REAL
ESTATE for
EVERYDAY
RETAIL
®
2017 ANNUAL REPORT
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2 0 1 7 A N N U A L R E P O R T
C O M PA N Y H I G H L I G H T S
YEAR ENDED DECEMBER 31,
FINANCIAL DATA (In thousands, except per share data):
2017
2016
2015
NET INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS
FUNDS FROM OPERATIONS ATTRIBUTABLE TO
COMMON SHAREHOLDERS (NAREIT FFO) (1) - DILUTED
CORE FUNDS FROM OPERATIONS ATTRIBUTABLE TO
COMMON SHAREHOLDERS (CORE FFO) (1) - DILUTED
FFO WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - DILUTED
$ 335,274
$ 238,933
$ 160,835
$ 311,601
$ 293,652
$ 260,029
$ 318,446
$ 300,894
$ 274,772
130,071
128,569
125,801
PER COMMON SHARE:
NAREIT FFO - Diluted
Core FFO - Diluted
Net Income Attributable to Common Shareholders - Diluted
Cash Dividends
$ 2.40
$ 2.45
$ 2.60
(2)
$ 2.29
$ 2.28
$ 2.07
$ 2.34
$ 2.18
$ 1.87
$ 1.29
$ 1.46
$ 1.38
NET DEBT TO ADJUSTED EBITDA
5.3x
5.9x
5.8x
PORTFOLIO DATA (At year end):
NUMBER OF PROPERTIES
TOTAL SQUARE FEET (3)
OWNED SQUARE FEET
SIGNED OCCUPANCY PERCENTAGE
AVERAGE BASE RENT
204
41,279
26,351
94.8%
220
44,654
28,535
94.3%
232
45,635
28,035
95.1%
$ 18.69
$ 17.93
$ 16.92
(1) NAREIT FFO is a non-GAAP financial measure commonly used in the real estate industry that we believe provides useful
information to investors. Core FFO, also a non-GAAP financial measure, is an additional supplemental measure we use as it is more
reflective of the core operating performance of our portfolio of properties. Please refer to Management’s Discussion and Analysis of
Financial Condition and Results of Operations in the accompanying Form 10-K for a definition of NAREIT FFO and Core FFO, and
for a reconciliation of net income attributable to common shareholders to NAREIT FFO and Core FFO.
(2) Includes a special dividend of $0.75 per common share.
(3) Includes area available to be leased that is owned by WRI, our joint venture partners and others not under our management.
D I V I D E N D H I S T O R Y
H I G H LY P R O D U C T I V E G R O C E R S
$2.50
$2.00
$1.50
$1.00
$1.10
$1.16
$1.22
$0.50
$0.75
6 % C A G R *
$0.25
$1.30
$1.46
$1.54
$1.38
GROCERS SALES AVERAGE
$633 PSF
All Other
25%
Grocery
Anchored
75%
2011
2012
2013
2014
2015
2016
2017
Regular Dividend
Special Dividend
* Compound Annual Growth Rate
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L E T T E R T O O U R S H A R E H O L D E R S
2017 saw the media significantly expand their focus and coverage of the changing consumer shopping patterns.
This was further fueled by Amazon’s purchase of Whole Foods. The evolution of these shopping habits, although
not new, began a debate on the future of retail real estate. We continue to believe, as we have for several years,
that the omni-channel retail model will be the successful retail format going forward. Additionally, with Amazon’s
purchase of Whole Foods, it confirms that good retail real estate is required to satisfy the consumer’s future
demands. Coupled with increasing interest rates, this resulted in a significant decline in the market value of all
REITs, including retail REITs. Given this backdrop, our accomplishments in 2017 were especially impressive as
we shifted our external growth strategy while making sure we remained laser-focused on operating our existing
portfolio and produced strong results in 2017, generating the following highlights:
• Net income attributable to common shareholders (“Net Income”) was $2.60 per diluted share
(hereinafter “per share”) for the year compared to $1.87 per share in 2016;
• Core Funds From Operations Attributable to Common Shareholders (“Core FFO”) increased
4.7% to $2.45 per share for the year ended 2017 compared to 2016;
• Common dividend per share increased 2.6% to $0.395 per quarter or $1.58 per share on an
annualized basis;
• Signed occupancy increased to 94.8% from 94.3% a year ago;
• Same Property Net Operating Income (“SPNOI”) including redevelopments increased 2.6%
over the year ended 2016;
• Rental rates on new leases and renewals completed during the year were up 23.1% and
9.0%, respectively;
• Dispositions totaled $444 million in 2017 and $221 million to-date in 2018;
• Balance sheet leverage was reduced with Net Debt to Adjusted EBITDA of 5.3 times; and,
• Invested $124 million in new development and redevelopment projects in 2017.
While we believe we will experience some headwinds going forward, the significant transformation of our portfolio
over the last several years and the deleveraging of our balance sheet will allow us to move forward in a controlled,
confident manner. We believe that Weingarten Realty is properly positioned to generate solid returns to our
shareholders while maintaining a very conservative risk profile going forward.
G R E AT O P E R AT I O N S L E A D T O O U T S TA N D I N G O P E R AT I N G R E S U LT S
For the year ended December 31, 2017, Funds From Operations Attributable to Common Shareholders in
accordance with the National Association of Real Estate Investment Trusts definition (“NAREIT FFO”) was $311.6
million or $2.40 per share compared to $293.7 million or $2.28 per share for 2016. Core FFO, which we consider
to be the most important measure of our performance, was $318.4 million or $2.45 per share for 2017 compared
to $300.9 million or $2.34 per share for 2016. The increase is primarily due to increased income from the existing
portfolio, specifically increases in base minimum rent and the full year effect of the significant acquisitions we
closed in 2016. Reduced interest expense from favorable debt refinancings completed in 2016, as well as a
reduction in our outstanding debt from our 2017 dispositions also contributed to the increase; however, these
increases were offset by the dilution from the issuance of additional common shares under our at-the-market
equity offering program during 2016 and by our disposition program.
1
Among the most important operating metrics in our industry is SPNOI. During 2017, SPNOI, including the impact
of our redevelopment program, increased by 2.6% over 2016, driven primarily by an increase in base minimum
rent. Occupancy of our Same Property portfolio was 95.4%. Occupancy of spaces greater than 10,000 square
feet increased to 97.3% from 96.5% in the prior year as we filled most of the spaces vacated in 2016 due to
tenant bankruptcies. We also produced solid leasing results during 2017 with 1,043 new leases and renewals
totaling 4.3 million square feet and representing $82.4 million of annualized revenue. The high quality of our
transformed portfolio allowed us to demand higher rents in our lease negotiations, which resulted in average rental
rate increases on new leases and renewals signed during the year of 11.6%, with rental rates on new leases up a
very strong 23.1% and renewals up 9.0%.
We continue to move
forward on an exciting
redevelopment project
at our prominent River
Oaks Shopping Center
in Houston, Texas,
where we are planning
a 30-story luxury
high-rise with around
10,000 square feet of
ground floor retail.
N E W D E V E L O P M E N T / R E D E V E L O P M E N T P R O G R E S S I O N
We are making great progress on all of our projects under development.
West Alex, formerly known as Gateway Alexandria, is our mixed-use
development in Alexandria, Virginia. This project will include 278 multi-
family units, 100,000 square feet of retail anchored by a 62,000 square
foot Harris Teeter grocery store. Our net investment upon completion is
estimated at $197 million.
In the second quarter, we closed on the land for Centro Arlington,
formerly known as Columbia Pike, a mixed-use project in Arlington,
Virginia that we are developing in partnership with a prominent
residential developer. This project will include 366 multi-family units
and 72,000 square feet of retail also anchored by a 52,000 square foot
Harris Teeter grocery store. The Company’s share of the net investment
upon completion is estimated at $135 million before the sale of the
residential component, based on an ownership interest of 90%.
The Whittaker in West Seattle, Washington is a six-story, mixed-use
project that has been co-developed with Lennar. Our 63,000 square
foot retail portion was delivered to us in early 2017 and is anchored by
Whole Foods and is currently 93% leased.
We continue to move forward on an exciting redevelopment project at our prominent River Oaks Shopping Center
in Houston, Texas, where we are planning a 30-story luxury high-rise with around 10,000 square feet of ground
floor retail. The tower will include over 300 residential units, and the total project cost, including a parking garage,
will approximate $150 million. This is an incredible infill location adjacent to a premier residential community
in Houston. This addition to our property will clearly benefit all of our merchants and greatly enhance the value
of this already outstanding asset. We expect to break ground around the third quarter of 2018 with stabilization
estimated in 2021.
We also have 15 active redevelopment projects, not including our River Oaks residential tower, where we will invest
about $80 million at an average return of around 11%. During 2017, we invested about $24 million in these
redevelopment projects. With numerous additional projects in the pipeline, redevelopments will continue to be an
important investment vehicle for us in the future.
D I S P O S I T I O N S D R I V E A S T R O N G B A L A N C E S H E E T
With the differential between the value of our properties in the private real estate market and what the implied
value is based on our share price or public valuations, we feel the sale of additional properties was the best capital
allocation in 2017. As such, we sold properties totaling $444 million in 2017 and have closed on an additional
$221 million to-date in 2018. We have focused on improving the overall quality of our portfolio by reducing
2
3
our exposure to tertiary markets and power centers while at the same time providing capital for future growth,
including our redevelopment and new development programs. We have also utilized these disposition proceeds to
pay down debt, which reduced both our Net Debt to Adjusted EBITDA to a very strong 5.3 times and Debt to Total
Market Capitalization to 32.8% at year-end. Our debt maturities remain very favorably laddered with no significant
maturities through 2020.
If our share price continues to trade at significant discount to our net asset value (NAV), we will also consider
repurchasing a modest amount of our common shares, however we are extremely focused on maintaining low
leverage and a fortress balance sheet. We will also continue to pursue quality acquisition opportunities, but the
environment remains extremely competitive.
With the significant gains generated by our 2017 dispositions, we paid a special dividend in December 2017 of
$0.75 per share and given our disposition activity to-date in 2018, we will likely also pay a special dividend this year.
S U S TA I N A B I L I T Y
We recognize environmental responsibility as an obligation and an opportunity to add long-term value to our
properties and to benefit our patrons, tenants and investors. As such, we created the GreenForward program in
order to officially implement and track sustainable initiatives across our portfolio. We commit ourselves to being
a corporate partner to the environment and the community we serve. Our Corporate Responsibility Report is
available online for an in-depth look at our sustainability initiatives and accomplishments.
2 0 1 8 A N D B E Y O N D
We expect challenges in our business, however our portfolio is significantly
stronger than it has ever been and continues to improve as we dispose of
assets with higher risk profiles. Accordingly, we feel good about the ability of
our portfolio to produce solid results again in 2018 and beyond.
