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Weingarten Realty Investors (NYSE:WRI)

Q4 2009 Earnings Call Transcript

February 25, 2010 11:00 am ET

Executives

Kristin Gandy – Director, IR

Drew Alexander – President and CEO

Steve Richter – EVP and CFO

Robert Smith – SVP, Director of New Development

Johnny Hendrix – EVP, Asset Management

Analysts

Jehan Mahmood – Goldman Sachs

David Wigginton – Macquarie

Christy McElroy – UBS

Greg [ph] – Citi

Carol Campbell – Hilliard Lyons

Nick Vedder – Green Street Advisors

Rich Moore – RBC Capital Markets

Angela Aman [ph] – Reed

Chris Lucas – Robert W. Baird

Nan Rogers [ph] – Rogers Realty

Operator

Good morning. My name is Bobby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Weingarten Realty Investors fourth-quarter 2009 earnings conference call. (Operator instructions)

Thank you. Ms. Kristin Gandy, Director of Investor Relations, you may begin your conference.

Kristin Gandy

Good morning and to our fourth quarter 2009 conference call. Joining me today are Drew Alexander, President & CEO; Stanford Alexander, Chairman; Johnny Hendrix, Executive Vice President; Steve Richter, Executive Vice President and CFO; Robert Smith, Senior Vice President; and Joe Shafer, Senior Vice President and Chief Account Officer.

As a reminder, certain statements made in the course of this call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are based on management’s current expectations, and are subject to uncertainty and changes in circumstances. Actual results could differ materially from those projected in such forward-looking statements due to a variety of factors.

More information about these factors is contained in the company's SEC filings. Also during this conference call management may make reference to certain non-GAAP financial measures such as funds from operations or FFO, which we believe helps analysts and investors to better understand Weingarten’s operating results. Reconciliation to this non-GAAP financial measure is available in our supplemental information packet located under the investors relations tab of our website.

I would also like to request that callers observe a two question limit during the Q&A portion of the call in order to give everyone a chance to participate. If you have additional questions, please rejoin the queue.

Before we begin the call today, I want to remind everyone that Weingarten’s annual analyst and investor day is taking place on May 25 and 26 in Las Vegas this year. Before the tour of our Vegas asset, the management team will discuss the 2010 strategy further. Should anyone have any follow up questions for any logistical assistance with the tour, please feel free to contact me.

I will now turn the call over to Drew Alexander.

Drew Alexander

Thanks Kristin. Good morning everyone and thanks for joining the call. Before I begin, I would like to direct everyone's attention to our new supplemental package, which we will refer to several times during the call. Our supplemental can be found under the investor relations tab on our website, and as you will see we have made a number of changes.

These changes include more detailed disclosure to such categories as interest income, and more detailed breakout of secured versus unsecured debt, and additional detail on TIs just to name a few. In order to help identify the changes in the supplemental, we have shaded the new information so it is more easily identified. We think this additional information will help you in analyzing our company, and given the e-mails we have gotten, many of you agree. Thanks for those e-mails.

For Weingarten 2009 was a year focused on addressing the widespread economic challenges faced in the shopping centre market, and materially strengthening our balance sheet and liquidity position. We accomplished both. Weingarten’s strategic operating plan is to continue to improve operating fundamentals, plant seeds for growth and increase shareholder value.

While the economy has not fully recovered we believe the worst is behind us, and that our core operations will remain stable. We know our balance sheet is solid, so growth is an important part of our 2010 strategy. Late last year, we began formulating our specific growth strategies. We are seeking opportunities using a multifaceted approach. Weingarten is looking for well anchored neighborhood and community centers, as well as redevelopment and stalled or distressed development deals.

We remain focused on locations with high barriers to entry in major metropolitan areas. The seeds have been planted by our leasing, acquisition and development teams. We have been communicating with numerous contracts including real estate brokers, lenders, contractors, retailers, and property owners. We are tasking our four geographic leasing division heads and their leasing teams to source core acquisitions.

Additionally, Robert Smith and his new development team are focused on value add or redevelopment opportunities and stalled developments. Johnny Hendrix and I spend a lot of time overseeing this effort, working with all team members. We have over 40 experienced associates across our 11 offices sourcing deals, and we are confident we will see the deal is executed successfully.

