in 2001 and 26,921 in 2000 . . . . . . . . . . . . . . . . . 1,029 807 Capital Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,066,757 758,363 Accumulated Dividends in Excess of Net Income . . . . . . . . . . . . (144,041) (129,568) Accumulated Other Comprehensive Loss. . . . . . . . . . . . . . . . . (2,936) ------------ ------------ Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . . 921,072 629,867 ------------ ------------ Total. . . . . . . . . . . . . . . . . . . . . $ 2,095,747 $ 1,498,477 ============ ============
See Notes to Consolidated Financial Statements. Page 28
STATEMENTS OF CONSOLIDATED CASH FLOWS (AMOUNTS IN THOUSANDS) Years Ended December 31, ---------------------------------- 2001 2000 1999 ---------- ---------- ---------- Cash Flows from Operating Activities: Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 108,542 $ 79,001 $ 96,130 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . 68,316 54,597 48,668 Equity in earnings of joint ventures. . . . . . . . . (5,547) (4,143) (3,654) Minority interest in income of partnerships . . . . . 475 630 789 Gain on sales of property . . . . . . . . . . . . . . (8,339) (382) (20,594) Extraordinary charge (early retirement of debt) . . . 190 Changes in accrued rent and accounts receivable . . . (12,680) (5,071) (4,265) Changes in other assets . . . . . . . . . . . . . . . (22,869) (15,667) (13,076) Changes in accounts payable and accrued expenses. . . 17,307 5,505 6,823 Other, net. . . . . . . . . . . . . . . . . . . . . . 1,454 4,573 2,340 ---------- ---------- ---------- Net cash provided by operating activities . . 146,659 119,043 113,351 ---------- ---------- ---------- Cash Flows from Investing Activities: Investment in properties. . . . . . . . . . . . . . . . . (471,174) (228,068) (185,667) Notes receivable: Advances. . . . . . . . . . . . . . . . . . . . . . . (2,895) (37,818) (20,602) Collections . . . . . . . . . . . . . . . . . . . . . 7,943 74,420 9,964 Proceeds from sales and disposition of property . . . . . 23,146 3,368 15,010 Proceeds from sales of marketable debt securities . . . . 15,000 Real estate joint ventures and partnerships: Investments . . . . . . . . . . . . . . . . . . . . . (1,011) (12,475) (3,368) Distributions . . . . . . . . . . . . . . . . . . . . 4,774 3,241 4,057 Other, net. . . . . . . . . . . . . . . . . . . . . . . . (514) (4) ---------- ---------- ---------- Net cash used in investing activities . . . . . . . . (439,217) (197,846) (165,610) ---------- ---------- ---------- Cash Flows from Financing Activities: Proceeds from issuance of: Debt. . . . . . . . . . . . . . . . . . . . . . . . . 442,650 211,804 125,898 Common shares of beneficial interest. . . . . . . . . 307,722 1,398 546 Preferred shares of beneficial interest . . . . . . . 111,263 Principal payments of debt. . . . . . . . . . . . . . . . (329,824) (28,161) (85,532) Common and preferred dividends paid . . . . . . . . . . . (123,015) (100,376) (95,397) Other, net. . . . . . . . . . . . . . . . . . . . . . . . 138 (3,144) (628) ---------- ---------- ---------- Net cash provided by financing activities . . . . . . 297,671 81,521 56,150 ---------- ---------- ---------- Net increase in cash and cash equivalents . . . . . . . . . . 5,113 2,718 3,891 Cash and cash equivalents at January 1. . . . . . . . . . . . 7,321 4,603 712 ---------- ---------- ---------- Cash and cash equivalents at December 31. . . . . . . . . . . $ 12,434 $ 7,321 $ 4,603 ========== ========== ==========
See Notes to Consolidated Financial Statements. Page 29
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY (AMOUNTS IN THOUSANDS) Years Ended December 31, 2001, 2000 and 1999 Preferred Common Accumulated Accumulated Shares of Shares of Dividends in Deferred Other Beneficial Beneficial Capital Excess of Compensation Comprehensive Interest Interest Surplus Net Income Obligation Loss ------------ ----------- ----------- -------------- -------------- --------------- Balance, January 1, 1999. . . . . . . . . $ 198 $ 800 $ 641,180 $ (108,926) $ (73) Net income. . . . . . . . . . . . . . . 96,130 Issuance of Series C preferred shares . 69 111,119 Shares issued under benefit plans . . . 1 883 Dividends declared - common shares. . . (75,804) Dividends declared - preferred shares . (19,593) Redemption of Series C preferred shares (152) Deferred compensation obligation. . . . 70 ------------ ----------- ----------- -------------- -------------- --------------- Balance, December 31, 1999. . . . . . . . 267 801 753,030 (108,193) (3) Net income. . . . . . . . . . . . . . . 79,001 Shares issued under benefit plans . . . 2 1,783 Shares issued in exchange for interest in limited partnerships. . . . . . . 2 3,554 Dividends declared - common shares. . . (80,336) Dividends declared - preferred shares . (20,040) Redemption of Series B preferred shares (1) 1 (2) Redemption of Series C preferred shares (1) 1 (2) Deferred compensation obligation. . . . 3 ------------ ----------- ----------- -------------- -------------- --------------- Balance, December 31, 2000. . . . . . . . 265 807 758,363 (129,568) Net income. . . . . . . . . . . . . . . 108,542 Issuance of common stock. . . . . . . . 216 301,824 Shares issued under benefit plans . . . 4 6,571 Dividends declared - common shares. . . (103,312) Dividends declared - preferred shares . (19,703) Redemption of Series B preferred shares (1) 1 Redemption of Series C preferred shares (1) 1 (1) Other Comprehensive Loss. . . . . . . . $ (2,936) ------------ ----------- ----------- -------------- -------------- --------------- Balance, December 31, 2001. . . . . . . . $ 263 $ 1,029 $1,066,757 $ (144,041) $ - $ (2,936) ============ =========== =========== ============== ============== ===============
See Notes to Consolidated Financial Statements. Page 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Weingarten Realty Investors, 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 60% of the square footage of WRI's portfolio is in Texas, with the remainder located primarily in the southern half of the United States. WRI's major tenants include supermarkets, discount retailers, drugstores and other merchants who generally sell basic, necessity-type commodities. WRI currently operates and intends to operate in the future as a real estate investment trust. Basis of Presentation The consolidated financial statements include the accounts of WRI and its subsidiaries, as well as 100% of the accounts of joint ventures and partnerships over which WRI exercises financial and operating control and the related amounts of minority interests. All significant intercompany balances and transactions have been eliminated. Investments in joint ventures and partnerships where WRI has the ability to exercise significant influence but does not exercise financial and operating control are accounted for using the equity method. In July 2000, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on EITF Issue No. 00-1, "Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures." This consensus requires that the proportionate share method of presenting balance sheet and income statement information for partnerships and other ventures in which entities have joint interest and control be discontinued, except in limited circumstances. WRI was required to conform with the guidance provided in this Issue effective December 31, 2000. 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 was estimated and accrued ratably over the year in 1999. Beginning January 1, 2000, such revenue was recognized only after the tenant exceeded their sales breakpoint, in accordance with the SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." Implementation of this bulletin reduced revenue by an estimated $.6 million in 2000 and had no effect on 2001. 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 where the betterment extends the useful life of the asset 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. WRI's properties are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. In such an event, a comparison is made of the current and projected operating cash flows of each such property into the foreseeable future on an undiscounted basis to the carrying amount of such property. Such carrying amount would be adjusted, if necessary, to estimated fair value to reflect an impairment in the value of the asset. 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. Page 31 Deferred Charges 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. 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):