As always, we thank our associates and our Board of Trust Managers for their
incredible efforts and renew our pledge to you, our investors, to continue to
do everything possible to enhance long-term shareholder value.
We feel good about
the ability of our
portfolio to produce
solid results again
in 2018 and beyond.
2
3
Andrew M. Alexander
President/Chief Executive Officer
Stanford Alexander
Chairman
O F F I C E R S
MANAGEMENT TEAM
Andrew M. Alexander
President/Chief Executive Officer
Johnny L. Hendrix
Executive Vice President/Chief Operating Officer
Stanford Alexander
Chairman
Stephen C. Richter
Executive Vice President/Chief Financial Officer
SENIOR VICE
PRESIDENTS
VICE
PRESIDENTS
Lee Brody
Senior Vice President/
Leasing
Joe D. Shafer
Senior Vice President/
Chief Accounting Officer
Darren Amato
Divisional Vice President/
Acquisitions
Frank Rollow
Regional Vice President/
Property Management
Richard H. Carson
Senior Vice President/
Development and
Acquisitions
Gerald Crump
Senior Vice President/
Leasing
Timothy M. Frakes
Senior Vice President/
Development and
Acquisitions
F. William Goeke III
Senior Vice President/
Property Management
Alan R. Kofoed
Senior Vice President/
Construction
Miles Sanchez
Senior Vice President/
Leasing
Mark D. Stout
Senior Vice President/
General Counsel
Karl Brinkman
Area Vice President/
Leasing
Kristen Seaboch
Divisional Vice President/
Controller
Michael Townsell
Senior Vice President/
Human Resources
Chris Byrd
Area Vice President/
Leasing
Candy Tillack
Regional Vice President/
Property Management
Steven R. Weingarten
Senior Vice President/
Leasing
William M. Crook
Divisional Vice President/
Associate General Counsel
Taylor Vaughan
Area Vice President/
Leasing
Jenny Hyun
Divisional Vice President/
Associate General Counsel
Gary Wankum
Divisional Vice President/
Construction
Marc A. Kasner
Divisional Vice President/
Associate General Counsel
Michelle Wiggs
Vice President/
Investor Relations
Terri Klages
Divisional Vice President/
Assistant Controller
Mark Witcher
Divisional Vice President/
Acquisitions
Patrick Manchi
Area Vice President/
Leasing
Ken Wygle
Area Vice President/
Leasing
Kent Maxey
Regional Vice President/
Property Management
4
Table of Contents
(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
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
(State or other jurisdiction of incorporation or
organization)
2600 Citadel Plaza Drive, Suite 125
Houston, Texas
(Address of principal executive offices)
Registrant’s telephone number, including area code
74-1464203
(I.R.S. Employer Identification No.)
77008
(Zip Code)
(713) 866-6000
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, $.03 par value
Title of Each Class
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YES NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.YES NO
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 NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YES NO
The aggregate market value of the common shares of beneficial interest held by non-affiliates on June 30, 2017 (based upon the
most recent closing sale price on the New York Stock Exchange as of such date of $30.10) was $3.6 billion.
As of January 31, 2018, there were 128,456,753 common shares of beneficial interest outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Proxy Statement relating to its Annual Meeting of Shareholders to be held on April 24, 2018 have been
incorporated by reference to Part III of this Form 10-K.
Table of Contents
Item No.
PART I
TABLE OF CONTENTS
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Shares of Beneficial Interest, Related Shareholder Matters
and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Trust Managers, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters
Certain Relationships and Related Transactions, and Trust Manager Independence
Principal Accountant Fees and Services
PART IV
15.
Exhibits and Financial Statement Schedules
Signatures
Page
No.
1
3
14
14
22
22
23
25
26
43
44
88
89
91
91
91
91
92
92
92
98
Table of Contents
Forward-Looking Statements
This annual report on Form 10-K, together with other statements and information publicly disseminated by us, contains
certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995 and include this statement for purposes of complying with those safe harbor provisions. Forward-
looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations,
are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar
expressions. You should not rely on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect actual
results, performances or achievements. Factors which may cause actual results to differ materially from current
expectations include, but are not limited to, (i) disruptions in financial markets, (ii) general economic and local real
estate conditions, (iii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency
or general downturn in their business, (iv) financing risks, such as the inability to obtain equity, debt, or other sources
of financing on favorable terms and changes in LIBOR availability, (v) changes in governmental laws and regulations,
(vi) the level and volatility of interest rates, (vii) the availability of suitable acquisition opportunities, (viii) the ability to
dispose of properties, (ix) changes in expected development activity, (x) increases in operating costs, (xi) tax matters,
including the effect of changes in tax laws and the failure to qualify as a real estate investment trust, and (xii) investments
through real estate joint ventures and partnerships, which involve risks not present in investments in which we are the
sole investor. Accordingly, there is no assurance that our expectations will be realized. For further discussion of the
factors that could materially affect the outcome of our forward-looking statements and our future results and financial
condition, see “Item 1A. Risk Factors.”
PART I
ITEM 1. Business
General Development of Business. Weingarten Realty Investors is a real estate investment trust (“REIT”) organized
under the Texas Business Organizations Code. We, and our predecessor entity, began the ownership of shopping
centers and other commercial real estate in 1948. Our primary business is leasing space to tenants in the shopping
centers we own or lease. We also provide property management services for which we charge fees to either joint
ventures where we are partners or other outside owners.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 and
the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K for
the year ended December 31, 2017, for information on certain recent developments of the Company.
Financial Information about Segments. We are in the business of owning, managing and developing retail shopping
centers. As each of our centers has similar characteristics and amenities, our operations have been aggregated into
one reportable segment. See the Consolidated Financial Statements and Notes thereto included in Item 8 of this
Annual Report on Form 10-K for further information regarding reportable segments.
Narrative Description of Business. At December 31, 2017, we owned or operated under long-term leases, either
directly or through our interest in real estate joint ventures or partnerships, a total of 204 properties, which are located
in 17 states spanning the country from coast to coast. The portfolio of properties contains approximately 41.3
million square feet of gross leasable area that is either owned by us or others.
We also owned interests in 25 parcels of land held for development that totaled approximately 18.0 million square
feet.
At December 31, 2017, we employed 281 full-time persons; our principal executive offices are located at 2600 Citadel
Plaza Drive, Houston, Texas 77008; and our phone number is (713) 866-6000. We also have 10 regional offices located
in various parts of the United States (“U.S.”).
Investment and Operating Strategy. Our goal is to remain a leader in owning and operating top-tier neighborhood
and community shopping centers in certain markets of the U.S. We expect to achieve this goal by:
•
•
raising net asset value and cash flows through quality acquisitions, redevelopments and new developments;
strategic focus on core operating fundamentals through our decentralized operating platform built on local
expertise in leasing and property management;
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•
•
•
disciplined growth from strategic acquisitions and new developments;
disposition of assets that no longer meet our ownership criteria, in which proceeds may be recycled by repaying
debt, purchasing new assets or reinvesting in currently owned assets or for other corporate purposes; and
commitment to maintaining a conservatively leveraged balance sheet, strong liquidity, a well-staggered debt
maturity schedule and strong credit agency ratings.
We may either purchase, develop 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.
We may invest in mortgages; however, we have traditionally invested in first mortgages to real estate joint ventures
or partnerships in which we own an equity interest or to obtain control over a real estate asset that we desire to own.
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.
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.
We expect to continue our focus on the future growth of the portfolio in neighborhood and community shopping centers
in markets where we currently operate throughout the U.S. Our markets of interest reflect high income and job growth,
as well as high barriers-to-entry. Our attention is also focused on high quality, supermarket-anchored and necessity-
based centers, which may include mixed-use properties containing this type of retail component.
Diversification from both a geographic and tenancy perspective is a critical component of our operating strategy. Our
largest markets are located in California, Florida and Texas, which represent 11.2%, 18.0% and 28.4%, respectively,
of our total properties' gross leasable area. With respect to tenant diversification, our two largest tenants, The Kroger
Co. and TJX Companies, Inc., accounted for 2.8% and 2.3%, respectively, of our total base minimum rental revenues
for the year ended December 31, 2017. No other tenant accounted for more than 1.9% of our total base minimum
rental revenues. Our anchor tenants are supermarkets, value-oriented apparel/discount stores and other retailers or
service providers who generally sell basic necessity-type goods and services. We believe the stability of our anchor
tenants, combined with convenient locations, attractive and well-maintained properties, high quality retailers and a
strong tenant mix, should ensure the long-term success of our merchants and the viability of our portfolio.
Strategically, we strive to finance our growth and working capital needs in a conservative manner, including managing
our debt maturities. Our senior debt credit ratings were BBB with a projected stable outlook from Standard & Poors
and Baa1 with a projected stable outlook from Moody’s Investor Services as of December 31, 2017. We intend to
maintain a conservative approach to managing our balance sheet, which, in turn, should give us many options for
raising debt or equity capital when needed. At December 31, 2017 and 2016, our ratio of earnings to combined fixed
charges and preferred dividends as defined by the Securities and Exchange Commission (“SEC”), not based on funds
from operations attributable to common shareholders, was 4.74 to 1 and 4.05 to 1, respectively. Our debt to total assets
before depreciation ratio was 38.6% and 42.0% at December 31, 2017 and 2016, respectively.
We have a $200 million share repurchase plan under which we may repurchase common shares of beneficial interest
("common shares") from time-to-time in open-market or privately negotiated purchases based on management's
evaluation of market conditions and other factors.
Our policies with respect to the investment and operating strategies discussed above are periodically reviewed by our
Board of Trust Managers and may be modified without a vote of our shareholders.
Location of Properties. Our properties are located in 17 states, principally in the South, West Coast and Southeast
Coast of the U.S. As of December 31, 2017, we have 204 properties that were owned or operated under long-term
leases, either directly or through our interest in real estate joint ventures or partnerships. Total revenues generated by
our centers located in Houston and its surrounding areas was 19.6% of total revenue for the year ended December
31, 2017, and an additional 9.2% of total revenue was generated in 2017 from centers that are located in other parts
of Texas. An additional 17.5% and 16.7%, respectively, of total revenue was generated in 2017 in Florida and California.
As of December 31, 2017, we also had 25 parcels of land held for development, six of which were located in Houston
and its surrounding areas and 11 of which were located in other parts of Texas. Because of our investments in Texas,
including Houston and its surrounding areas, Florida and California, these economies could affect our business and
operations more so than in other geographic areas.
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Competition. We compete with 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
in our trade areas. This results in competition for the acquisition of both existing income-producing properties and
prime development sites.