Since 2009, we have evaluated over 250 projects. A few weeks ago, I was struck by a remark from Warren Buffett, when someone he knows buys a company or other asset, Buffett purchases two greeting cards. One condolence and one saying congratulations. But he waits several years, before deciding which card to send, that is because it is not always easy to spot a good deal initially.

Buffett’s comment captures our cautious approach to acquiring properties. We're not interested in growth for growth’s sake. We want to create long-term shareholder value. So we will remain focused and patient in our growth strategy. It has been a challenging economy and the challenges continue, but we are excited to once again be focused on growth.

Steve, would you please take us through the financials.

Steve Richter

Thanks Drew, and good morning to everyone. We reported funds from operation or FFO per share of $0.42 for the fourth quarter and $1.97 for the full year 2009. After adjusting for impairment losses, and gains related to early retirement of debt, FFO per share would be $0.44 for the quarter, and $2.19 for the full year. These results were affected by a number of items, which we have discussed for several quarters. The largest of these items, including the gain on the redemption of debt and the impairment of land held for future development.

The majority of these items were non-cash and related directly to the diminishing economy and the effect it is having on our retailers. We have actually summarized these items on page 45 of the new informational package. Our company’s liquidity picture is quite strong. Currently we have over $100 million of excess cash, we are investing short-term, and we have the full $500 million of capacity under our new revolving credit agreement, which now expires in February 2013.

As reported last week, we closed on our new revolver, electing not to exercise our one-year extension option available under the old agreement. Even though we are well oversubscribed at the $500 million level, the company elected to lower the size of the revolver given the reduced size of our development program, the limited opportunities we see, we currently see in the market today, and our well (inaudible) future debt maturities.

During 2009 we utilized a variety of transactions to create a very strong capital position. One-off dispositions of non-core assets for the year totaled $257 million, which further fine tuned our portfolio, while raising new capital. In addition to these one-off dispositions, we sold six properties to our Jamestown joint venture. Four of these properties we reported closed by December 31, 2009, which contributed $99 million, and after the quarter we closed the two remaining properties, contributing an additional $46.5 million.

Also during 2009, Weingarten issued $450 million of common equity, $281 million of secured debt, and $100 million of unsecured bonds, with the majority of these proceeds used to pay down our shorter term maturities and totally eliminate any balance on the revolver. In total, the company raised $1.2 billion worth of new capital last year.

In addition to the balance sheet, our related debt ratios improved nicely year-over-year further cementing our continued success in this challenging market. As an example, debt to total assets improved from 54.6% to 44.3%, and debt to EBITDA improved from 8.15 times at the end of last year to barely over 6 times at 6.04.

Turning to 2010 FFO guidance, we have completed our normal grounds up space by space budgeting process, and are narrowing our guidance range. We forecast FFO per share for 2010 will be in the range of $1.58 to $1.70 per share. These projections assume occupancy is generally flat, ending 2010 around 91%. Given our assumptions on rent, we project same-store NOI for the year will be in the range of flat to down 3%. We are also included 75 million to 125 million of acquisitions this year, but we expect most of these acquisitions to occur in the latter part of 2010 and mostly in the fourth quarter.

A full list of the 2010 guidance and assumptions can be found on page 47 of the supplement. In summary, the financial restructuring we accomplished in 2009 positions us to take advantage of the growth opportunities we talked about earlier. But as always, we will remain patient.

I would now like to turn the call over to Robert to discuss developments.

Robert Smith

Thank you Steve. On the development front, we continue to work on right sizing our development portfolio. As outlined in our supplemental, during the fourth quarter three of our properties reached an occupancy level such that they transition to operations. These properties reached an average occupancy of 84%, and are generating a current return of 5.3%. We expect these assets to improve over time and provider us some upside long-term.

For the full year of 2009, we wound up stabilizing 11 projects, and a full summary of these properties are detailed on page 10 in the supplemental. Given these stabilizations, our active development pipeline now consists of 10 projects, which require a gross investment of approximately $55 million to complete before any proceeds from land sales.

For 2010 we expect three properties to stabilize as returns in the invested amounts that are indicated in the supplemental. These three properties are currently in good shape. They are at 79% net leased and reflect a current return of 6.1% based solely on the leases that are signed or commenced to date.