2001 2000 1999 --------- --------- --------- Numerator: Net income available to common shareholders - basic. . . . . $ 88,839 $ 58,961 $ 76,537 Income attributable to operating partnership units . . . . . 83 131 141 --------- --------- --------- Net income available to common shareholders - diluted. . . . $ 88,922 $ 59,092 $ 76,678 ========= ========= ========= Denominator: Weighted average shares outstanding - basic. . . . . . . . . 32,069 26,775 26,690 Effect of dilutive securities: Share options and awards . . . . . . . . . . . . . . . . 126 52 58 Operating partnership units. . . . . . . . . . . . . . . 51 104 142 --------- --------- --------- Weighted average shares outstanding - diluted. . . . . . . . 32,246 26,931 26,890 ========= ========= =========
Options to purchase, in millions: .3, .9 and .6 common shares in 2001, 2000 and 1999, 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 WRI considers all highly liquid investments with original maturities of three months or less as cash equivalents. WRI issued .1 million common shares of beneficial interest in 2000 valued at $3.6 million in exchange for interests in limited partnerships which had been formed to acquire operating properties. We assumed debt and/or capital lease obligations totaling $165.0 million, $30.7 million and $39.1 million in connection with purchases of property during 2001, 2000 and 1999, respectively. In connection with the sale of improved properties in 1999, we received notes receivable totaling $41.4 million. Reclassifications Certain reclassifications of prior years' amounts have been made to conform with the current year presentation. NOTE 2. NEWLY ADOPTED ACCOUNTING PRONOUNCEMENTS On January 1, 2001, WRI adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments. Specifically, SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either shareholders' equity or net income depending on whether the derivative instruments qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. Page 32 WRI hedges the future cash flows of debt transactions principally through interest rate swaps with major financial institutions. WRI has four interest rate swap contracts with an aggregate notional amount of $70 million, which are designated as cash flow hedges, and eleven interest rate swap contracts with an aggregate notional amount of $107.5 million, which are designated as fair value hedges. As of January 1, 2001, the adoption of the new standard resulted in a cumulative transition adjustment of $1.9 million to accumulated other comprehensive loss, a component of shareholders' equity, and a corresponding liability of the same amount for our interest rate swaps designated as cash flow hedges. For the year ended December 31, 2001, the decrease in fair market value of these interest rate swaps was $2.6 million and was recorded in accumulated other comprehensive loss and other liabilities. For the year ended December 31, 2001, the increase in fair market value of the interest rate swaps designated as fair value hedges was $1.0 million and was recorded in other assets and fixed-rate debt. Within the next twelve months, the Company expects to reclassify to earnings as interest expense approximately $2.6 million of the current balance held in accumulated other comprehensive loss. With respect to fair value hedges, both changes in fair market value of the derivative hedging instrument and changes in the fair value of the hedged item will be recorded in earnings each reporting period. These amounts should completely offset with no impact to earnings, except for the portion of the hedge that proves to be ineffective, if any. In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of SFAS No. 143 will not have a material impact on our financial position, results of operations, or cash flows. In August 2001, FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 addresses accounting and reporting for the impairment or disposal of a segment of a business. The adoption of SFAS No. 144 will not have a material impact on our financial position, results of operations, or cash flows. NOTE 3. DEBT WRI's debt consists of the following (in thousands):
DECEMBER 31, -------------------------- 2001 2000 ------------ ------------ Fixed-rate debt payable to 2015 at 6.0% to 8.75% . . . . . . . . . . $ 796,900 $ 472,271 Variable-rate unsecured notes payable. . . . . . . . . . . . . . . . 100,000 50,000 Unsecured notes payable under revolving credit agreements. . . . . . 134,500 230,100 Obligations under capital leases . . . . . . . . . . . . . . . . . . 33,554 33,467 Industrial revenue bonds payable to 2015 at 1.8% to 3.6% . . . . . . 5,868 6,010 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 505 ------------ ------------ Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,070,835 $ 792,353 ============ ============
In November 2000, WRI entered into an unsecured $350 million revolving credit agreement with a syndicate of banks. The agreement expires in November 2003, but we can request a one-year extension of the agreement, solely at our option. We also have an agreement for an unsecured and uncommitted overnight credit facility totaling $20 million with a bank to be used for cash management purposes. WRI also has letters of credit totaling $39.6 million outstanding under the $350 million revolving credit facility at December 31, 2001. The revolving credit agreements are subject to normal banking terms and conditions and do not adversely restrict our operations or liquidity. On July 5, 2001, we entered into a $50 million unsecured term loan with two banks that also participate in our $350 million revolving credit facility. The terms of the $50 million loan, including pricing, are substantially identical to those of our $350 million revolving credit facility, and it also matures on the same date. Page 33 At December 31, 2001, the variable interest rate for notes payable under the $20 million revolving credit agreement was 2.04%. During 2001, the maximum balance and weighted average balance outstanding under both revolving credit facilities were $302.9 million and $149.5 million, respectively, at an average interest rate of 5.16%. WRI made cash payments for interest on debt, net of amounts capitalized, of $42.9 million in 2001, $40.8 million in 2000 and $31.9 million in 1999. Various leases and properties and current and future rentals from those leases and properties collateralize certain debt. At December 31, 2001 and 2000, the carrying value of such property aggregated $491.3 million and $221.6 million, respectively. On June 25, 2001, WRI entered into two forward-starting interest rate swap contracts with a notional amount of $188.7 million. These contracts were designated as a cash flow hedge of forecasted interest payments for $200 million of unsecured notes with a coupon of 7% that were sold on July 12, 2001. Concurrent with the sale of the 7% notes, we settled our $188.7 million forward-starting interest rate swap contracts, resulting in a gain of $1.6 million recorded in accumulated other comprehensive income. This $1.6 million gain is being amortized to earnings over the life of the 7% notes. On July 26, 2001, the Company entered into eleven interest rate swaps with an aggregate notional amount of $107.5 million that convert fixed interest payments at rates from 6.35% to 7.35% to variable interest payments. These interest rate swaps have been designated as fair value hedges. We have determined that these contracts will be highly effective in limiting our risk of changes in the fair value of the fixed-rate notes attributable to changes in variable interest rates. WRI has two interest rate swap contracts with an aggregate notional amount of $20 million that serve as a hedge against changes in interest rates on a like amount of our $350 million variable-rate revolving