We also compete for tenants to occupy the space that is developed, acquired and managed by our competitors. The
principal competitive factors in attracting tenants in our market areas are location, price, anchor tenants and
maintenance of properties. We believe our key competitive advantages include the favorable locations of our properties,
the strong demographics surrounding our centers, knowledge of markets and customer bases, our ability to provide
a retailer with multiple locations with quality anchor tenants and the practice of continuous maintenance and renovation
of our properties.
Qualification as a Real Estate Investment Trust. As of December 31, 2017, we met the qualification requirements of
a REIT under the Internal Revenue Code, as amended. As a result, we will not be subject to federal income tax to the
extent we meet certain requirements of the Internal Revenue Code, with the exception of our taxable REIT subsidiary.
Materials Available on Our Website. Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and any amendments to those reports, as well as Reports on Forms 3, 4, 5 and SC
13G regarding our officers, trust managers or 10% beneficial owners, filed or furnished pursuant to
Section 13(a), 15(d) or 16(a) of the Securities Exchange Act of 1934 are available free of charge through our website
(www.weingarten.com) as soon as reasonably practicable after we electronically file the material with, or furnish it to,
the SEC. We have also made available on our website copies of our Audit Committee Charter, Executive Committee
Charter, Management Development and Executive Compensation Committee Charter, Governance and Nominating
Committee Charter, Code of Conduct and Ethics, Code of Ethical Conduct for Officers and Senior Financial Associates
and Governance Policies. In the event of any changes to these charters, codes or policies, changed copies will also
be made available on our website. You may also read and copy any materials we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, NE, Washington, D.C. 20549 or the SEC’s Internet site at www.sec.gov. Materials
on our website are not part of our Annual Report on Form 10-K.
Financial Information. Additional financial information concerning us is included in the Consolidated Financial
Statements located in Item 8 herein.
ITEM 1A. Risk Factors
The risks described below could materially and adversely affect our shareholders and our results of operations, financial
condition, liquidity and cash flows. In addition to these risks, our operations may also be affected by additional factors
not presently known or that we currently consider immaterial to our operations.
Disruptions in the financial markets could affect our liquidity and have other adverse effects on us and the
market price of our common shares of beneficial interest.
The U.S. and global equity and credit markets have experienced and may in the future experience significant price
volatility, dislocations and liquidity disruptions, which could cause market prices of many stocks to fluctuate substantially
and the spreads on prospective debt financings to widen considerably. These circumstances could materially impact
liquidity in the financial markets, making terms for certain financings less attractive, and in certain cases result in the
unavailability of certain types of financing. Uncertainties in the equity and credit markets may negatively impact our
ability to access additional financing at reasonable terms or at all, which may negatively affect our ability to complete
dispositions, form joint ventures or refinance our debt. A prolonged downturn in the equity or credit markets could
cause us to seek alternative sources of potentially less attractive financing, and require us to adjust our business plan
accordingly. In addition, these factors may make it more difficult for us to sell properties or adversely affect the price
we receive for properties that we do sell, as prospective buyers may experience increased costs of financing or
difficulties in obtaining financing. These events in the equity and credit markets may make it more difficult or costly for
us to raise capital through the issuance of our common shares or preferred shares. These disruptions in the financial
markets also may have a material adverse effect on the market value of our common shares and other adverse effects
on us or the economy generally. There can be no assurances that government responses to any disruptions in the
financial markets would restore consumer confidence, maintain stabilized markets or provide the availability of equity
or credit financing.
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Among the market conditions that may affect the value of our common shares and access to the capital markets are
the following:
• The attractiveness of REIT securities as compared to other securities, including securities issued by other real
estate companies, fixed income equity securities and debt securities;
• Changes in revenues or earnings estimates or publication of research reports and recommendations by
financial analysts or actions taken by rating agencies with respect to our securities or those of other REITs;
• The degree of interest held by institutional investors;
• The market's perception of the quality of our assets and our growth potential;
• The ability of our tenants to pay rent to us and meet their other obligations to us under current lease terms;
• Our ability to re-lease space as leases expire;
• Our ability to refinance our indebtedness as it matures;
• Actual or anticipated quarterly fluctuations in our operating results and financial condition;
• Any changes in our dividend policy;
• Any future issuances of equity securities;
• Strategic actions by us or our competitors, such as acquisitions or restructurings;
• General market conditions and, in particular, developments related to market conditions for the real estate
industry; and
• Domestic and international economic and political factors unrelated to our performance.
The volatility in the stock market can create price and volume fluctuations that may not necessarily be comparable to
operating performance.
The economic performance and value of our shopping centers depend on many factors, each of which could
have an adverse impact on our cash flows and operating results.
The economic performance and value of our properties can be affected by many factors, including the following:
• Changes in the national, regional and local economic climate;
• Changes in existing laws and regulations, including environmental regulatory requirements including, but not
limited to, legislation on global warming, trade reform, health care reform, employment laws and immigration
laws;
•
Local conditions such as an oversupply of space or a reduction in demand for real estate in the area;
• The attractiveness of the properties to tenants;
• Competition from other available space;
• Competition for our tenants from Internet sales and shifts in consumer shopping patterns;
• Our ability to provide adequate management services and to maintain our properties;
•
Increased operating costs, if these costs cannot be passed through to tenants;
• The cost of periodically renovating, repairing and releasing spaces;
• The consequences of any armed conflict involving, or terrorist attack against, the U.S.;
• Our ability to secure adequate insurance;
• Fluctuations in interest rates;
• Changes in real estate taxes and other expenses; and
• Availability of financing on acceptable terms or at all.
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Our properties consist primarily of neighborhood and community shopping centers and, therefore, our performance is
linked to general economic conditions in the market for retail space. The market for retail space has been and could
in the future be adversely affected by weakness in the national, regional and local economies where our properties
are located, the adverse financial condition of some large retail companies, the ongoing consolidation in the retail
sector, the excess amount of retail space in a number of markets and increasing consumer purchases through the
Internet. To the extent that any of these conditions exist, they are likely to affect market rents for retail space. In addition,
we may face challenges in the management and maintenance of the properties or encounter increased operating
costs, such as real estate taxes, insurance and utilities, which may make our properties unattractive to tenants. A
significant decrease in rental revenue and an inability to replace such revenues may adversely affect our profitability,
the ability to meet debt and other financial obligations and pay dividends to shareholders.
We have properties that are geographically concentrated, and adverse economic or other conditions in that
area could have a material adverse effect on us.
We are particularly susceptible to adverse economic or other conditions in markets where our properties are
concentrated, including California, Florida and Texas. These adverse conditions include increased unemployment,
industry slowdowns, including declining oil prices, business layoffs or downsizing, decreases in consumer confidence,
relocations of businesses, changes in demographics, increases in real estate and other taxes, increases in regulations
and natural disasters, any of which could have an increased material adverse effect on us than if our portfolio was
more geographically diverse.
Our acquisition activities may not produce the cash flows that we expect and may be limited by competitive
pressures or other factors.
We intend to acquire existing commercial properties to the extent that suitable acquisitions can be made on
advantageous terms. Acquisitions of commercial properties involve risks such as:
• We may have difficulty identifying acquisition opportunities that fit our investment strategy;
• Our estimates on expected occupancy and rental rates may differ from actual conditions;
• Our estimates of the costs of any redevelopment or repositioning of acquired properties may prove to be
inaccurate;
• We may be unable to operate successfully in new markets where acquired properties are located, due to a
lack of market knowledge or understanding of local economies;
• We may be unable to successfully integrate new properties into our existing operations; or
• We may have difficulty obtaining financing on acceptable terms or paying the operating expenses and debt
service associated with acquired properties prior to sufficient occupancy.
In addition, we may not be in a position or have the opportunity in the future to make suitable property acquisitions on
advantageous terms due to competition for such properties with others engaged in real estate investment. Our inability
to successfully acquire new properties may have an adverse effect on our results of operations.
Turmoil in capital markets could adversely impact acquisition activities and pricing of real estate assets.
Volatility in the capital markets could impact the availability of debt financing due to numerous factors, including the
tightening of underwriting standards by lenders and credit rating agencies. These factors directly affect a lender’s
ability to provide debt financing as well as increase the cost of available debt financing. As a result, we may not be
able to obtain debt financing on favorable terms or at all. This may result in future acquisitions generating lower overall
economic returns, which may adversely affect our results of operations and dividends paid to shareholders.
Furthermore, any turmoil in the capital markets could adversely impact the overall amount of capital available to invest
in real estate, which may result in price or value decreases of real estate assets.
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Our real estate assets may be subject to impairment charges.
Periodically, we assess whether there are any indicators that the value of our real estate assets, including any capitalized
costs and any identifiable intangible assets, may be impaired. A property's value is impaired only if the estimate of the
aggregate future undiscounted cash flows without interest charges to be generated by the property are less than the
carrying value of the property. In estimating cash flows, we consider factors such as expected future operating income,
trends and prospects, the effects of demand, competition and other factors. If we are evaluating the potential sale of
an asset or development/redevelopment alternatives, the undiscounted future cash flows consider the most likely
course of action at the balance sheet date based on current plans, intended holding periods and available market
information. Determining whether a property is impaired and, if impaired, the amount of write-down to fair value requires
a significant amount of judgment by management and is based on the best information available to management at
the time of evaluation. If market conditions deteriorate or management’s plans for certain properties change, additional
write-downs could be required in the future, and any future impairment could have a material adverse effect on our
results of operations in the period in which the charge is taken.
Reduction of rental income would adversely affect our profitability, our ability to meet our debt obligations
and our ability to pay dividends to our shareholders.
The substantial majority of our income is derived from rental income from real property. As a result, our performance
depends on our ability to collect rent from tenants. Our income and funds to pay dividends would be negatively affected
if a significant number of our tenants, or any of our major tenants (as discussed in more detail below):
• Delay lease commencements;
• Decline to extend or renew leases upon expiration;
• Fail to make rental payments when due; or
• Close stores or declare bankruptcy.
Any of these actions could result in the termination of the tenants’ lease and the loss of rental income attributable to
the terminated leases. In addition, lease terminations by an anchor tenant or a failure by that anchor tenant to occupy
the premises could also result in lease terminations or reductions in rent by other tenants in the same shopping center
under the terms of some leases. In these events, we cannot be sure that any tenant whose lease expires will renew
that lease or that we will be able to re-lease space on economically advantageous terms. Furthermore, certain costs
remain fixed even though a property may not be fully occupied. The loss of rental revenues from a number of our
tenants and our inability to replace such tenants, particularly in the case of a substantial tenant with leases in multiple
locations, may adversely affect our profitability, our ability to meet debt and other financial obligations and our ability
to pay dividends to the shareholders.