Looking beyond this year, we now project two properties stabilizing 2011 and the balance in 2012 and thereafter. I will note that we pushed one of our properties to Surf City Crossing out of the 2011 group and into this latter category to reflect the delayed opening of our anchor Harris Teeter, which is a executed lease to open now in 2011 rather than 2010, and of course once they get open we need some time to finish leasing and get stabilized.

I'm happy to report that we did get our completion filled for the year. We managed to achieve $110 million in completions, which was in our guidance, and given the rough market conditions that we have been battling, we are as you can imagine quite proud of our associate efforts in pulling this off.

And we think this is reflective of our theme that the worst is behind us, and we believe that with a smaller development pipeline, we are well positioned to benefit from the continuing uptick in leasing demand. In fact, given our balance sheet and retailer relationships and our development expertise, we have our development group out, as Drew mentioned, actively looking for redevelopment opportunities or broken or stalled deals that we can get involved with that are in key infill sites, as a means of planting some seeds for future growth. And of course we are excited about this.

And now I would like to turn the call back over to Johnny to discuss operations.

Johnny Hendrix

Thank you Robert. Good morning to everyone on the call. Operating conditions are firming for Weingarten in many of our retailers. While increases are positive, it is realistic to say improvement remains gradual and comparisons are against weak results from a year ago. ICSC reported holiday sales were up 3.6%. This along with efficient inventory controls and cost-cutting resulted in better than expected margins and net profits for retailers.

For December, the census bureau reported supermarket sales were up 2.3%. Sporting goods and hobby stores were up 5%, while electronics, furniture, and department stores suffered sales decline. Discount apparel has also been doing well. For January TJX [ph] reported comp store sales increases of 12%. You probably also saw yesterday they reported great increases in profit for the fourth quarter.

Ross Stores reported comp store increases of 8%. It is significant that over 90% of Weingarten’s net operating income is generated in shopping centers that have supermarket and/or discount apparel component. Our leasing velocity remained strong. Incoming calls are up 25% and we are seeing more retailer interest in expanding.

Our team ended 2009 with a terrific push. As a matter of fact, by the week between Christmas and New Year is slow for many companies, our leasing and legal team was working overtime assigning 50 leases in the last 10 days of 2009. During the fourth quarter, our retail production was up 40% from the year ago.

The companies made good progress on the big box vacancies. The details of this progress are shown on page 46 of the supplemental. At the end of the quarter we had at least 18 of the 43 boxes available during the year, and we were in some form of negotiation for an additional 10 stores. We had 63 global meetings with retailers in 2009, and now have 55 leases that resulted from these meetings. These discussions allow us to introduce multiple locations across a national footprint. We are also able to move through the leasing process at a much faster rate.

A great example of this is the lease we are commencing with Nordstrom Rack. During our visit to Seattle, we finalized a commitment from Nordstrom, and Nordstrom Rack this opening this morning at Post Oak Center across from the Galleria here in Houston. This store marks Nordstrom Rack’s entry into Houston, and we are working closely with them on other opportunities.

Relationships with our retail customers are crucial. And we are continually in touch with our tenants looking for opportunities to expand successful stores where we can. A good example are two remodels underway in Memphis. First at Bartlett shopping center, Kroger is expanding by 21,000 square feet, and adding a fuel station. We also agreed to expand Kroger by 12,000 square feet at Mindenhall [ph] shopping center. These deals involve many moving pieces with construction, entitlements, relocating shop tenants, approval for fuel stations and negotiating renewals and expansions with Kroger.

As a result, Kroger should generate higher sales and improve margins. And at the same time, we have repositioned our properties and extended our anchor’s term creating shareholder value. Many of the retailers we are monitoring have improved their financial condition from a year ago, specifically national retailers, many of which are public companies, have been able to recapitalize or restructure debt giving us confidence they can weather this downturn.

We still remain concerned about categories including books, video, and home furnishings. As you know, Hollywood Video entered Chapter 11 bankruptcy. Our exposure to them is pretty small. We only have eight leases totaling 38,000 square feet. Local tenants have not generally experienced the same improvements as national retailers. 127 tenants fell out during the quarter. This is consistent with the fourth quarter of 2008. Contraction of credit continues to cause small tenants problem.