credit facility. Such contracts, which expire in 2004, have been outstanding since their purchase in 1992 and fix the interest rate at 7.7%. We also entered into two additional interest rate swaps for a notional amount of $25 million each which serve as hedges against changes in interest rates on two separate $25 million variable-rate medium term notes which mature in 2002 and 2003. These swaps fix the interest rates on the medium term notes at 7.0% and 6.8% for the two-year and three-year notes, respectively. The interest rate swaps increased interest expense and decreased net income by $.8 million in 2001, $.5 million in 2000 and $1.0 million in 1999. The interest rate swaps increased the average rate for our debt by .1% for 2001 and 2000 and .2% for 1999. WRI could be exposed to credit losses in the event of non-performance by the counter-party; however, the likelihood of such non-performance is remote. In January 2000, WRI issued $10.5 million of ten-year 8.25% fixed-rate, unsecured medium term notes. In connection with this debt issuance, we entered into a ten-year interest rate swap agreement with a notional amount of $10.5 million to swap 8.25% fixed-rate interest for floating-rate interest. On January 4, 2001, we terminated this swap with the counter-party, resulting in the receipt of $.9 million. As the swap was accounted for as a hedge of the medium term note, the gain is being amortized over the remaining life of the note, which lowers the effective interest rate on the note to 7.4%. In July 2000, the Company issued a two-year $25 million variable-rate, unsecured medium term note that bears interest at 50 basis points over LIBOR and a three-year $25 million variable-rate note that bears interest at 60 basis points over LIBOR. At the time of issuance, the interest rates were 7.23% and 7.33%, respectively. During November and December of 2000, we entered into interest rate swap agreements which fix the interest rates on these notes. In December 2000, we completed three fixed-rate medium term note transactions totaling $36 million which included a twelve-year $11 million note bearing interest at 7.5%, a ten-year $10 million note bearing interest at 7.4% and a ten-year $15 million note bearing interest at 7.5%. In conjunction with acquisitions completed during 2001, we assumed $165.0 million of non-recourse debt secured by the related properties. The weighted average interest rate on this debt is 8.22%, and the average remaining life is 7.8 years. Additionally, ten-year non-recourse debt secured by retail Page 34 properties held by joint ventures in which we participate was issued during 2001, our share of which totaled $5.4 million. The weighted average interest rate on this debt is 7.3%. In the third quarter of 1999, WRI filed a $400 million shelf registration statement with the SEC, which allows for the issuance of debt or equity securities or warrants. The unused portion of the shelf registration was $83.0 million at December 31, 2001 and $18.0 million following the issuance of $65 million medium term notes in early 2002. In March 2001, we filed a $500 million shelf registration statement, of which $398.9 million is currently available. WRI's debt can be summarized as follows (in thousands):
DECEMBER 31, -------------------------- 2001 2000 ------------ ------------ As to interest rate (including the effects of interest rate swaps): Fixed-rate debt . . . . . . . . . . . . . . . . .$ 780,500 $ 572,783 Variable-rate debt. . . . . . . . . . . . . . . . 290,335 219,570 ------------ ------------ Total . . . . . . . . . . . . . . . .$ 1,070,835 $ 792,353 ============ ============
As to collateralization: Unsecured debt. . . . . . . . . . . . . . . . . .$ 798,524 $ 669,106 Secured debt. . . . . . . . . . . . . . . . . . . 272,311 123,247 ------------ ------------ Total . . . . . . . . . . . . . . . .$ 1,070,835 $ 792,353 ============ ============
Subsequent to year end, we completed two medium term note transactions totaling $65 million which included a twelve-year $35 million note bearing interest at 6.7% and a twelve-year $30 million note bearing interest at 6.5%. Scheduled principal payments on our debt (excluding $134.5 million due under our revolving credit agreements, $50.0 million term loan, $21 million of capital leases and $1.0 million market value of rate swaps) are due during the following years (in thousands):
2002 . . . . . . $ 58,781 2003 . . . . . . 53,925 2004 . . . . . . 55,755 2005 . . . . . . 66,057 2006 . . . . . . 53,603 2007 . . . . . . 59,984 2008 . . . . . . 162,231 2009 . . . . . . 56,068 2010 . . . . . . 39,771 2011 . . . . . . 231,683 Thereafter . . . 26,365
Various debt agreements contain restrictive covenants, the most restrictive of which requires WRI to maintain a pool of qualifying assets, as defined, of not less than 185% of unsecured debt. Other restrictions include minimum interest and fixed charge coverage ratios, minimum unencumbered interest coverage ratios, minimum net worth requirements and both secured and unsecured debt to total asset value measures. Management believes that WRI is in compliance with all restrictive covenants. Page 35 NOTE 4. PREFERRED SHARES In February 1998, WRI 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 WRI's option any time after March 31, 2003 and have no stated maturity. In October 1998, WRI issued $90 million of 7.125% Series B cumulative redeemable preferred shares with a liquidation preference of $25 per share and no stated maturity. WRI 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 our option. There are limitations on the number of shares per shareholder and in the aggregate that may be redeemed per year. In January 1999, WRI issued $115 million of 7.0% Series C cumulative redeemable preferred shares with a liquidation preference of $50 per share and no stated maturity. WRI 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. NOTE 5. COMMON SHARES On January 29, 2001, we issued 4.5 million common shares of beneficial interest. In February 2001, the underwriters exercised their over-allotment option and purchased an additional 200,000 shares. Net proceeds to WRI totaled $188.1 million based on a price of $42.19 per share. In May 2001, we issued 690,000 common shares of beneficial interest. Net proceeds of $27.9 million were based on a price of $42.85 per share. In November 2001, we issued 1.8 million common shares of beneficial interest. Net proceeds of $86.0 million were based on a price of $50.20 per share. Proceeds from these offerings were used to pay down amounts outstanding under our $350 million revolving credit facility. In February 2002, we issued 198,098 common shares of beneficial interest. Net proceeds to WRI totaled $9.5 million based on a price of $50.48 per share and will be used to pay down amounts outstanding under our $350 million revolving credit facility. In February 2002, a three-for-two stock split was declared for shareholders of record on April 1, 2002, payable April 15, 2002. NOTE 6. PROPERTY WRI's property consists of the following (in thousands):
DECEMBER 31, -------------------------- 2001 2000 ------------ ------------ Land . . . . . . . . . . . . . . $ 439,332 $ 329,082 Land held for development. . . . 24,131 23,924 Land under development . . . . . 56,414 38,181 Buildings and improvements . . . 1,750,059 1,303,595 Construction in-progress . . . . 82,457 33,632 ------------ ------------ Total. . . . . . . . . $ 2,352,393 $ 1,728,414 ============ ============
The following carrying charges were capitalized (in thousands):
DECEMBER 31, ------------------------------- 2001 2000 1999 --------- --------- --------- Interest . . . . . . . . . . . . $ 9,698 $ 4,204 $ 3,037 Ad valorem taxes . . . . . . . . 383 333 326 --------- --------- --------- Total. . . . . . . . . $ 10,081 $ 4,537 $ 3,363 ========= ========= =========