Adverse effects on the success and stability of our anchor tenants, could lead to reductions of rental income.
Our rental income could be adversely affected in the event of a downturn in the business, or the bankruptcy or insolvency
of, any anchor store or anchor tenant. Anchor tenants generally occupy large amounts of square footage, pay a
significant portion of the total rents at a property and contribute to the success of other tenants by drawing significant
numbers of customers to a property. The closing of one or more anchor stores at a property could adversely affect
that property and result in lease terminations or reductions in rent from other tenants, whose leases may permit
termination or rent reduction in those circumstances or whose own operations may suffer as a result. Furthermore,
tenant demand for certain of our anchor spaces may decrease, and as a result, we may see an increase in vacancy
and/or a decrease in rents for those spaces, which could have a negative impact to our rental income.
Adverse effects resulting from a shift in retail shopping from brick and mortar stores to online shopping may
impact our operating results.
Online sales for many retailers has become a fundamental part of their business in addition to operating brick and
mortar stores. Additionally, online sales from companies without physical stores has increased significantly. Although
many of the retailers operating in our properties sell groceries, value-oriented apparel and other necessity-based type
goods or provide services, including entertainment and dining, the shift to online shopping may cause certain of our
tenants to reduce the size or number of their retail locations in the future. As a result, this could negatively affect our
ability to lease space and our operating results.
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We face significant competition in the leasing market, which may decrease or prevent increases in the
occupancy and rental rates of our properties.
We compete with numerous developers, owners and operators of retail properties, many of which own properties
similar to, and in the same market sectors as, our properties. If our competitors offer space at rental rates below current
market rates, or below the rental rates we currently charge our tenants, we may lose existing or potential tenants, or
we may be forced to reduce rental rates in order to attract new tenants and retain existing tenants when their leases
expire.
Also, if our competitors develop additional retail properties in locations near our properties, there may be increased
competition for customer traffic and creditworthy tenants, which may result in fewer tenants or decreased cash flows
from tenants, or both, and may require us to make capital improvements to properties that we would not have otherwise
made. Our tenants also face increasing competition from other forms of marketing of goods, such as direct mail and
Internet marketing, which may decrease cash flow from such tenants. As a result, our financial condition and our ability
to pay dividends to our shareholders may be adversely affected.
We may be unable to collect balances due from tenants in bankruptcy.
A tenant that files for bankruptcy protection may not continue to pay us rent. A bankruptcy filing by or relating to one
of our tenants or a lease guarantor would bar all efforts by us to collect pre-bankruptcy debts from the tenant or the
lease guarantor, or their property, unless the bankruptcy court permits us to do so. A tenant or lease guarantor bankruptcy
could delay our efforts to collect past due balances under the relevant leases and could ultimately preclude collection
of these sums. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for
damages. As a result, it is likely that we would recover substantially less than the full value of any unsecured claims
it holds, if at all.
Our development, redevelopment and construction activities could adversely affect our operating results.
We intend to continue the selective development, redevelopment and construction of retail properties in accordance
with our development and underwriting policies as opportunities arise. Our development, redevelopment and
construction activities include risks that:
• We may abandon development opportunities after expending resources to determine feasibility;
• Construction costs of a project may exceed our original estimates;
• Occupancy rates and rents at a newly completed or redeveloped property may not be sufficient to make the
property profitable;
• Rental rates could be less than projected;
• Project completion may be delayed because of a number of factors, including weather, labor disruptions,
construction delays or delays in receipt of zoning or other regulatory approvals, adverse economic conditions,
acts of terror or other acts of violence, or acts of God (such as fires, earthquakes or floods);
• Financing may not be available to us on favorable terms for development or redevelopment of a property; and
• We may not complete construction and lease-up on schedule, resulting in increased debt service expense
and construction costs.
Additionally, the time frame required for development, redevelopment, construction and lease-up of these properties
means that we may have to wait years for a significant cash return. If any of the above events occur, the development
and redevelopment of properties may hinder our growth and have an adverse effect on our results of operations,
including additional impairment charges. Also, new development activities, regardless of whether or not they are
ultimately successful, typically require substantial time and attention from management.
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There is a lack of operating history with respect to any recent acquisitions and redevelopment or development
of properties, and we may not succeed in the integration or management of additional properties.
These properties may have characteristics or deficiencies currently unknown to us that affect their value or revenue
potential. It is also possible that the operating performance of these properties may decline under our management.
We also may not have the experience in developing and managing mixed-use properties and may need to rely on
external resources which may not perform as we expected. As we acquire additional properties, we will be subject to
risks associated with managing new properties, including lease-up and tenant retention. In addition, our ability to
manage our growth effectively will require us to successfully integrate any new acquisitions into our existing
management structure. We may not succeed with this integration or effectively manage additional properties. Also,
newly acquired properties may not perform as expected.
Real estate property investments are illiquid, and therefore, we may not be able to dispose of properties when
desirable or on favorable terms.
Real estate property investments generally cannot be disposed of quickly. In addition, the Internal Revenue Code
imposes restrictions on the ability of a REIT to dispose of properties that are not applicable to other types of real estate
companies. Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including
competition from other sellers and the availability of attractive financing for potential buyers of our properties, and we
cannot predict the various market conditions affecting real estate investments that will exist at any particular time in
the future. Therefore, we may not be able to quickly vary our portfolio in response to economic or other conditions
promptly or on favorable terms, which could cause us to incur extended losses and reduce our cash flows and adversely
affect dividends paid to shareholders.
As part of our capital recycling program, we intend to sell our non-core assets and may not be able to recover
our investments, which may result in losses to us.
There can be no assurance that we will be able to recover the current carrying amount of all of our owned and partially
owned non-core properties and investments in the future. Our failure to do so would require us to recognize impairment
charges in the period in which we reached that conclusion, which could adversely affect our business, financial condition,
operating results and cash flows.
Credit ratings may not reflect all the risks of an investment in our debt or equity securities and rating changes
could adversely effect our revolving credit facility.
Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real
or anticipated changes in our credit ratings will generally affect the market value of our debt. Credit ratings may be
revised or withdrawn at any time by the rating agency at its sole discretion. Additionally, our revolving credit facility
fees are based on our credit ratings. We do not undertake any obligation to maintain the ratings or to advise holders
of our debt of any change in ratings. Each agency's rating should be evaluated independently of any other agency's
rating.
There can be no assurance that we will be able to maintain our current credit ratings. Adverse changes in our credit
ratings could impair our ability to obtain additional debt and equity financing on favorable terms, if at all, and could
significantly reduce the market price of our publicly-traded securities.
Our cash flows and operating results could be adversely affected by required payments of debt or related
interest and other risks of our debt financing.
We are generally subject to risks associated with debt financing. These risks include:
• Our cash flow may not satisfy required payments of principal and interest;
• We may not be able to refinance existing indebtedness on our properties as necessary or the terms of the
refinancing may be less favorable to us than the terms of existing debt;
• Required debt payments are not reduced if the economic performance of any property declines;
• Debt service obligations could reduce funds available for dividends to our shareholders and funds available
for capital investment;
• Any default on our indebtedness could result in acceleration of those obligations and possible loss of property
to foreclosure; and
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• The risk that capital expenditures necessary for purposes such as re-leasing space cannot be financed on
favorable terms.
If a property is mortgaged to secure payment of indebtedness and we cannot make the mortgage payments, we may
have to surrender the property to the lender with a consequent loss of any prospective income and equity value from
such property. Any of these risks can place strains on our cash flows, reduce our ability to grow and adversely affect
our results of operations.
We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is
determined.
As of December 31, 2017, we had outstanding approximately $217.9 million of debt that was indexed to the London
Interbank Offered Rate (“LIBOR”); however, we have swapped $200 million of that amount to a fixed rate. On July 27,
2017, the Financial Conduct Authority (the “FCA”) announced its intention to phase out LIBOR rates by the end of
2021. It is not possible to predict the further effect of the rules of the FCA, any changes in the methods by which LIBOR
is determined, or any other reforms to LIBOR that may be enacted in the United Kingdom, the European Union or
elsewhere. Any such developments may cause LIBOR to perform differently than in the past, or cease to exist. In
addition, any other legal or regulatory changes made by the FCA, ICE Benchmark Administration Limited, the European
Money Markets Institute (formerly Euribor-EBF), the European Commission or any other successor governance or
oversight body, or future changes adopted by such body, in the method by which LIBOR is determined or the transition
from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease
in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may
discourage market participants from continuing to administer or to participate in LIBOR’s determination, and, in certain
situations, could result in LIBOR no longer being determined and published. If a published U.S. dollar LIBOR rate is
unavailable after 2021, the interest rates on our debt which is indexed to LIBOR will be determined using various
alternative methods, any of which may result in interest obligations which are more than or do not otherwise correlate
over time with the payments that would have been made on such debt if U.S. dollar LIBOR was available in its current
form. Further, the same costs and risks that may lead to the discontinuation or unavailability of U.S. dollar LIBOR may
make one or more of the alternative methods impossible or impracticable to determine. Any of these proposals or
consequences could have a material adverse effect on our financing costs.
Rising interest rates could increase our borrowing costs, thereby adversely affecting our cash flows and the
amounts available for dividends to our shareholders, and decrease our share price, if investors seek higher
yields through other investments.
We have indebtedness with interest rates that vary depending on market indices. Also, our credit facilities bear interest
at variable rates. We may incur variable-rate debt in the future. Increases in interest rates on variable-rate debt would
increase our interest expense, which would negatively affect net income and cash available for payment of our debt
obligations and dividends to shareholders. In addition, an increase in interest rates could adversely affect the market
value of our outstanding debt, as well as increase the cost of refinancing and the issuance of new debt or securities.
An environment of rising interest rates could also lead holders of our securities to seek higher yields through other
investments, which could adversely affect the market price of our shares. One of the factors which may influence the
price of our shares in public markets is the annual dividend rate we pay as compared with the yields on alternative
investments.
Our financial condition could be adversely affected by financial covenants.
Our credit facilities and public debt indentures under which our indebtedness is, or may be, issued contain certain
financial and operating covenants, including, among other things, certain coverage ratios, as well as limitations on our
ability to incur secured and unsecured indebtedness, restrictions on our ability to sell all or substantially all of our assets
and engage in mergers and consolidations and certain acquisitions. These covenants could limit our ability to obtain
additional funds needed to address cash shortfalls or pursue growth opportunities or transactions that would provide
substantial return to our shareholders. In addition, a breach of these covenants could cause a default under or accelerate
some or all of our indebtedness, which could have a material adverse effect on our financial condition.
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Property ownership through real estate partnerships and joint ventures could limit our control of those
investments and reduce our expected return.