Shop owners are having difficulty raising capital, and many are tapped out financially. They are unable to buy adequate inventory or advertise. For the most part, we have been able to keep up with the fallout pace with the improved leasing velocity. Weingarten’s occupancy fell 30 basis points during the fourth quarter. Much of the reduction was related to two spaces in Texas, where we accepted a free to terminate a theater, and secondly where we relocated a bookstore into a Weingarten redevelopment nearby.

We actually picked up occupancy in California, Arizona, Florida and Nevada during the quarter. And over the last three quarters combined, our retail occupancy has increased. Looking forward, we are expecting a small decline in the overall currency during the first quarter of 2010 to around 90%. I expect an increase to follow through the balance of 2010 as we continue to release the big boxes and shop spaces. Our budget predicts an average occupancy of close to 91% for the year.

Leasing spreads in spaces commencing during the quarter deteriorated a little. For the year we produced increases of 6.2%. This metric will decline during 2010. New leases and renewals that are currently signed and not commenced have decreased 3.6%. This is detailed on page 24 of the supplemental. Clearly the box retailers have taken advantage of the breath [ph] in available spaces over the last 18 months, but as good spaces are absorbed and no new shopping centre spaces build, I do think we will see a tipping point where the box retailers, most of whom are public company needing to grow, we will be on a more balanced playing field with landlords.

This should allow shopping centre owners with quality locations to improve rent spreads going forward. Finally, I think it is worth noting that the same property NOI that we are projecting for 2010 is going to be a bit lumpy. For example, during the first quarter of last year, we were still receiving revenue from Circuit City, Goody's and Linens 'n Things. So the first quarter 2010 comps will be a little more difficult than the balance of the year.

To quickly run through operations, retail sales and profits are up. Retailers are healthier. Leasing is going well. Occupancies held up during the last three quarters, and we are optimistic leasing stretch can improve as we get near a tipping point. Drew, I think had a few comments before we go to questions.

Drew Alexander

Thanks Johnny. While 2009 was very challenging, we accomplished a great deal. Retail occupancy remained above 91%. We sold $257 million of non-core assets for fine tuning our portfolio and raising capital. Our total estimated final investment in the new development pipeline is approximately $175 million, which is around 3% of total assets. We finished the year with our revolver completely paid off and additional cash on hand raising over $1 billion worth of capital during the year.

Our management team and board are quite seasoned. Although our 2009 results were not optimal, there were better than many anticipated and I thank everyone for their help. We are now looking forward to 2010 and the opportunities to grow.

Before I open it up to questions, let me answer a question to give a little background on the dividend increase. We feel the economy while not great has stabilized, and we have good access to capital. We are sensitive to the dividend reduction last year, and felt that this increase was an appropriate sign that we had turned the corner. We are also sensitive to our taxable income estimates.

So considering a number of factors, the board elected to increase the quarterly dividend by $0.01 per share to $0.26 per share per quarter, a 4% increase. The new $1.04 per share yearly dividend represents a 63% payout ratio to the midpoint of the full year FFO range. The increase only uses about $5 million of extra cash. So we're positioned to increase the dividend again when appropriate.

Thank you and we look forward to your questions. Bobby we will take questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Jay Habermann of Goldman Sachs.

Jehan Mahmood - Goldman Sachs

Hi guys. This is Jehan on for Jay. Just the first question on guidance, and the same (inaudible) range of flat to down 3%, Johnny, you mentioned last quarter that the sort of biggest variable around that range was the amount of bankruptcies that we've seen this year end. Given that Q1 has been pretty quiet on that front, have your thoughts changed at all, like the variables behind the range? Do you think that we could see more of the swing on the rent side versus the occupancy side, and I guess just the overall comfort with the 91% number for the year?

Johnny Hendrix

You know, there are a lot of variables associated with the occupancy. Obviously, you know, we mentioned before that we are concerned about a couple of categories specifically books and video and home furnishings. You know, we have some exposure in those categories, and we feel like you know, we have appropriately guessed kind of where we will be at the end of the year with the 91% occupancy. Obviously, if we don't have any bankruptcies, we'll end up better than that but we have anticipated that we have more than we've seen so far.