Page 36 During 2001, WRI acquired 30 shopping centers and four industrial properties. These transactions added 6.1 million square feet to our portfolio and represent an investment of $518.6 million. In 2001, WRI acquired land at seven separate locations for the development of retail shopping centers. During 2001, we invested $76.9 million in new developments. NOTE 7. INVESTMENTS IN REAL ESTATE JOINT VENTURES WRI owns interests in 15 joint ventures or limited partnerships where we do not exercise financial and operating control. These partnerships are accounted for under the equity method since WRI exercises significant influence. Our interests in these joint ventures and limited partnerships range from 20% to 75% and, with the exception of one partnership which owns seven industrial properties, each venture owns a single real estate asset. Combined condensed financial information of these ventures is summarized as follows (in thousands):
DECEMBER 31, ---------------------- 2001 2000 ---------- ---------- Combined Balance Sheets Property . . . . . . . . . . . . . . . $ 171,344 $ 176,247 Accumulated depreciation . . . . . . . (24,941) (21,755) ---------- ---------- Property - net. . . . . . . . . . 146,403 154,492 Other assets . . . . . . . . . . . . . 11,373 10,800 ---------- ---------- Total . . . . . . . . . $ 157,776 $ 165,292 ========== ========== Debt . . . . . . . . . . . . . . . . . $ 76,635 $ 77,274 Amounts payable to WRI . . . . . . . . 9,270 16,622 Other liabilities. . . . . . . . . . . 4,705 5,359 Accumulated equity . . . . . . . . . . 67,166 66,037 ---------- ---------- Total . . . . . . . . . $ 157,776 $ 165,292 ========== ==========
YEARS ENDED DECEMBER 31, ---------------------------- 2001 2000 1999 -------- -------- -------- Combined Statements of Income Revenues. . . . . . . . . . . . . . . $ 25,548 $ 21,301 $ 10,960 -------- -------- -------- Expenses: Interest. . . . . . . . . . . . . . 7,082 6,427 1,538 Depreciation and amortization . . . 4,519 3,924 1,991 Operating . . . . . . . . . . . . . 3,578 3,208 1,943 Ad valorem taxes. . . . . . . . . . 3,294 2,731 1,280 General and administrative. . . . . 46 18 16 -------- -------- -------- Total. . . . . . . . . . . . . 18,519 16,308 6,768 -------- -------- -------- Gain on sales of property . . . . . . 2,854 5 -------- -------- -------- Net income. . . . . . . . . . . . . . $ 9,883 $ 4,993 $ 4,197 ======== ======== ========
Page 37 Our investment in real estate joint ventures, as reported on the balance sheets, differs from our proportionate share of the joint ventures' underlying net assets due to basis differentials which arose upon the transfer of assets from WRI to the joint ventures. This basis differential which totaled $5.0 million and $5.1 million at December 31, 2001 and 2000, respectively, is depreciated over the useful lives of the related assets. Fees earned by WRI for the management of these joint ventures totaled, in millions, $.5 in 2001, $.4 in 2000 and $.1 in 1999. In December 1999, WRI sold seven industrial properties totaling 2.0 million square feet to a limited partnership in which we retained 20% ownership. WRI serves as general partner. WRI loaned $41.4 million to the partnership until August of 2000, at which time the loan was replaced with a ten-year non-recourse third party mortgage with an interest rate of 8.1%. Two shopping centers were acquired in June and one in August of 2000 in joint ventures with an institutional investor. WRI loaned these three partnerships an aggregate of $32.0 million which was replaced with ten-year non-recourse third party mortgages with a weighted average interest rate of 7.8%. In August of 2001, WRI sold its interests in two joint ventures which owned mini-storage warehouses resulting in a gain of $2.9 million. NOTE 8. RELATED PARTY TRANSACTIONS WRI has mortgage bonds and notes receivable from WRI Holdings, Inc. of $4.0 million and $3.8 million, net of deferred gain of $3.0 million at December 31, 2001 and 2000, respectively. WRI and WRI Holdings share certain directors and are under common management. Unimproved land and an investment in a joint venture which owns a motor hotel collateralize these receivables. The bonds and notes bear interest at rates of 16% and prime plus 1%, respectively. However, due to WRI Holdings' poor financial condition, WRI has limited the recognition of interest income for financial statement purposes to the amount of cash payments received. WRI did not receive any interest payments in 2001 or 2000 and does not anticipate receiving such payments in the near term. No interest income has been recognized for financial reporting purposes in the last three years. In December 1999, undeveloped land from WRI Holdings of 102.6 acres was sold and the net proceeds of $8.1 million were used to pay down amounts outstanding under mortgage bonds and notes payable to WRI. WRI's unrecorded receivable for interest on the mortgage bonds and notes receivable was $26.2 million and $23.6 million at December 31, 2001 and 2000, respectively. Interest income not recognized by WRI for financial reporting purposes aggregated, in millions, $2.5, $2.7 and $4.2 for 2001, 2000 and 1999, respectively. WRI does not anticipate recovery of the unrecorded receivable in the future. WRI owns interests in several joint ventures and partnerships. Notes receivable from these entities bear interest at 4.25% to 10% at December 31, 2001, are due at various dates through 2028 and are generally secured by real estate assets. WRI recognized interest income on these notes as follows, in millions: $.6 in 2001; $3.1 in 2000 and $1.0 in 1999. JPMorgan Chase Bank is a significant participant in and the agent for the banks that provide WRI's $350 million revolving credit agreement and is a counter-party in 13 interest rate swap agreements with WRI. An executive officer of J.P. Morgan Chase & Co. serves on the WRI Board of Trustees. NOTE 9. FEDERAL INCOME TAX CONSIDERATIONS Federal income taxes are not provided because WRI believes it qualifies as a REIT under the provisions of the Internal Revenue Code. Shareholders of WRI include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% (95% in 2000 and 1999) of our ordinary taxable income to our shareholders and meet certain income source and investment restriction requirements. Page 38 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 and pension expense. As a result of these differences, the tax basis of our net assets exceeds the book value by $1.4 million at December 31, 2001. For federal income tax purposes, the cash dividends distributed to common shareholders are characterized as follows:
2001 2000 1999 -------- -------- -------- Ordinary income . . . . . . . . . . . . . . . . . 92.2% 87.1% 84.2% Return of capital (generally non-taxable) . . . . 6.2 12.7 4.0 Capital gain distributions. . . . . . . . . . . . 1.6 .2 11.8 -------- -------- -------- Total . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% ======== ======== ========
NOTE 10. LEASING OPERATIONS WRI'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, 2001, in millions, is: $248.9 in 2002; $220.9 in 2003; $190.0 in 2004; $158.1 in 2005; $125.1 in 2006 and $644.8 thereafter. The future minimum rental amounts do not include estimates for contingent rentals. Such contingent rentals, in millions, aggregated $64.0 in 2001, $50.3 in 2000 and $44.5 in 1999. NOTE 11. COMMITMENTS AND CONTINGENCIES WRI leases land from the owners and then subleases these properties to other parties. Future minimum rental payments under these operating leases, in millions, are: $1.5 in 2002; $1.4 in 2003; $1.2 in 2004; $1.0 in 2005, $1.0 in 2006; and $19.1 thereafter. Future minimum rental payments on these leases have not been reduced by future minimum sublease rentals aggregating $21.4 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: $2.8 in 2001, $2.5 in 2000 and $3.8 in 1999. Sublease rental revenue (excluding amounts for improvements constructed by WRI on the leased land) from these leased properties was as follows, in millions: $3.0 in 2001, $3.1 in 2000 and $2.9 in 1999. Property under capital leases, consisting of four shopping centers, aggregated $29.1 million at December 31, 2001 and 2000, respectively, and is included in buildings and improvements. Amortization of property under capital leases is included in depreciation and amortization expense. Future minimum lease payments under these capital leases total $65.4 million, with annual payments due, in millions, of $1.8 in 2002; $1.9 in each of 2003, 2004 and 2005; $2.0 in 2006 and $55.9 thereafter. The amount of these total payments representing interest is $31.8 million. Accordingly, the present value of the net minimum lease payments is $33.6 million at December 31, 2001. In 1998 and 1997, WRI formed limited partnerships to acquire certain property. WRI exercises operating and financial control of 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 for the original consideration of $5.7 million payable in cash or WRI common shares at the option of WRI. In 2000, WRI issued .1 million common shares of beneficial interest valued at $3.6 million in exchange for certain of these limited partnership interests. WRI is involved in various matters of litigation arising in the normal course of business. While WRI is unable to predict with certainty the amounts involved, WRI's management and counsel are of the opinion that, when such litigation is resolved, WRI's resulting liability, if any, will not have a material effect on WRI's consolidated financial statements. Page 39 NOTE 12. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of WRI's financial instruments was determined using available market information and appropriate valuation methodologies as of December 31, 2001. Unless otherwise described below, all other financial instruments are carried at amounts which approximate their fair values. Based on rates currently available to WRI for debt with similar terms and average maturities, fixed-rate debt with carrying values of $780.5 million and $572.8 million have fair values of approximately $816.9 million and $575.9 million at December 31, 2001 and 2000, respectively. The fair value of WRI's variable-rate debt approximates its carrying values of $290.3 million and $219.6 million at year-end 2001 and 2000, respectively. NOTE 13. SHARE OPTIONS AND AWARDS WRI had an incentive share option plan, which provided 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. WRI has an additional share option plan, which grants 100 share options to every employee of WRI, 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 WRI 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 2001, WRI granted .3 million share options under a compensatory incentive share plan. This plan, which expires in 2002, provides for the issuance of up to 1,750,000 shares, either in the form of restricted shares or share options. Prior to 2000, the restricted shares generally vested over a ten-year period, with potential acceleration of vesting due to appreciation in the market value of our common shares. Beginning in 2000, the vesting period is five years. The share options granted to non-officers vest over a three-year period beginning one year after the date of grant and over a seven-year period beginning two years after the date of grant for officers. Share options were granted at the quoted fair market value on the date of grant. Restricted shares are issued at no cost to the employee, and as such we recognized compensation expense relating to restricted shares as follows, in millions: $.8 in 2001 and $.3 in 2000 and 1999. In April 2001, the Company adopted the 2001 Long Term Incentive Plan for the issuance of options and share awards up to a maximum of one million common shares. The plan expires in April 2011. WRI 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 we determined compensation cost for our share option and award plans based on the fair value of the options granted at the grant dates, our proforma net income available to common shareholders would have been as follows, in millions: $88.3, $58.7 and $75.9 in 2001, 2000 and 1999, respectively. Proforma net income per common share - basic would have been $2.75, $2.19 and $2.84 in 2001, 2000 and 1999, 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 2001, 2000 and 1999, respectively: dividend yield of 6.6%, 6.9% and 7.3%; expected volatility of 15.3%, 15.4% and 18.1%; expected lives of 7.4, 7.4 and 6.9 and risk-free interest rates of 5.1%, 5.1% and 6.6%. Page 40 Following is a summary of the option activity for the three years ended December 31, 2001:
SHARES WEIGHTED UNDER AVERAGE OPTION EXERCISE PRICE ----------- -------------- Outstanding, January 1, 1999 . . . . . 1,152,779 $ 37.99 Granted. . . . . . . . . . . . . . . . 17,900 41.29 Canceled . . . . . . . . . . . . . . . (14,800) 40.23 Exercised. . . . . . . . . . . . . . . (39,089) 32.95 ----------- Outstanding, December 31, 1999 . . . . 1,116,790 38.19 Granted. . . . . . . . . . . . . . . . 371,801 42.17 Canceled . . . . . . . . . . . . . . . (27,800) 42.17 Exercised. . . . . . . . . . . . . . . (45,000) 34.40 ----------- Outstanding, December 31, 2000 . . . . 1,415,791 39.28 Granted. . . . . . . . . . . . . . . . 351,640 46.59 Canceled . . . . . . . . . . . . . . . (110,900) 37.79 Exercised. . . . . . . . . . . . . . . (286,434) 36.76 ----------- Outstanding, December 31, 2001 . . . . 1,370,097 $ 41.80 ===========
The number of share options exercisable at December 31, 2001, 2000 and 1999 was, in millions: .7, .9 and .7, respectively. Options exercisable at year-end 2001 had a weighted average exercise price of $38.94. The weighted average fair value per share of options granted during 2001, 2000 and 1999 was $3.64, $2.92 and $4.25, respectively. Share options outstanding at December 31, 2001 had exercise prices ranging from $25.00 to $49.04 and a weighted average remaining contractual life of 6.6 years. Approximately 98% of the options outstanding at year-end 2001 have exercise prices between $37.00 and $49.04 and a weighted average contractual life of 6.6 years. There were 1.4 million common shares available for the future grant of options or awards at December 31, 2001. NOTE 14. EMPLOYEE BENEFIT PLANS WRI has a Savings and Investment Plan to which eligible employees may elect to contribute from 1% of their salaries to the maximum amount established annually by the Internal Revenue Service. Employee contributions are matched by WRI 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 $.4 million in 2001 and $.3 million in 2000 and 1999. Effective April 1, 1999, WRI adopted an Employee Share Purchase Plan under which 250,000 WRI common shares have been authorized. These shares, as well as common shares purchased by WRI on the open market, are made available for sale to employees at a discount of 15%. Shares purchased by the employee under the plan are restricted from being sold for two years from the date of purchase or until termination of employment with WRI. A total of 10,574 and 9,759 shares were purchased by employees at an average price of $38.76 and $37.73 during 2001 and 2000, respectively. WRI 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. Our funding policy is to make annual contributions as required by applicable regulations; however, we Page 42 have not been required to make contributions for any of the past three years. Reconciliation of the benefit obligation, plan assets at fair value and the funded status of the plan are as follows (in thousands):
2001 2000 --------- --------- Benefit obligation at beginning of year . . . . . . . . $ 11,129 $ 10,703 Service cost. . . . . . . . . . . . . . . . . . . . . . 556 539 Interest cost . . . . . . . . . . . . . . . . . . . . . 825 746 Actuarial gain. . . . . . . . . . . . . . . . . . . . . (19) (640) Benefit payments. . . . . . . . . . . . . . . . . . . . (294) (219) --------- --------- Benefit obligation at end of year . . . . . . . . . . . $ 12,197 $ 11,129 ========= ========= Fair value of plan assets at beginning of year. . . . . $ 12,243 $ 12,057 Actual return on plan assets. . . . . . . . . . . . . . (1,095) 405 Benefit payments. . . . . . . . . . . . . . . . . . . . (322) (219) --------- --------- Fair value of plan assets at end of year. . . . . . . . $ 10,826 $ 12,243 ========= ========= Plan assets at fair value less benefit obligation . . . $ (1,371) $ 1,114 Unrecognized gain . . . . . . . . . . . . . . . . . . . (432) (2,785) --------- --------- Pension liability . . . . . . . . . . . . . . . . . . . $ (1,803) $ (1,671) ========= =========
The components of net periodic pension cost are as follows (in thousands):