Real estate partnership or joint venture investments may involve risks not otherwise present for investments made
solely by us, including the possibility that our partner or co-venturer might become bankrupt, that our partner or co-
venturer might at any time have different interests or goals than us, and that our partner or co-venturer may take action
contrary to our instructions, requests, policies or objectives. Other risks of joint venture investments could include
impasse on decisions, such as a sale or refinance, because neither our partner or co-venturer nor we would have full
control over the partnership or joint venture. These factors could limit the return that we receive from those investments
or cause our cash flows to be lower than our estimates.
Volatility in market and economic conditions may impact our partners’ ability to perform in accordance with
our real estate joint venture and partnership agreements resulting in a change in control or the liquidation
plans of its underlying properties.
Changes in control of our investments could result if any reconsideration events occur, such as amendments to our
real estate joint venture and partnership agreements, changes in debt guarantees or changes in ownership due to
required capital contributions. Any changes in control will result in the revaluation of our investments to fair value,
which could lead to an impairment. We are unable to predict whether, or to what extent, a change in control may result
or the impact of adverse market and economic conditions may have to our partners.
If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax as a regular
corporation and could have significant tax liability.
We intend to operate in a manner that allows us to qualify as a REIT for U.S. federal income tax purposes. However,
REIT qualification requires us to satisfy numerous requirements (some on an annual or quarterly basis) established
under highly technical and complex provisions of the Internal Revenue Code, for which there are a limited number of
judicial or administrative interpretations. Our status as a REIT requires an analysis of various factual matters and
circumstances that are not entirely within our control. Accordingly, it is not certain we will be able to qualify and remain
qualified as a REIT for U.S. federal income tax purposes. Even a technical or inadvertent violation of the REIT
requirements could jeopardize our REIT qualification. If we fail to qualify as a REIT in any tax year, then:
• We would be taxed as a regular domestic corporation, which, among other things, means that we would be
unable to deduct dividends paid to our shareholders in computing our taxable income and would be subject
to U.S. federal income tax on our taxable income at regular corporate rates;
• Any resulting tax liability could be substantial and would reduce the amount of cash available for dividends to
shareholders, and could force us to liquidate assets or take other actions that could have a detrimental effect
on our operating results; and
• Unless we were entitled to relief under applicable statutory provisions, we would be disqualified from treatment
as a REIT for the four taxable years following the year during which we lost our qualification, and our cash
available for dividends to our shareholders would, therefore, be reduced for each of the years in which we do
not qualify as a REIT.
Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow. We may also be
subject to certain U.S. federal, state and local taxes on our income and property either directly or at the level of our
subsidiaries. Any of these taxes would decrease cash available for dividends to our shareholders.
Tax laws have recently changed and may continue to change at any time, and any such legislative or other
actions could have a negative effect on us.
The Tax Cuts and Jobs Act of 2017 ("Tax Act") was signed into law on December 22, 2017. The law includes significant
changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21% for
non-REIT "C" corporations, which may cause investors to perceive investments in REITs to be less attractive than
investments in the stock of non-REIT “C” corporations. The law also includes limitations on the deductibility of executive
compensation, which may result in our being required to pay higher dividends to continue to qualify as a REIT at a
time and in an amount that otherwise may not be in our and our shareholders’ best interests.
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In addition, tax laws remain under constant review by persons involved in the legislative process, at the Internal
Revenue Service ("IRS") and the U.S. Department of the Treasury, and by various state and local tax authorities.
Changes to tax laws, regulations, or administrative interpretations, which may be applied retroactively, could adversely
affect us in a number of additional ways, including making it more difficult or more costly for us to qualify as a REIT or
decreasing real estate values generally.
We cannot predict the full impact of the Tax Act or whether, when, in what forms, or with what effective dates, the tax
laws, regulations, and administrative interpretations applicable to us or our shareholders may be further changed.
Compliance with REIT requirements may negatively affect our operating decisions.
To maintain our status as a REIT for U.S. federal income tax purposes, we must meet certain requirements, on an
ongoing basis, including requirements regarding our sources of income, the nature and diversification of our assets,
the amounts we distribute to our shareholders and the ownership of our common shares. We may also be required to
pay dividends to our shareholders when we do not have funds readily available for distribution or at times when our
funds are otherwise needed to fund capital expenditures or debt service obligations.
As a REIT, we must distribute at least 90% of our annual net taxable income (excluding net capital gains) to our
shareholders. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our net taxable
income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. From time to
time, we may generate taxable income greater than our income for financial reporting purposes, or our net taxable
income may be greater than our cash flow available for distribution to our shareholders. If we do not have other funds
available in these situations, we could be required to borrow funds, sell a portion of our securities at unfavorable prices
or find other sources of funds in order to meet the REIT distribution requirements.
Our common shares dividend policy may change in the future.
The timing, amount and composition of any future dividends to our common shareholders will be at the sole discretion
of our Board of Trust Managers and will depend upon a variety of factors as to which no assurance can be given. Our
ability to make dividends to our common shareholders depends, in part, upon our operating results, overall financial
condition, the performance of our portfolio (including occupancy levels and rental rates), our capital requirements,
access to capital, our ability to qualify for taxation as a REIT and general business and market conditions. Any change
in our dividend policy could have an adverse effect on the market price of our common shares.
Our declaration of trust contains certain limitations associated with share ownership.
To maintain our status as a REIT, our declaration of trust prohibits any individual from owning more than 9.8% of our
outstanding common shares. This restriction is likely to discourage third parties from acquiring control without the
consent of our Board of Trust Managers, even if a change in control were in the best interests of our shareholders.
Also, our declaration of trust requires the approval of the holders of 80% of our outstanding common shares and the
approval by not less than 50% of the outstanding common shares not owned by any related person (a person owning
more than 50% of our common shares) to consummate a business transaction such as a merger. There are certain
exceptions to this requirement; however, the 80% approval requirement could make it difficult for us to consummate
a business transaction even if it is in the best interests of our shareholders.
There may be future dilution of our common shares.
Our declaration of trust authorizes our Board of Trust Managers to, among other things, issue additional common or
preferred shares or securities convertible or exchangeable into equity securities, without shareholder approval. We
may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional
common or preferred shares or convertible securities could be substantially dilutive to holders of our common shares.
Moreover, to the extent that we issue restricted shares, options, or warrants to purchase our common shares in the
future and those options or warrants are exercised or the restricted shares vest, our shareholders may experience
further dilution. Holders of our common shares have no preemptive rights that entitle them to purchase a pro rata share
of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution
to our shareholders.
We may issue debt and equity securities or securities convertible into equity securities, any of which may be senior
to our common shares as to distributions and in liquidation, which could negatively affect the value of our common
shares.
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In the future, we may attempt to increase our capital resources by entering into unsecured or secured debt or debt-
like financings, or by issuing additional debt or equity securities, which could include issuances of medium-term notes,
senior notes, subordinated notes, secured debt, guarantees, preferred shares, hybrid securities, or securities
convertible into or exchangeable for equity securities. In the event of our liquidation, our lenders and holders of our
debt and, if any, preferred securities would receive distributions of our available assets before distributions to the
holders of our common shares. Because any decision to incur debt and issue securities in future offerings may be
influenced by market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing,
or nature of our future financings. Further, market conditions could require us to accept less favorable terms for the
issuance of our securities in the future.
Our declaration of trust contains certain limitations that make removal of our Trust Managers difficult, which
could limit our shareholders ability to effect changes to our management.
Our declaration of trust provides that a Trust Manager may only be removed for cause upon the affirmative vote of
holders of two-thirds of the total votes authorized to be cast by shares outstanding and entitled to be voted. Vacancies
may be filled by either a majority of the remaining Trust Managers or elected by the vote of holders of at least two-
thirds of the outstanding shares at the Annual Meeting or a special meeting of the shareholders. These requirements
provide limitations to make changes in our management by removing and replacing Trust Managers and may prevent
a change of control that is in the best interests of our shareholders.
Loss of our key personnel could adversely affect the value of our common shares and operations.
We are dependent on the efforts of our key executive personnel. A significant number of persons in our management
group are eligible for retirement. Although we believe qualified replacements could be found for these key executives
and other members of our management group, the loss of their services could adversely affect the value of our common
shares and operations.
Changes in accounting standards may adversely impact our reported financial condition and results of
operations.
The Financial Accounting Standards Board (“FASB”), in conjunction with the SEC, continually engages in projects to
evaluate additions or changes to current accounting standards which could impact how we currently account for our
material transactions. We believe that these and other potential proposals could have varying degrees of impact on
us ranging from minimal to material. At this time, we are unable to predict with certainty which, if any, proposals may
be passed or what level of impact any such proposal could have on us, except as disclosed in Item 8.
We could be subject to litigation that may negatively impact our cash flows, financial condition and results
of operations.
From time to time, we may be a defendant in lawsuits and regulatory proceedings relating to our business. Due to the
inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of
any such litigation or proceedings. We could experience a negative impact to our cash flows, financial condition and
results of operations due to an unfavorable outcome.
Compliance with certain laws and governmental rules and regulations may require us to make unintended
expenditures that adversely affect our cash flows.
All of our properties are required to comply with certain laws and governmental rules and regulations, including the
Americans with Disabilities Act, fire and safety regulations, building codes and other land use regulations, as they may
be in effect or adopted by governmental agencies and bodies and become applicable to our properties. We may be
required to make substantial capital expenditures to comply with those requirements, and these expenditures could
have a material adverse effect on our ability to meet the financial obligations and pay dividends to our shareholders.
12
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An uninsured loss or a loss that exceeds the policies on our properties could subject us to lost capital or
revenue on those properties.
Under the terms and conditions of the leases currently in force on our properties, tenants generally are required to
indemnify and hold us harmless from liabilities resulting from injury to persons, air, water, land or property, on or off
the premises, due to activities conducted on the properties, except for claims arising from our negligence or intentional
misconduct or that of our agents. Tenants are generally required, at the tenant’s expense, to obtain and keep in full
force during the term of the lease, liability and tenant's property damage insurance policies. We have obtained
comprehensive liability, casualty, property, flood, earthquake, environmental and rental loss insurance policies on our
properties. All of these policies may involve substantial deductibles and certain exclusions. In addition, we cannot
assure the shareholders that the tenants will properly maintain their insurance policies or have the ability to pay the
deductibles. Should a loss occur that is uninsured or in an amount exceeding the combined aggregate limits for the
policies noted above, or in the event of a loss that is subject to a substantial deductible under an insurance policy, we
could lose all or part of our capital invested in, and anticipated revenue from, one or more of the properties, which
could have a material adverse effect on our operating results and financial condition, as well as our ability to pay
dividends to the shareholders.