Jehan Mahmood - Goldman Sachs

Thanks. That's helpful. And then, I guess, just switching gears for a moment to the comments on your outlook for acquisitions, understandably, a lot of that is expected to happen kind of in the second half of the year. But are you guys seeing much on the market today that interests you? And if not, is it more of a function of pricing today or you know, is it just that the assets don't interest you from a quality standpoint?

Drew Alexander

This is Drew. It's a combination of both. There haven't been very many hardly any very, very good quality properties come to market. As we mentioned, we have looked at a lot of properties but we're also been very patient and we do expect there will be more opportunities towards the end of the year and into next year. So we'll continue that patience. So it is both that the number of quality properties is very, very low and the rising expectations for A minus B plus properties haven't aligned with our goal.

The biggest issue as we talked about before is getting agreement on the net operating income, given our 11 regional offices, 40 experienced associates, we do a very thorough space by space underwriting, and we are very comfortable with our NOI projections and very comfortable we know where market rents are going. We think our boots on the ground gives us a big advantage in this regard, and oftentimes we don't agree with the seller, you know, on NOI and if somebody, you know, has a more optimistic view, we'll continue to be patient, because we think we know our markets and we know what rents and occupancies are.

Jehan Mahmood - Goldman Sachs

Thanks guys.

Operator

Your next question comes from the line of David Wigginton of Macquarie.

David Wigginton - Macquarie

Thank you. Good morning guys. With respect to the big box leasing detail you broke out, how many of the 18 boxes or leased boxes have already started paying rent and when do the remaining start? And I guess can you also provide us with an update of what activities have occurred so far in the first quarter?

Johnny Hendrix

Yes, David we -- I think Nordstrom Rack is opening today. So, that's one of them that is commencing today. Other than that I think we have only one of the other boxes that has commenced, and the balance of them will commence during 2010.

David Wigginton - Macquarie

Okay, great. So is that, I mean, is that going to be heavier weighted to one particular quarter over another? Or is it --

Johnny Hendrix

No, I think it's going to be pretty even throughout the year. You know, we really started making progress on leasing the boxes during the first quarter of last year, and you know, as you go through the cycle of entitlements and construction, it takes about a year. We're going to have quite a few of them that will be opening up for Easter and then back to school will be another big time and then again before Christmas. So, you know, it'll probably be pretty well-balanced throughout those time frames.

David Wigginton - Macquarie

Is there any activity on the 15 boxes listed as vacant?

Johnny Hendrix

Yes, there is and I appreciate you saying that. You know, we are like I said out in the market making really good progress on all of the boxes. We have the 10 that we were negotiating on, we have two -- I am sorry, three of them assigned since the end of the quarter and we've added a few more to the negotiation. I think we'll have another three signed by the end of this quarter. So I'm feeling you know, like we'll have six more done.

David Wigginton - Macquarie

Right. Okay. And then just I think you mentioned you expect occupancy to fall to 90% in the first-quarter, what's driving that decline?

Johnny Hendrix

Some of what's driving it is the small tenants, you know, some of the shop space that we're continuing to lose. The company only has 30% of our space leased to local tenants and 70% to national and regional tenants, but the local tenants, smaller tenants have made up about 80% of the fallout over the last half of 2009, and we have not seen that abate.

David Wigginton - Macquarie

So, is accelerating or is it just sort of going on?

Johnny Hendrix

No, it's the same.

David Wigginton - Macquarie

Okay. Thank you.

Operator

The next question comes from the line of Christy McElroy of UBS.

Christy McElroy - UBS

Hi. Good morning guys. Just a couple of questions on the development pipeline, Mohave Crossroads was originally supposed to stabilize in 2011, you stabilized it in Q4. Just wondering about the change there? And then the yields associated with the properties that were stabilized in Q4 was 5.3% on average. Just wondering if you could break out those yields on each of the projects?

Robert Smith

This is Robert. I'll respond to the question. You know, we expect Mohave Crossroads to be stabilized if you will three properties, and these are all good projects that have gone reasonably well. Unfortunately they were caught up in this whole economic timing nationally, and essentially we got to the point where these properties achieved sort of an occupancy plateau, and we really don't see any you know, big momentum that's going to change that.