2001 2000 1999 -------- -------- -------- Service cost . . . . . . . . . . . . . . . . . $ 556 $ 539 $ 533 Interest cost. . . . . . . . . . . . . . . . . 825 746 729 Expected return on plan assets . . . . . . . . (1,092) (1,075) (950) Prior service cost . . . . . . . . . . . . . . 8 Recognized gains . . . . . . . . . . . . . . . (158) (281) (59) -------- -------- -------- Total . . . . . . . . . . . . . $ 131 $ (71) $ 261 ======== ======== ========
Assumptions used to develop periodic expense and the actuarial present value of the benefit obligations were:
2001 2000 1999 ------ ------ ------ Weighted average discount rate. . . . . . . . . . . . . . . 7.5% 7.5% 7.5% Expected long-term rate of return on plan assets. . . . . . 9.0% 9.0% 9.0% Rate of increase in compensation levels . . . . . . . . . . 5.0% 5.0% 5.0%
In December of 2001, WRI informed the participants that their accrual of benefits under this plan would cease effective December 31, 2001, but would be replaced by another plan. We do not anticipate any gain or loss relating to this change. WRI also has a non-qualified supplemental retirement plan for officers of WRI, 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 our common shares. We recognized expense as follows, in millions: $.4 in 2001 and $.3 in 2000 and 1999. Page 42 NOTE 15. SEGMENT INFORMATION The operating segments presented are the segments of WRI 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. WRI 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. Management does not consider the effect of gains or losses from the sale of property in evaluating ongoing operating performance. 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, California, Louisiana, Arizona, Nevada, Arkansas, New Mexico, Oklahoma, Tennessee, Kansas, Colorado, Missouri, Illinois, Florida, North Carolina, Mississippi and Maine. The customer base includes supermarkets, discount retailers, 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, Georgia, Florida 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 WRI's reportable segments is as follows (in thousands):
SHOPPING CENTER INDUSTRIAL OTHER TOTAL ----------- ------------ --------- ------------ 2001 Revenues . . . . . . . . . . . . . . . . . . $ 277,647 $ 32,148 $ 5,097 $ 314,892 Net operating income . . . . . . . . . . . . 200,372 22,256 4,862 227,490 Equity in earnings of joint ventures . . . . 3,696 1,909 (58) 5,547 Investment in real estate joint ventures . . 25,094 648 25,742 Total assets . . . . . . . . . . . . . . . . 1,775,131 222,005 98,611 2,095,747 Capital expenditures . . . . . . . . . . . . 615,144 44,083 3,306 662,533 2000: Revenues . . . . . . . . . . . . . . . . . . $ 215,780 $ 27,500 $ 6,954 $ 250,234 Net operating income . . . . . . . . . . . . 155,003 18,826 7,277 181,106 Equity in earnings of joint ventures . . . . 3,410 907 (174) 4,143 Investment in real estate joint ventures . . 25,802 1,046 26,848 Total assets . . . . . . . . . . . . . . . . 1,229,340 185,938 83,199 1,498,477 Capital expenditures . . . . . . . . . . . . 237,071 22,532 594 260,197 1999: Revenues . . . . . . . . . . . . . . . . . . $ 193,163 $ 27,556 $ 3,376 $ 224,095 Net operating income . . . . . . . . . . . . 137,315 19,653 4,866 161,834 Equity in earnings of joint ventures . . . . 3,277 398 (21) 3,654 Investment in real estate joint ventures . . 17,197 481 17,678 Total assets . . . . . . . . . . . . . . . . 1,048,408 159,464 104,874 1,312,746 Capital expenditures . . . . . . . . . . . . 184,323 49,469 11,095 244,887
Page 43 Net operating income reconciles to income before extraordinary charge as shown on the Statements of Consolidated Income and Comprehensive Income as follows (in thousands):
---------------------------------- 2001 2000 1999 ---------- ---------- ---------- Total segment net operating income . . . . . . . $ 227,490 $ 181,106 $ 161,834 Less: Depreciation and amortization. . . . . . . . 68,316 54,597 48,668 Interest. . . . . . . . . . . . . .. . . . . 54,473 43,190 32,792 General and administrative. . . . .. . . . . 9,570 8,213 7,513 Minority interest in partnerships .. . . . . 475 630 789 Equity in earnings of joint ventures . . . . (5,547) (4,143) (3,654) Gain on sales of property . . . . .. . . . . (8,339) (382) (20,594) ---------- ---------- ---------- Income before extraordinary charge.. . . . . . . $ 108,542 $ 79,001 $ 96,320 ========== ========== ==========
NOTE 16. BANKRUPTCY REMOTE PROPERTIES On April 2, 2001, we purchased 19 supermarket-anchored shopping centers, aggregating 2.5 million square feet, in California. The purchase price for the properties was $277.5 million, including the assumption of approximately $132 million in debt secured by all 19 properties. These 19 properties, having a net book value of approximately $275.1 million at December 31, 2001 (collectively the "Bankruptcy Remote Properties", and each a "Bankruptcy Remote Property"), are wholly owned by various "Bankruptcy Remote Entities". Each Bankruptcy Remote Entity is an indirect subsidiary of the Company. The assets of each Bankruptcy Remote Entity, including the respective Bankruptcy Remote Property or Properties owned by each, are owned by that Bankruptcy Remote Entity alone and are not available to satisfy claims that any creditor may have against the Company, its affiliates, or any other person or entity. No Bankruptcy Remote Entity has agreed to pay or make its assets available to pay creditors of the Company, any of its affiliates, or any other person or entity. Neither the Company nor any of its affiliates has agreed to pay or make its assets available to pay creditors of any Bankruptcy Remote Entity (other than any agreement by a Bankruptcy Remote Entity to pay its own creditors). No affiliate of any Bankruptcy Remote Entity has agreed to pay or make its assets available to pay creditors of any Bankruptcy Remote Entity. The accounts of the Bankruptcy Remote Entities are included in WRI's consolidated financial statements, as WRI owns, indirectly, 100% of each of the entities. Additionally, WRI, through its wholly owned subsidiaries, makes all day-to-day operating and financial decisions with respect to these properties, subject to approval by the loan servicing agent for the certain significant transactions. WRI has the right to prepay the loan, subject to prepayment penalties, at any time, which would eliminate all encumbrances and restrictions. NOTE 17. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) During the year ended December 31, 2001, WRI acquired 30 retail centers and four industrial projects totaling $518.6 million. The pro forma financial information for the years ended December 31, 2001 and 2000 is based on the historical statements of WRI after giving effect to the acquisitions as if such acquisitions took place on January 1, 2001 and 2000, respectively. Page 44 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, ---------------------- 2001 2000 ---------- ---------- Pro forma revenues . . . . . . . . . . . . . . . . . . . . $ 341,471 $ 319,709 ========== ========== Pro forma net income available to common shareholders. . . $ 92,931 $ 61,883 ========== ========== Pro forma net income per common share - basic. . . . . . . $ 2.90 $ 2.31 ========== ========== Pro forma net income per common share - diluted. . . . . . $ 2.89 $ 2.31 ========== ==========
NOTE 18. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data is as follows (in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH --------- --------- --------- --------- 2001: Revenues. . . . . . . . . . . . . .. . . . . . . $ 67,625 $ 78,979 $ 82,460 $ 85,828 Net income available to common shareholders. . . 20,392 20,971 22,379 25,097 (1) Net income per common share - basic. . . . . . . 0.68 0.65 0.69 0.75 (1) Net income per common share - diluted. . . . . . 0.68 0.65 0.69 0.74 (1) 2000: Revenues. . . . . . . . . . . . . .. . . . . . . $ 59,302 $ 61,566 $ 63,676 $ 65,690 Net income available to common shareholders. . . 14,441 14,968 14,852 14,700 Net income per common share - basic. . . . . . . 0.54 0.56 0.55 0.55 Net income per common share - diluted. . . . . . 0.54 0.56 0.55 0.54 (1) Increase is primarily the result of a gains on the sale of property during the quarter.
**** ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Page 45 PART III ITEM 10. TRUST MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to WRI's Trust Managers and executive officers is incorporated herein by reference to the "Election of Trust Managers" and "Executive Officers" sections of WRI's definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 29, 2002. ITEM 11. EXECUTIVE COMPENSATION Incorporated herein by reference to the "Executive Compensation" section of WRI's definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 29, 2002. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference to the "Share Ownership of Certain Beneficial Owners" section of WRI's definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 29, 2002. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated herein by reference to the "Compensation Committee Interlocks and Insider Participation" section of WRI's definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 29, 2002. 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. . . . . . . . . . . . . . . 26 (B) Financial Statements (i) Statements of Consolidated Income and Comprehensive Income for the years ended December 31, 2001, 2000 and 1999. . . . . . . . 27 (ii) Consolidated Balance Sheets as of December 31, 2001 and 2000 . . . . . . . . . . . 28 (iii) Statements of Consolidated Cash Flows for the years ended December 31, 2001, 2000 and 1999. . 29 (iv) Statements of Consolidated Shareholders' Equity for the years ended ended December 31, 2001, 2000 and 1999 . . . 30 (v) Notes to Consolidated Financial Statements. . . . 31 (2) Financial Statement Schedules: SCHEDULE PAGE -------- ---- II Valuation and Qualifying Accounts . . . . . . . . 51 III Real Estate and Accumulated Depreciation. . . . . 52 IV Mortgage Loans on Real Estate . . . . . . . . . . 54 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. Page 46 (b) Reports on Form 8-K Form 8-K, dated October 26, 2001, was filed to report significant acquisitions in response to Item 2., Acquisition or Disposition of Assets and Item 7., Financial Statements, Pro Forma Financial Information and Exhibits. A Form 8-K/A, dated October 29, 2001, was filed to supplement information previously filed on October 26, 2001 in response to Item 2., Acquisition or Disposition of Assets and Item 7., Financial Statements, Pro Forma Financial Information and Exhibits. Form 8-K, dated October 29, 2001, was filed to report an event in response to Item 5., Other Events and Item 7., Financial Statements, Pro Forma Financial Information and Exhibits. Form 8-K, dated November 29, 2001, was filed to report an event in response to Item 5., Other Events and Item 7., Financial Statements, Pro Forma Financial Information and Exhibits. (c) Exhibits: 3.1 - Restated Declaration of Trust (filed as Exhibit 3.1 to WRI's Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by reference). 3.2 - Amendment of the Restated Declaration of Trust (filed as Exhibit 3.2 to WRI'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 WRI'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 WRI's Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by reference). 3.5* - Fourth Amendment of the Restated Declaration of Trust dated April 28, 1999. 3.6* - Fifth Amendment of the Restated Declaration of Trust dated April 20, 2001. 3.7 - Amended and Restated Bylaws of WRI (filed as Exhibit 99.2 to WRI's Registration Statement on Form 8-A dated February 23, 1998 and incorporated herein by reference). 4.1 - 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 WRI (filed as Exhibit 10.8 to WRI's Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference). 4.2 - Master Promissory Note in the amount of $20,000,000 between WRI, as payee, and Chase Bank of Texas, National Association (formerly, Texas Commerce Bank National Association), as maker, effective December 30, 1998 (filed as Exhibit 4.15 to WRI's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 4.3 - Senior Indenture dated as of May 1, 1995 between WRI and Chase Bank of Texas, National Association (formerly, Texas Commerce Bank National Association), as trustee (filed as Exhibit 4(a) to WRI's Registration Statement on Form S-3 (No. 33-57659) and incorporated herein by reference). 4.4 - Subordinated Indenture dated as of May 1, 1995 between WRI and Chase Bank of Texas, National Association (formerly, Texas Commerce Bank National Association) (filed as Exhibit 4(b) to WRI's Registration Statement on Form S-3 (No. 33-57659) and incorporated herein by reference). 4.5 - Form of Fixed Rate Senior Medium Term Note (filed as Exhibit 4.19 to WRI's Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference). Page 47 4.6 - Form of Floating Rate Senior Medium Term Note (filed as Exhibit 4.20 to WRI's Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference). 4.7 - Form of Fixed Rate Subordinated Medium Term Note (filed as Exhibit 4.21 to WRI's Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference). 4.8 - Form of Floating Rate Subordinated Medium Term Note (filed as Exhibit 4.22 to WRI's Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference). 4.9 - Statement of Designation of 7.44% Series A Cumulative Redeemable Preferred Shares (filed as Exhibit 99.3 to WRI's Current Report on Form 8-A dated February 23, 1998 and incorporated herein by reference). 4.10 - Statement of Designation of 7.125% Series B Cumulative Redeemable Preferred Shares (filed as Exhibit 4.2 to WRI's Current Report on Form 8-K dated October 28, 1998 and incorporated herein by reference). 4.11 - Statement of Designation of 7.00% Series C Cumulative Redeemable Preferred Shares (filed as Exhibit 4.1 to WRI's Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by reference). 4.12 - 7.44% Series A Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4 to WRI's Current Report on Form 8-K dated February 23, 1998 and incorporated herein by reference). 4.13 - 7.125% Series B Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4.1 to WRI's Current Report on Form 8-K dated October 28, 1998 and incorporated herein by reference). 4.14 - 7.00% Series C Cumulative Redeemable Preferred Share Certificate (filed as Exhibit 4.2 to WRI's Registration Statement on Form 8-A dated January 19, 1999 and incorporated herein by reference). 4.15 - Credit Agreement dated November 21, 2000 among WRI, the Lenders Party Hereto and the Chase Manhattan Bank as Administrative Agent (filed as Exhibit 4.25 to WRI's Annual Report on Form 10-K for the year ended December 31, 2000 and incorporated herein by reference). 4.16* - Credit Agreement dated July 5, 2001 among WRI, the Lenders Party Hereto and Commerzbank AG, as Administrative Agent. 4.17* - Form of 7% Notes due 2011. 10.1 - 1988 Share Option Plan of WRI, as amended (filed as Exhibit 10.1 to WRI'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 WRI'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 WRI, as amended (filed as Exhibit 4.1 to WRI'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 WRI (filed as Exhibit 4.1.1 to WRI'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 WRI (filed as Exhibit 4.1 to WRI's Registration Statement on Form S-8 (No. 33-52473) and incorporated herein by reference). 10.6 - 1999 WRI Employee Share Purchase Plan (filed as Exhibit 10.6 to WRI's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 10.7* - 2001 Long Term Incentive Plan. 12.1* - Computation of Fixed Charges Ratios. 21.1* - Subsidiaries of the Registrant. 23.1* - Consent of Deloitte & Touche LLP. 24.1* - Power of Attorney (included on first signature page). * Filed with this report. Page 48 SIGNATURES 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: /s/ Andrew M. Alexander ------------------------ Andrew M. Alexander Chief Executive Officer
Date: March 19, 2002 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each of Weingarten Realty Investors, a real estate investment trust organized under the Texas Real Estate Investment Trust Act, and the undersigned trust managers and officers of Weingarten Realty Investors hereby constitutes and appoints Andrew M. Alexander, Stanford Alexander, Martin Debrovner, Stephen C. Richter and Joe D. Shafer, or any one of them, its or his true and lawful attorney-in-fact and agent, for it or him and in its or his name, place and stead, in any and all capacities, with full power to act alone, to sign any and all amendments to this Report, and to file each such amendment to the Report, with all exhibits thereto, and any and all other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorney-in-fact and agent full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as it or he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. 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: /s/ Stanford Alexander Chairman March 19, 2002 ------------------------- Stanford Alexander and Trust Manager By: /s/ Andrew M. Alexander Chief Executive Officer, March 19, 2002 ------------------------- Andrew M. Alexander President and Trust Manager By: /s/ James W. Crownover Trust Manager March 19, 2002 ------------------------- James W. Crownover By: /s/ Robert J. Cruikshank Trust Manager March 19, 2002 ------------------------- Robert J. Cruikshank By: /s/ Martin Debrovner Vice Chairman March 19, 2002 ------------------------- Martin Debrovner and Trust Manager By: /s/ Melvin Dow Trust Manager March 19, 2002 ------------------------- Melvin Dow Page 49 By: /s/ Stephen A. Lasher Trust Manager March 19, 2002 ------------------------- Stephen A. Lasher By: /s/ Stephen C. Richter Sr. Vice President and March 19, 2002 ------------------------- Stephen C. Richter Chief Financial Officer By: /s/ Douglas W. Schnitzer Trust Manager March 19, 2002 ------------------------- Douglas W. Schnitzer By: /s/ Marc J. Shapiro Trust Manager March 19, 2002 ------------------------- Marc J. Shapiro By: /s/ Joe D. Shafer Vice President/Controller March 19, 2002 ------------------------- Joe D. Shafer (Principal Accounting Officer)
Page 50 SCHEDULE II
WEINGARTEN REALTY INVESTORS VALUATION AND QUALIFYING ACCOUNTS DECEMBER 31, 2001, 2000 AND 1999 (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 --------------------------------------------- ---------- -------- -------- ---------- --------- 2001: Allowance for Doubtful Accounts. . . . . . $ 1,884 $ 3,764 $ 2,722 $ 2,926 2000: Allowance for Doubtful Accounts. . . . . . $ 909 $ 1,667 $ 692 $ 1,884 1999: Allowance for Doubtful Accounts. . . . . . $ 887 $ 1,043 $ 1,021 $ 909 --------- Note A - Write-offs of accounts receivable previously reserved.