We may be subject to liability under environmental laws, ordinances and regulations.
Under various federal, state and local laws, ordinances and regulations, we may be considered an owner or operator
of real property or have arranged for the disposal or treatment of hazardous or toxic substances. As a result, we may
become liable for the costs of disposal or treatment of hazardous or toxic substances released on or in our property.
We may also be liable for certain other potential costs that could relate to hazardous or toxic substances (including
governmental fines and injuries to persons and property). We may incur such liability whether or not we knew of, or
were responsible for, the presence of such hazardous or toxic substances.
Natural disasters and severe weather conditions could have an adverse effect on our cash flow and operating
results.
Changing weather patterns and climatic conditions, such as global warming, may have added to the unpredictability
and frequency of natural disasters in some parts of the world and created additional uncertainty as to future trends
and exposures. Our operations are located in many areas that have experienced and may in the future experience
natural disasters and severe weather conditions such as hurricanes, tornadoes, earthquakes, droughts, floods and
fires. The occurrence of natural disasters or severe weather conditions can delay new development and redevelopment
projects, increase investment costs to repair or replace damaged properties, increase future property insurance costs,
and negatively impact the tenant demand for lease space. Additionally, these weather conditions may also disrupt our
tenants business, which could affect the ability of some tenants to pay rent and may reduce the willingness of residents
to remain in or move to the affected area. Intense weather conditions during the last decade have caused our cost of
property insurance to increase significantly. If insurance is unavailable to us or is unavailable on acceptable terms, or
if our insurance is not adequate to cover business interruption or losses from these events, our earnings, liquidity or
capital resources could be adversely affected.
Our business and operations would suffer in the event of system failures.
Despite the implementation of security measures and the existence of a disaster recovery and business continuity
plans for our internal information technology systems, our systems are vulnerable to damages from any number of
sources, including computer viruses, unauthorized access, energy blackouts, natural disasters, terrorism, war and
telecommunication failures. Any system failure or accident that causes interruptions in our operations could result in
a material disruption to our business. We may also incur additional costs to remedy damages caused by such
disruptions.
13
Table of Contents
We face risks relating to cybersecurity attacks, loss of confidential information and other business disruptions.
Our business is at risk from and may be impacted by cybersecurity attacks, including attempts to gain unauthorized
access to our confidential data and other electronic security breaches. Such cybersecurity attacks can range from
individual attempts to gain unauthorized access to our information technology systems to more sophisticated security
threats. In addition to our own information technology systems, third parties have been engaged to provide information
technology services relating to several key business functions, such as payroll, human resources, electronic
communications and certain finance functions. While we and such third parties employ a number of measures to
prevent, detect and mitigate these threats including a defense in depth strategy of firewalls, intrusion sensors, malware
detection, password protection, backup servers, user training and periodic penetration testing, there is no guarantee
such efforts will be successful in preventing a cybersecurity attack. As our reliance on technology has increased, so
have the risks posed to our systems, both internal and those we have outsourced. Cybersecurity incidents could
compromise the confidential information of our tenants, employees and third-party vendors and disrupt and affect the
efficiency of our business operations.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Properties
At December 31, 2017, we owned or operated under long-term leases, either directly or through our interest in real
estate joint ventures or partnerships, a total of 204 centers, primarily neighborhood, community and power shopping
centers, which are located in 17 states spanning the country from coast to coast with approximately 41.3 million square
feet of gross leasable area. Our centers are located principally in the South, West Coast and Southeast Coast of the
U.S. with concentrations in California, Florida, and Texas. We also owned interests in 25 parcels of land that totaled
approximately 18.0 million square feet at December 31, 2017 of which approximately 17.7 million square feet of land
may be used for new development or sold, and the remaining is adjacent to our existing operating centers, which may
be used for expansion of those centers.
In 2017, no single center accounted for more than 7.3% of our total assets or 3.3% of base minimum rental revenues.
The five largest centers, in the aggregate, represented approximately 11.1% of our base minimum rental revenues for
the year ended December 31, 2017; otherwise, none of the remaining centers accounted for more than 1.8% of our
base minimum rental revenues during the same period.
Our centers are designed to attract local area customers and are typically anchored by a supermarket or other national
tenants (such as Kroger, HEB or T.J. Maxx). The centers are primarily neighborhood and community shopping centers
that often include discounters, value-oriented retailers and specialty grocers as additional anchors or tenants, and
typically range in size from 50,000 to 600,000 square feet of building area. Very few of the centers have climate-
controlled 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 actively embrace various initiatives that support the future of environmentally friendly shopping centers. Our primary
areas of focus include energy efficiency, waste recycling, water conservation and construction/development best
practices. We recognize there are economic, environmental and social implications associated with the full range of
our sustainability efforts, and that a commitment to incorporating sustainable practices will add long-term value to our
centers.
As of December 31, 2017, the weighted average occupancy rate for our centers was 94.8% compared to 94.3% as
of December 31, 2016. The average base rent per square foot was approximately $18.69 in 2017, $17.93 in 2016,
$16.92 in 2015, $16.24 in 2014 and $15.66 in 2013 for our centers.
We have approximately 5,400 separate leases with 3,700 different tenants. Included among our top revenue-producing
tenants are: The Kroger Co., TJX Companies, Inc., Ross Stores, Inc., H-E-B Grocery Company, LP, Albertsons
Companies, Inc., Office Depot, Inc., PetSmart, Inc., Bed, Bath & Beyond Inc., 24 Hour Fitness Worldwide, Inc. and
Whole Foods Market, Inc. The diversity of our tenant base is also evidenced by the fact that our largest tenant, The
Kroger Co., accounted for only 2.8% of base minimum rental revenues during 2017.
14
Table of Contents
Tenant Lease Expirations
As of December 31, 2017, lease expirations for the next 10 years, assuming tenants do not exercise renewal options,
are as follows:
Number of
Expiring
Leases
Square Feet
of Expiring
Leases
(000’s)
Percentage of
Leaseable
Square Feet
Total
(000’s)
Per Square
Foot
Percentage of
Total Annual
Net Rent
Annual Rent of Expiring Leases
526
589
615
581
523
200
126
96
105
110
2,177
3,094
3,177
3,237
3,304
1,858
1,330
783
753
1,217
5.27% $
41,359 $
7.50%
7.70%
7.84%
8.00%
4.50%
3.22%
1.90%
1.82%
2.95%
52,449
56,813
56,774
59,896
28,751
21,087
14,746
15,741
20,001
19.00
16.95
17.88
17.54
18.13
15.47
15.85
18.83
20.90
16.43
10.41%
13.20%
14.29%
14.28%
15.07%
7.23%
5.31%
3.71%
3.96%
5.03%
Year
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
New Development
At December 31, 2017, we had three projects in various stages of development that were partially or wholly owned.
We have funded $140.4 million through December 31, 2017 on these projects. We estimate our aggregate net
investment upon completion to be $363.1 million. These projects are forecasted to have an average stabilized return
on investment of approximately 5.5% when completed. Effective January 1, 2017, we stabilized a development in
White Marsh, Maryland, moving it to our operating property portfolio, which added 136,000 square feet to the portfolio
at an estimated cost per square foot of $337.52. This development was 100% leased with an investment of $46 million
and an 8% yield.
Upon completion, the estimated costs and square footage to be added to the portfolio for the three projects are as
follows:
Project
City, State
Project Type
The Whitaker
Seattle, Washington
Retail only portion of
mixed-use
West Alex
Alexandria, Virginia
Mixed-Use
Centro Arlington (2)
Arlington, Virginia
Mixed-Use
___________________
Retail/
Office
Square
Feet
(000’s)
63
123
72
Residential
Units
Net Estimated
Costs (1)
(000's)
Estimated
Year of
Completion
—
278
366
$29,700 - $32,900
187,100 - 206,900
128,000 - 141,600
2018
2022
2020
(1) Net estimated costs represents WRI's share of capital expenditures net of any forecasted sales of land pads.
(2) Represents an unconsolidated joint venture where we have funded $36.8 million as of December 31, 2017, and we anticipate funding
an additional $93 million in equity and debt through 2020.
15
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Property Listing
The following table is a list of centers, summarized by state and includes our share of both consolidated and
unconsolidated real estate partnerships and joint ventures as of December 31, 2017:
ALL PROPERTIES BY STATE
Number of
Properties
21
Gross
Leasable
Area (GLA)
3,488,748
1
23
8
29
13
4
2
11
1
14
3
4
180,200
4,625,509
2,261,320
7,429,237
2,500,439
759,569
212,111
3,516,707
144,796
2,327,431
276,924
662,218
60
11,729,001
1
3
6
304,899
250,811
609,488
204
41,279,408
% of
Total GLA
8.5%
0.4%
11.2%
5.5%
18.0%
6.1%
1.8%
0.5%
8.5%
0.4%
5.6%
0.7%
1.6%
28.4%
0.7%
0.6%
1.5%
100%
Arizona
Arkansas
California
Colorado
Florida
Georgia
Kentucky
Maryland
Nevada
New Mexico
North Carolina
Oregon
Tennessee
Texas
Utah
Virginia
Washington
Total
___________________
GLA includes 4.5 million square feet of our partners’ ownership interest in these properties and 10.4 million square
feet not owned or managed by us. Additionally, encumbrances on our properties total $.4 billion. See Schedule III for
additional information.