So they are really taking on the characteristics of an operating property with sort of flat expectation from here, and it is much more efficient for us to absorb that into operations and to track it from there and so we just wanted to you know, capture that now in kind of mark-to-market where we wound up on the average for the portfolio at a 5.3% return, and we'd rather just keep it in average rather than talk about specifically in each asset.

Christy McElroy - UBS

And now that you've moved these projects over to, or out of CIP, how much NOI is currently being generated from the assets in CIP?

Robert Smith

I don't really -- anything sitting in CIP is not income producing.

Christy McElroy - UBS

Okay. Okay. And then, just lastly, you increased your land held for development, was this a new purchase or was this something that was previously categorized as something else?

Steve Richter

No, it was categorized as something else. There is no new addition into that category.

Christy McElroy - UBS

What was it previously?

Steve Richter

It came out as a new development program. It was phasing out some other properties. We faced a couple of the existing properties and moved them over to land held.

Christy McElroy - UBS

Okay, so putting them on the back burner for now?

Johnny Hendrix

No, there was nothing new on the back burner. I think it was --

Steve Richter

It has to do with the transfer of CIP into the assets that were already classified as land held. There were no new additions in terms of number of properties that are specific properties, but the transfer of dollars out of CIP for incremental cost that came in of those projects.

Johnny Hendrix

I think we went back and double-checked all the allocations, and I think they have something to do with it. There is nothing new in there.

Steve Richter

No new projects.

Christy McElroy - UBS

Okay. Thank you.

Operator

Your next question comes from the line of Quentin Velleley of Citi.

Greg - Citi

Good morning. This is Greg [ph] (inaudible) is on as well. Could you provide a bit more color on the decline in same-store NOI from the west portfolio and expectations from that portfolio through this year?

Drew Alexander

Yes, the primary cause for same property NOI decline is clearly occupancy. You know, the west had the highest occupancy in the portfolio. The peak is somewhere around 97%. I think it has fallen to around 92.5% today. You know, we have had more tenant fallout in the west than the central and that's you know, primarily where those numbers are coming from.

Greg - Citi

Okay. And then could you break out the new lease spreads between the shop space and the junior anchors?

Drew Alexander

Yes, these are the new lease spreads for 2009, where over 15,000 square feet was minus 11.5. Under 15,000 square feet was minus 4, and then on the renewals, over 15,000 square feet is 7.2% and under 15,000 square feet was plus 9.7% for total of 6.2%.

Greg - Citi

Great. Thanks.

Operator

And your next question comes from the line of Carol Campbell of Hilliard Lyons.

Carol Campbell - Hilliard Lyons

Good morning. Where do you all see debt add up end of 2010?

Steve Richter

I'm sorry Carol. I didn't --

Johnny Hendrix

Debt at the end of 2010.

Steve Richter

Actually, quite frankly it is -- our 2010 business plan as I mentioned assumes a little bit of acquisitions somewhere between that $75 million and $125 million. If you assume that, you can very simply just take the about a little over $100 million of maturities, reduce debt for that and increase it for the $75 million to $125 million, which is pretty much the same number. So our business plan actually has it fairly flat.

Carol Campbell - Hilliard Lyons

Okay. Thank you.

Operator

Your next question comes from the line of Nick Vedder of Green Street Advisors.

Nick Vedder - Green Street Advisors

Good morning. Just one quick question for you, with respect to the, I think, mid-40s range on total leverage that you had thrown out earlier, how is the asset value being calculated for that?

Steve Richter

That's based on book. Quite frankly though if you use a, you know, I don't know exactly what Street consensus cap rate would be for our NAV calculation, but if you're somewhere in the neighborhood of you know, high 7s to low 8s kind of cap rate, you'll get pretty close to the same number.

Nick Vedder - Green Street Advisors

Okay. And so I guess, in terms of you look like you're fairly comfortable with your leverage position right now. So do you expect any further deleveraging over the course of this year or next?

Steve Richter

Not really. As you mentioned we are pretty comfortable where we are. I think it's important to note that as we improve the occupancy back, you know, it improves those ratios significantly specifically the debt-to-EBITDA ratio or metric, which seems to be kind of the new industry metric we all seem to want to use going forward. So, you know, we are about six times today, and I think that number will improve nicely down into the 5 as you know, we lease back up the portfolio and you generate that additional NOI.