Page 51
SCHEDULE III WEINGARTEN REALTY INVESTORS REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2001 (AMOUNTS IN THOUSANDS) Total Cost --------------------------------------- Buildings Projects and Under Total Accumulated Encumbrances Land Improvements Development Cost Depreciation (A) ----------- ------------- ------------ ---------- ------------- ------------ SHOPPING CENTERS: Texas. . . . . . . . . . . . . $ 167,882 $ 668,938 $ 836,820 $ 262,767 $ 18,727 Other States . . . . . . . . . 227,757 823,382 1,051,139 90,839 203,553 ----------- ------------- ------------ ---------- ------------- ------------ Total Shopping Centers . . 395,639 1,492,320 1,887,959 353,606 222,280 INDUSTRIAL: Texas. . . . . . . . . . . . . 31,813 148,621 180,434 32,756 Other States . . . . . . . . . 9,070 37,100 46,170 996 ----------- ------------- ------------ ---------- ------------- ------------ Total Industrial . . . . . 40,883 185,721 226,604 33,752 OFFICE BUILDING: Texas. . . . . . . . . . . . . 534 9,306 9,840 6,409 ----------- ------------- ------------ ---------- ------------- ------------ MULTI-FAMILY RESIDENTIAL: Texas. . . . . . . . . . . . . 2,276 14,705 16,981 1,529 ----------- ------------- ------------ ---------- ------------- ------------ Total Improved Properties. . . . . . . 439,332 1,702,052 2,141,384 395,296 222,280 ----------- ------------- ------------ ---------- ------------- ------------ LAND UNDER DEVELOPMENT OR HELD FOR DEVELOPMENT: Texas. . . . . . . . . . . . . $ 32,640 32,640 Other States . . . . . . . . . 47,905 47,905 ----------- ------------- ------------ ---------- ------------- ------------ Total Land Under Development or Held for Development . . . . 80,545 80,545 ----------- ------------- ------------ ---------- ------------- ------------ LEASED PROPERTY (SHOPPING CENTER) UNDER CAPITAL LEASE: Texas. . . . . . . . . . . . . 18,953 18,953 513 Other States . . . . . . . . . 29,054 29,054 7,149 5,857 ----------- ------------- ------------ ---------- ------------- ------------ Total Leased Property Under Capital Lease . . 48,007 48,007 7,662 5,857 ----------- ------------- ------------ ---------- ------------- ------------ CONSTRUCTION IN PROGRESS: Texas. . . . . . . . . . . . . 9,972 9,972 Other States . . . . . . . . . 72,485 72,485 ----------- ------------- ------------ ---------- ------------- ------------ Total Construction in Progress. . . . . . . . 82,457 82,457 ----------- ------------- ------------ ---------- ------------- ------------ TOTAL OF ALL PROPERTIES. . . . . . . . $ 439,332 $ 1,750,059 $ 163,002 $2,352,393 $ 402,958 $ 228,137 =========== ============= ============ ========== ============= ============ __________ Note A - Encumbrances do not include $23.5 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.
Page 52 SCHEDULE III (CONTINUED) The changes in total cost of the properties for the years ended December 31, 2001, 2000 and 1999 were as follows:
2001 2000 1999 ------------ ------------ ------------ Balance at beginning of year . . . . $ 1,728,414 $ 1,486,224 $ 1,278,466 Additions at cost. . . . . . . . . . 662,533 260,197 244,887 Retirements or sales . . . . . . . . (38,554) (18,007) (37,129) ------------ ------------ ------------ Balance at end of year . . . . . . . $ 2,352,393 $ 1,728,414 $ 1,486,224 ============ ============ ============
The changes in accumulated depreciation for the years ended December 31, 2001, 2000 and 1999 were as follows:
2001 2000 1999 ---------- ---------- ---------- Balance at beginning of year . . . . $ 362,267 $ 319,276 $ 291,080 Additions at cost. . . . . . . . . . 58,297 47,208 42,882 Retirements or sales . . . . . . . . (17,606) (4,217) (14,686) ---------- ---------- ---------- Balance at end of year . . . . . . . $ 402,958 $ 362,267 $ 319,276 ========== ========== ==========
Page 53 SCHEDULE IV
WEINGARTEN REALTY INVESTORS MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 2001 (AMOUNTS IN THOUSANDS) FINAL PERIODIC FACE CARRYING INTEREST MATURITY PAYMENT AMOUNT OF AMOUNT OF RATE DATE TERMS MORTGAGES MORTGAGES(A) -------- --------- ------------------ ---------- ------------- SHOPPING CENTERS: FIRST MORTGAGES: Eastex Venture Beaumont, TX (Note D). . . . . . . . 8% 10-31-09 $ 335 Annual P & I $ 2,300 $ 2,012 Main/O.S.T., Ltd. Houston, TX (Note D). . . . . . . . 9.3% 02-01-20 $ 476 Annual P & I 4,800 4,397 ($1,241 balloon) INDUSTRIAL: FIRST MORTGAGES: South Loop Business Park Houston, TX (Note D). . . . . . . . 9.25% 11-01-07 $ 74 Annual P & I 439 331 ($1,241 balloon) UNIMPROVED LAND: SECOND MORTGAGE: River Pointe, Conroe,TX (Notes B and D) . . . . Prime 12-01-02 Varying 12,000 3,887 +1% ($3,887 balloon) ---------- ------------- TOTAL MORTGAGE LOANS ON REAL ESTATE (Note D) . . . . $ 19,539 $ 10,627 ========== ============= _________ Note A - The aggregate cost at December 31, 2001 for federal income tax purposes is $10,627. Note B - Principal payments are due monthly to the extent of cash flow generated by the underlying property. Note C - Changes in mortgage loans for the years ended December 31, 2001, 2000 and 1999 are summarized below. Note D - Represents WRI share of mortgage loans to joint ventures.
------------------------------- 2001 2000 1999 --------- --------- --------- Balance, Beginning of Year . . . . .$ 14,327 $ 47,828 $ 28,359 New Mortgage Loans . . . . . . . . . 33,588 Additions to Existing Loans. . . . . 205 380 1,773 Collections of Principal . . . . . . (3,905) (33,881) (15,892) --------- --------- --------- Balance, End of Year . . . . . . . .$ 10,627 $ 14,327 $ 47,828 ========= ========= =========
Page 54