The following table is a detailed list of centers by state and includes our share of both consolidated and unconsolidated
real estate partnerships and joint ventures as of December 31, 2017:
Center
CBSA (5)
Owned %
Foot
Notes
GLA
Grocer Anchor
( ) indicates owned
by others
Other Anchors
( ) indicates owned by others
Operating Properties
Arizona
Broadway Marketplace
Phoenix-Mesa-Scottsdale, AZ
Camelback Village Square
Phoenix-Mesa-Scottsdale, AZ
Desert Village Shopping
Center
Phoenix-Mesa-Scottsdale, AZ
Fountain Plaza
Laveen Village
Marketplace
Phoenix-Mesa-Scottsdale, AZ
Phoenix-Mesa-Scottsdale, AZ
Monte Vista Village Center
Phoenix-Mesa-Scottsdale, AZ
Palmilla Center
Phoenix-Mesa-Scottsdale, AZ
Phoenix Office Building
Phoenix-Mesa-Scottsdale, AZ
Pueblo Anozira Shopping
Center
Phoenix-Mesa-Scottsdale, AZ
Raintree Ranch Center
Phoenix-Mesa-Scottsdale, AZ
Red Mountain Gateway
Phoenix-Mesa-Scottsdale, AZ
Scottsdale Horizon
Phoenix-Mesa-Scottsdale, AZ
Scottsdale Waterfront
Phoenix-Mesa-Scottsdale, AZ
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
87,379
Office Max, Ace Hardware
240,951
Fry’s Supermarket
Office Max
107,071
AJ Fine Foods
CVS
305,588
Fry’s Supermarket
Dollar Tree, (Lowe's)
318,805
(Fry’s Supermarket)
(Home Depot)
108,551
(Safeway)
178,219
(Fry’s Supermarket)
Office Max, PetSmart, Dollar Tree
21,122
Weingarten Realty Regional Office, Endurance
Rehab
157,607
Fry’s Supermarket
Petco, Dollar Tree
133,020 Whole Foods
205,013
(Target), Bed Bath & Beyond, Famous Footwear
155,093
Safeway
CVS
93,334
16
Olive & Ivy, P.F. Chang's, David's Bridal, Urban
Outfitters
Table of Contents
Center
CBSA (5)
Owned %
Foot
Notes
GLA
Grocer Anchor
( ) indicates owned
by others
Other Anchors
( ) indicates owned by others
Squaw Peak Plaza
Phoenix-Mesa-Scottsdale, AZ
100.0%
60,728
Sprouts Farmers Market
Summit at Scottsdale
Phoenix-Mesa-Scottsdale, AZ
51.0%
(1)(3)
322,993
Safeway
(Target), CVS, OfficeMax, PetSmart
The Shoppes at Parkwood
Ranch
Entrada de Oro Plaza
Shopping Center
Madera Village Shopping
Center
Oracle Crossings
Oracle Wetmore Shopping
Center
Phoenix-Mesa-Scottsdale, AZ
Tucson, AZ
Tucson, AZ
Tucson, AZ
Tucson, AZ
Shoppes at Bears Path
Tucson, AZ
Arizona Total:
Arkansas
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Markham West Shopping
Center
Little Rock-North Little Rock-
Conway, AR
100.0%
106,738
Hobby Lobby, Dollar Tree
109,075 Walmart Neighborhood Market
106,858
Safeway
Dollar Tree
261,194
Sprouts Farmers Market
Kohl's, HomeGoods
343,278
66,131
3,488,748
180,200
180,200
(Home Depot), (Nordstrom Rack), Jo Ann Fabric,
Cost Plus, PetSmart, Walgreens, Ulta Beauty
(CVS Drug)
Academy, Office Depot, Michaels, Dollar Tree
Arkansas Total:
California
8000 Sunset Strip
Shopping Center
Centerwood Plaza
The Westside Center
Westminster Center
Los Angeles-Long Beach-
Anaheim, CA
Los Angeles-Long Beach-
Anaheim, CA
Los Angeles-Long Beach-
Anaheim, CA
Los Angeles-Long Beach-
Anaheim, CA
Chino Hills Marketplace
Jess Ranch Marketplace
Riverside-San Bernardino-Ontario,
CA
Riverside-San Bernardino-Ontario,
CA
Jess Ranch Marketplace
Phase III
Riverside-San Bernardino-Ontario,
CA
Menifee Town Center
Stoneridge Town Centre
Prospector's Plaza
Valley Shopping Center
Riverside-San Bernardino-Ontario,
CA
Riverside-San Bernardino-Ontario,
CA
Sacramento--Roseville--Arden-
Arcade, CA
Sacramento--Roseville--Arden-
Arcade, CA
El Camino Promenade
San Diego-Carlsbad, CA
Rancho San Marcos
Village
San Diego-Carlsbad, CA
San Marcos Plaza
San Diego-Carlsbad, CA
580 Market Place
Gateway Plaza
Greenhouse Marketplace
Cambrian Park Plaza
Silver Creek Plaza
San Francisco-Oakland-Hayward,
CA
San Francisco-Oakland-Hayward,
CA
San Francisco-Oakland-Hayward,
CA
San Jose-Sunnyvale-Santa Clara,
CA
San Jose-Sunnyvale-Santa Clara,
CA
Freedom Centre
Santa Cruz-Watsonville, CA
Stony Point Plaza
Santa Rosa, CA
Creekside Center
Vallejo-Fairfield, CA
Southampton Center
Vallejo-Fairfield, CA
California Total:
Colorado
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
169,775
Trader Joe's
CVS, Crunch, AMC Theaters, CB2
75,486
Superior Grocers
Dollar Tree
36,540
Guitar Center
440,437
Albertsons
Home Depot, Ross Dress for Less, Petco, Rite Aid,
Dollar Tree, 24 Hour Fitness
310,913
Smart & Final Stores
Dollar Tree, 24 Hour Fitness, Rite Aid
307,826
(Winco Foods)
Burlington Coat Factory, PetSmart, Rite Aid, Big 5
194,342
(Winco Foods)
Best Buy, Cinemark Theatres, Bed Bath &
Beyond, 24 Hour Fitness
258,734
Ralph's
Ross Dress for Less, Dollar Tree
67.0%
(1)(3)
434,450
(Super Target)
(Kohl's)
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
252,524
SaveMart
Kmart, CVS, Ross Dress for Less
107,191
Food 4 Less
129,676
134,628
Vons
81,086
(Albertsons)
T.J. Maxx, Staples, Dollar Tree, BevMo
24 Hour Fitness
100,097
Safeway
24 Hour Fitness, Petco
352,778
Raley’s
24 Hour Fitness
236,864
(Safeway)
170,449
202,820
(CVS), Jo-Ann Fabrics, 99 Cents Only, Factory 2
U, Petco
Beverages & More, Dollar Tree
Walgreens, (Orchard Supply)
150,865
Safeway
Rite Aid, Big Lots
200,011
Food Maxx
Ross Dress for Less, Fallas Paredes
115,991
Raley’s
162,026
Raley’s
4,625,509
Ace Hardware, Dollar Tree
Aurora City Place
Denver-Aurora-Lakewood, CO
50.0%
(1)(3)
542,956
(Super Target)
Barnes & Noble, Ross Dress For Less, PetSmart,
Michael's, Conn's
Cherry Creek Retail Center
Denver-Aurora-Lakewood, CO
CityCenter Englewood
Denver-Aurora-Lakewood, CO
Crossing at Stonegate
Denver-Aurora-Lakewood, CO
Edgewater Marketplace
Denver-Aurora-Lakewood, CO
Green Valley Ranch -
AutoZone
Denver-Aurora-Lakewood, CO
100.0%
100.0%
100.0%
100.0%
100.0%
272,658
(Super Target)
PetSmart, Bed Bath & Beyond
307,255
109,079
King Sooper’s
(Walmart), Ross Dress for Less, Petco, Office
Depot, 24 Hour Fitness
270,548
King Sooper's
Ace Hardware, (Target)
7,381
(King Sooper’s)
17
Table of Contents
Center
CBSA (5)
Owned %
Lowry Town Center
Denver-Aurora-Lakewood, CO
River Point at Sheridan
Denver-Aurora-Lakewood, CO
100.0%
100.0%
Colorado Total:
Florida
Foot
Notes
GLA
Grocer Anchor
( ) indicates owned
by others
127,717
(Safeway)
623,726
2,261,320
Other Anchors
( ) indicates owned by others
(Target), (Costco), Regal Cinema, Michaels,
Conn's, PetSmart
Argyle Village Shopping
Center
Jacksonville, FL
100.0%
306,461
Publix
Atlantic West
Jacksonville, FL
50.0%
(1)(3)
180,578
(Walmart Supercenter)
Bed Bath & Beyond, T.J. Maxx, Babies “R” Us,
Jo-Ann’s Fabrics, Michaels
T.J. Maxx, HomeGoods, Dollar Tree, Shoe
Carnival, (Kohl's)
Epic Village St. Augustine
Jacksonville, FL
70.0%
(1)
64,180
(Epic Theaters)
Kernan Village
Jacksonville, FL
50.0%
(1)(3)
288,780
(Walmart Supercenter)
Ross Dress for Less, Petco
Boca Lyons Plaza
Deerfield
Miami-Fort Lauderdale-West Palm
Beach, FL
Miami-Fort Lauderdale-West Palm
Beach, FL
Embassy Lakes Shopping
Center
Miami-Fort Lauderdale-West Palm
Beach, FL
100.0%
100.0%
100.0%
117,423
Aroma Market & Catering
Ross Dress for Less
404,944
Publix
T.J. Maxx, Marshalls, Cinépolis, YouFit, Ulta
142,751 Winn Dixie
Tuesday Morning, Dollar Tree
Flamingo Pines
Hollywood Hills Plaza
Northridge
Pembroke Commons
Sea Ranch Centre
Tamiami Trail Shops
Miami-Fort Lauderdale-West Palm
Beach, FL
Miami-Fort Lauderdale-West Palm
Beach, FL
Miami-Fort Lauderdale-West Palm
Beach, FL
Miami-Fort Lauderdale-West Palm
Beach, FL
Miami-Fort Lauderdale-West Palm
Beach, FL
Miami-Fort Lauderdale-West Palm
Beach, FL
20.0%
(1)(3)
148,840
Publix
20.0%
(1)(3)
416,767
Publix
Target, CVS
20.0%
(1)(3)
236,628
Publix
Petco, Ross Dress for Less, Dollar Tree
20.0%
(1)(3)
323,679
Publix
Marshalls, Office Depot, LA Fitness, Dollar Tree
100.0%
99,029
Publix
CVS, Dollar Tree
20.0%
(1)(3)
132,564
Publix
CVS
The Palms at Town &
County
Miami-Fort Lauderdale-West Palm
Beach, FL
TJ Maxx Plaza
Miami-Fort Lauderdale-West Palm
Beach, FL
Vizcaya Square Shopping
Center
Miami-Fort Lauderdale-West Palm
Beach, FL
Wellington Green
Commons
Miami-Fort Lauderdale-West Palm
Beach, FL
100.0%
100.0%
100.0%
100.0%
657,592
Publix
161,429
Fresco Y Mas
110,081 Winn Dixie
143,854 Whole Foods Market
Clermont Landing
Orlando-Kissimmee-Sanford, FL
75.0%
(1)(3)
354,418
Colonial Plaza
Orlando-Kissimmee-Sanford, FL
100.0%
498,761
Kohl's, Marshalls, HomeGoods, Dick's Sporting
Goods, Toys R Us, 24 Hour Fitness, Nordstrom
Rack, CVS
T.J. Maxx, Dollar Tree
(J.C. Penney), (Epic Theater), T.J. Maxx, Ross
Dress for Less, Michaels
Staples, Ross Dress for Less, Marshalls, Old Navy,
Stein Mart, Barnes & Noble, Petco, Big Lots,
Hobby Lobby
Marketplace at Seminole
Towne
Orlando-Kissimmee-Sanford, FL
100.0%
496,953
(Super Target)
Marshalls, Ross Dress for Less, Old Navy, Petco
Phillips Crossing
Orlando-Kissimmee-Sanford, FL
Shoppes of South Semoran
Orlando-Kissimmee-Sanford, FL
100.0%
100.0%
145,644 Whole Foods
Golf Galaxy, Michaels
101,611 Walmart Neighborhood Market
Dollar Tree
The Marketplace at Dr.