Nick Vedder - Green Street Advisors

Okay. And then just with respect to the land held for development, I'm just curious how you think about selling that and redeploying the capital versus waiting for market conditions to improve to the point where development makes sense?

Robert Smith

Well, you know, I think, this is Robert. With respect to our long-term plans for the land held, we continue to believe that these are excellent locations have development, potential ones who are back in an economic recovery. We know from a lot of the conversations that we are having with our major retailer clients that they will be -- they are thinking about growth again, and there's going to be needs for properties that are already entitled and ready to go. So, you know, at this stage we look at a more, as an asset for long-term growth. Now, that doesn't mean we are precluded from selling them if there was ever a deal that made sense, but we are not actively trying to promote that.

Nick Vedder - Green Street Advisors

Okay. Thanks.

Operator

Your next question comes from the line of Rich Moore of RBC Capital Markets.

Rich Moore - RBC Capital Markets

Hello. Good morning guys. Steve, what do you plan to do with the cash that you have on the balance sheet? It didn't sound like you're planning to pay down any debt with that and I'm curious. Does that just sit there for a while?

Steve Richter

Rich, quite frankly I would like to buy some debt back. Most of our, the majority of our MTNs [ph] and bonds are in like company buying old accounts. Our debt does not trade that much. I will tell you that for example thus far in this year we've already bought back a little bit of debt less than $10 million. So we are out there. We would enjoy reducing that debt because obviously the hundred plus million we have today is earning around, you know, 50-75 basis points. So in the business plan again as we talked about doesn't have us investing any money till late in the year. That of course will depend upon the market and what opportunities we see and we'd love to put that together, put that money to work quicker, however, as we’ve said a couple times, I think we'll be patient.

Rich Moore - RBC Capital Markets

So that'll probably stay as cash for the most part for the year, you think?

Steve Richter

Yes.

Rich Moore - RBC Capital Markets

Okay. Good. Thank you. And then, with you

guys’ new joint venture, I mean in any joint venture, for that matter, are so many acquisitions you're looking at planned for joint ventures so that you can maybe take a little different view of the kinds of assets are looking at, or how you're looking at, I guess, the whole joint venture concept for acquisitions?

Drew Alexander

Hi Rich. It's Drew. Good morning. We think joint ventures are absolutely a long-term, important part of our strategy, and as you know we've done several of them and we feel that the platform that we have has a lot of value. Like now, given what you and Steve talked about in terms of the cash that we have, it's not the first tier thing that we're looking for, we're looking to do you know, more investments, you know, for ourselves just for the cash flow. So long-term we will certainly look to joint ventures, but don't know that it's likely to be a big part of our strategy in 2010.

Rich Moore - RBC Capital Markets

Okay, very good. And last thing, great job on the supplemental. Thank you guys.

Drew Alexander

Thank you.

Steve Richter

Thank you Rich.

Operator

And your next question comes from the line of Joseph Dazio of JP Morgan. Sir, your line is open. Your next question comes from the line of Angela Aman [ph] of Reed.

Angela Aman - Reed

I had just a quick clarification on the development pipeline. Going back to sort of an earlier question, I guess you guys said there was no NOI coming from properties under development today, which would mean that the $63 million listed as (inaudible) completions have been moved out of CIP? Is that correct?

Steve Richter

Angela, it's a little bit of a mixture, and I don't mean to get too far into accounting but the property, development as it goes through its natural stages, it sits in CIP, until it becomes income producing, and then it moves out. So there are, for example the 10 projects that are sitting out there today, there are pieces of that that have been completed, and they are more closed out, and they are not sitting as CIP.

So anything sitting in CIP is not income producing, but there is some investment in the existing portfolio or the new development portfolio that is income-producing. For example, what we just closed out in Q4 as a 5.3 return that's obviously was sitting in there that did not come on line, you know, at the end of the quarter.

Robert Smith

The completions number is NOI producing.

Steve Richter

Yes, and that's my point. When we take it, when it becomes income producing it's moved to property and that's actually what triggers the completion.

Angela Aman - Reed

Okay, all right. So the $63 million should've been moved out of CIP then, it sounds like? I guess one thing I'm trying to reconcile, is the amounts provided on page 10 relative to the CIP balance and land under development balance on page 7. I guess if I start with $180 million of spend inception to date, and I back off the unconsolidated joint venture properties, and then I back off the completions on the development properties, I get to an implied CIP balance of about $60 million relative to the, I guess, $140 million sitting in CIP in land under development.

Steve Richter

Yes Angela, I would say it's a little more involved than that because of the JVs and the way it flows through the financials, we'll be more than happy to walk you through that off-line.

Angela Aman - Reed

Okay. Thanks guys.

Operator

Your next question comes from the line of Chris Lucas of Robert W. Baird.

Chris Lucas - Robert W. Baird

Good morning guys.

Steve Richter

Good morning.

Chris Lucas - Robert W. Baird

Just Steve, a quick point of clarification. On the transition of the lines, there are no charges associated with that?

Steve Richter

When you say the transition of the new revolver?

Chris Lucas - Robert W. Baird

Yes. Were there any penalty fees or anything like that that we will see the first quarter?

Steve Richter

No, there were no penalty fees at all. We obviously whenever you get banks to commit they have their hand out for commitment fees, but no, there is no penalty.

Chris Lucas - Robert W. Baird

Okay. And then just, recognizing you have cash on the books, but also recognizing that the market is somewhat void of quality product. Is there any thought to taking advantage of the market right now and doing dispositions? Or using existing stabilized assets for JV formation and pulling some additional capital out?

Steve Richter

As we mentioned in our assumptions, we do anticipate doing some dispositions this year. We will certainly delay less than last year as we are a lot more selective pricing wise. So we do definitely look at some non-core dispositions and further improving our already strong portfolio, but I don't think that joint ventures are likely to play a big part in our plans for 2010 unless, you know, something very dramatic happened with the amount property coming to market.

Chris Lucas - Robert W. Baird

And then last question, just any thoughts about entering any new market at this point?

Steve Richter

Robert -- I've been handling a lot of day-to-day stuff on new development and Robert Smith has been spending a tremendous amount of time both in Washington DC, and also to expand our footprint in the Pacific Northwest, you know, Robert actually used to live in the Pacific Northwest. So we're looking to come join you up there in lovely DC as a new market looking really across the majority of the rest of our footprint, you know, the West Coast all through Texas, and into the Southeast as I think we've discussed in some other context the properties that we have in the Midwest. You know, we probably won't be adding a lot to. So across most of our footprint and the addition of Washington DC is where we are focused.

Chris Lucas - Robert W. Baird

Robert, give me a call the next time you're in town.

Robert Smith

I'll definitely do that.

Chris Lucas - Robert W. Baird

Thanks, guys.

Operator

Your next question comes from the line of Nan Rogers [ph] of Rogers Realty.

Nan Rogers - Rogers Realty

Good morning. I'm sure this is right in front me somewhere, but I'm not seeing it. Maybe you can direct me. In your fourth quarter calls, you had mentioned in your joint venture portfolios you had 124 properties and $3 billion in assets, and I notice on page 20, you're down to 85 properties and $2 billion in assets. Could you reconcile that for me?

Steve Richter

I think part of that difference is we were using the $3 billion. We were using more at market, and these were -- these numbers are all at historical cost. In terms of the reconciliation of the numbers, I don't believe that we had any dispositions inside JVs, but I think it has to do again with the difference between unconsolidated and consolidated, but again we are more than happy to get with you off-line to reconcile that.

Nan Rogers - Rogers Realty

Well thank you very much. I'll get with Christy later.

Steve Richter

Thank you.

Nan Rogers - Rogers Realty

You bet.

Operator

(Operator instructions) Now, I'm showing no questions at this time sir.

Drew Alexander

So thank you everyone so much. I know we'll see some of you over the next few days, and we want to extend an invitation to everybody to our analyst tour in Las Vegas. We will be around this afternoon, if there is any other questions, and we thank you so much for your interest in the company. Have a great day.

Operator

Ladies and gentlemen, this does conclude today’s conference call. Thank you for your participation. You may now disconnect.

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Source: Weingarten Realty Investors Q4 2009 Earnings Call Transcript
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