Phillips
Orlando-Kissimmee-Sanford, FL
20.0%
(1)(3)
326,868
Publix
Stein Mart, HomeGoods, Morton's of Chicago,
Office Depot
Winter Park Corners
Orlando-Kissimmee-Sanford, FL
100.0%
83,161
Sprouts Farmers Market
Pineapple Commons
Port St. Lucie, FL
20.0%
(1)(3)
269,451
Countryside Centre
East Lake Woodlands
Largo Mall
Sunset 19 Shopping Center
Florida Total:
Georgia
Brookwood Marketplace
Brownsville Commons
Tampa-St. Petersburg-Clearwater,
FL
Tampa-St. Petersburg-Clearwater,
FL
Tampa-St. Petersburg-Clearwater,
FL
Tampa-St. Petersburg-Clearwater,
FL
Atlanta-Sandy Springs-Roswell,
GA
Atlanta-Sandy Springs-Roswell,
GA
Camp Creek Marketplace
II
Atlanta-Sandy Springs-Roswell,
GA
Dallas Commons Shopping
Center
Atlanta-Sandy Springs-Roswell,
GA
Grayson Commons
Lakeside Marketplace
Atlanta-Sandy Springs-Roswell,
GA
Atlanta-Sandy Springs-Roswell,
GA
Ross Dress for Less, Best Buy, PetSmart,
Marshalls, (CVS)
T.J. Maxx, HomeGoods, Dick's Sporting Goods,
Ross Dress for Less
100.0%
245,958
20.0%
(1)(3)
104,431 Walmart Neighborhood Market
Walgreens
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
610,080
(Safeway)
256,321
7,429,237
Bealls, Marshalls, PetSmart, Bed Bath & Beyond,
Staples, Michaels, (Target)
Bed Bath & Beyond, Barnes & Noble, Old Navy,
Hobby Lobby, Cost Plus World Market
397,295
(Super Target)
Home Depot, Bed Bath & Beyond, Office Max
81,913
(Kroger)
228,003
95,262
(Kroger)
76,611
Kroger
DSW, LA Fitness, Shopper's World, American
Signature
332,889
(Super Target)
Ross Dress for Less, Petco
18
CBSA (5)
Owned %
Foot
Notes
GLA
Grocer Anchor
( ) indicates owned
by others
Other Anchors
( ) indicates owned by others
Table of Contents
Center
Mansell Crossing
Perimeter Village
Publix at Princeton Lakes
Reynolds Crossing
Roswell Corners
Roswell Crossing
Shopping Center
Thompson Bridge
Commons
Georgia Total:
Kentucky
Atlanta-Sandy Springs-Roswell,
GA
Atlanta-Sandy Springs-Roswell,
GA
Atlanta-Sandy Springs-Roswell,
GA
Atlanta-Sandy Springs-Roswell,
GA
Atlanta-Sandy Springs-Roswell,
GA
Atlanta-Sandy Springs-Roswell,
GA
Gainesville, GA
Millpond Center
Lexington-Fayette, KY
Regency Centre
Lexington-Fayette, KY
Tates Creek Centre
Lexington-Fayette, KY
Festival on Jefferson Court
Louisville/Jefferson County, KY-IN
Kentucky Total:
Maryland
Pike Center
Maryland Total:
Nevada
Best in the West
Las Vegas-Henderson-Paradise,
NV
Charleston Commons
Shopping Center
Las Vegas-Henderson-Paradise,
NV
College Park Shopping
Center
Las Vegas-Henderson-Paradise,
NV
Las Vegas-Henderson-Paradise,
NV
Las Vegas-Henderson-Paradise,
NV
Las Vegas-Henderson-Paradise,
NV
Las Vegas-Henderson-Paradise,
NV
Las Vegas-Henderson-Paradise,
NV
Las Vegas-Henderson-Paradise,
NV
Las Vegas-Henderson-Paradise,
NV
Las Vegas-Henderson-Paradise,
NV
Decatur 215
Eastern Commons
Francisco Center
Paradise Marketplace
Rancho Towne & Country
Tropicana Beltway Center
Tropicana Marketplace
Westland Fair
Nevada Total:
New Mexico
20.0%
(1)(3)
102,931
buybuy BABY, Ross Dress for Less, Party City
100.0%
381,738 Walmart Supercenter
Cost Plus World Market, DSW, Hobby Lobby
20.0%
(1)(3)
72,207
Publix
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
115,983
(Kroger)
318,261
(Super Target), Fresh Market
T.J. Maxx
201,759
Trader Joe's
Office Max, PetSmart, Walgreens
95,587
(Kroger)
2,500,439
151,498
Kroger
188,826
(Kroger)
201,138
Kroger
218,107
Kroger
759,569
T.J. Maxx, Michaels
Rite Aid
(PetSmart), (T.J. Maxx), Staples, Party City
80,841
212,111
428,066
366,952 Walmart
Pier 1, DXL Mens Apparel
Best Buy, T. J. Maxx, Babies "R" Us, Bed Bath &
Beyond, PetSmart, Office Depot
Ross Dress for Less, Office Max, 99 Cents Only,
PetSmart
195,367
El Super
Factory 2 U, CVS
345,720
(WinCo Foods)
(Target), Hobby Lobby, Ross Dress for Less
356,673
Trader Joe's
148,815
La Bonita Grocery
(Ross Dress for Less)
152,672
(Smith’s Food)
Dollar Tree
161,837
Smith’s Food
617,821
(Walmart Supercenter)
(Lowe’s), Ross Dress for Less, PetSmart, Office
Depot, 99 Cents Only
144,571
(Smith’s Food)
Family Dollar
598,213
(Walmart Supercenter)
(Lowe’s), PetSmart, Office Depot, Michaels,
Smart & Final
3,516,707
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Nottingham Commons
Baltimore-Columbia-Towson, MD
100.0%
131,270 MOM's Organic Market
T.J. Maxx, DSW, Petco
Washington-Arlington-Alexandria,
DC-VA-MD-WV
100.0%
North Towne Plaza
Albuquerque, NM
100.0%
144,796 Whole Foods Market
HomeGoods
New Mexico Total:
North Carolina
Galleria Shopping Center
Charlotte-Concord-Gastonia, NC-
SC
Bull City Market
Durham-Chapel Hill, NC
Hope Valley Commons
Durham-Chapel Hill, NC
Avent Ferry Shopping
Center
Capital Square
Falls Pointe Shopping
Center
Raleigh, NC
Raleigh, NC
Raleigh, NC
High House Crossing
Raleigh, NC
Leesville Towne Centre
Raleigh, NC
Northwoods Shopping
Center
Raleigh, NC
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
144,796
324,704
(Walmart Supercenter)
Off Broadway Shoes
40,875 Whole Foods Market
81,371
Harris Teeter
119,652
Food Lion
Family Dollar
143,063
Food Lion
198,549
Harris Teeter
(Kohl’s)
90,155
127,106
Harris Teeter
Rite Aid
77,803 Walmart Neighborhood Market
Dollar Tree
19
Table of Contents
Center
CBSA (5)
Owned %
Six Forks Shopping Center
Raleigh, NC
Stonehenge Market
Raleigh, NC
Wake Forest Crossing II
Raleigh, NC
Surf City Crossing
Wilmington, NC
Waterford Village
Wilmington, NC
100.0%
100.0%
100.0%
100.0%
100.0%
Foot
Notes
GLA
Grocer Anchor
( ) indicates owned
by others
468,414
Food Lion
Other Anchors
( ) indicates owned by others
Kmart, Home Depot, Bed Bath & Beyond,
PetSmart
188,437
Harris Teeter
Stein Mart, Rite Aid
296,037
(Lowes Foods)
63,016
Harris Teeter
108,249
Harris Teeter
2,327,431
(Kohl's), (T.J. Maxx), (Michaels), (Ross Dress for
Less), (Petco)
North Carolina Total:
Oregon
Clackamas Square
Oak Grove Market Center
Raleigh Hills Plaza
Oregon Total:
Tennessee
Portland-Vancouver-Hillsboro, OR-
WA
Portland-Vancouver-Hillsboro, OR-
WA
Portland-Vancouver-Hillsboro, OR-
WA
20.0%
(1)(3)
140,227
(Winco Foods)
T.J. Maxx
100.0%
97,177
20.0%
(1)(3)
39,520
New Seasons Market
Walgreens
276,924
14,490
88,108
Kroger
314,224
Walgreens
(Target), Best Buy, PetSmart
245,396
Kroger
Stein Mart, Marshalls, HomeGoods
100.0%
100.0%
100.0%
100.0%
Highland Square
Memphis, TN-MS-AR
Mendenhall Commons
Memphis, TN-MS-AR
Ridgeway Trace
Memphis, TN-MS-AR
Memphis, TN-MS-AR
The Commons at Dexter
Lake
Tennessee Total:
Texas
Mueller Regional Retail
Center
Austin-Round Rock, TX
100.0%
North Park Plaza
Beaumont-Port Arthur, TX
50.0%
(1)(3)
North Towne Plaza
Brownsville-Harlingen, TX
Rock Prairie Marketplace
College Station-Bryan, TX
Moore Plaza
Corpus Christi, TX
Horne Street Market
Dallas-Fort Worth-Arlington, TX
Overton Park Plaza
Dallas-Fort Worth-Arlington, TX
100.0%
100.0%
100.0%
100.0%
100.0%
662,218
351,099
281,255
145,000
18,163
Marshalls, PetSmart, Bed Bath & Beyond, Home
Depot, Best Buy
(Target), (Toys “R” Us), Spec's, Kirkland's
(Lowe's)
Corner Store
599,415
(H-E-B)
Office Depot, Marshalls, (Target), Old Navy,
Hobby Lobby, Stein Mart
51,918
(24 Hour Fitness)
462,150
Sprouts Farmers Market
PetSmart, T.J. Maxx, (Home Depot), Goody
Goody Wines, buybuy BABY
Stein Mart, Nordstrom, Marshalls, Office Depot,
Petco
Preston Shepard Place
Dallas-Fort Worth-Arlington, TX
20.0%
(1)(3)
363,337
10-Federal Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
1919 North Loop West
Alabama Shepherd
Shopping Center
Baybrook Gateway
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Bellaire Blvd. Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
Blalock Market at I-10
Braeswood Square
Shopping Center
Citadel Building
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
15.0%
(1)
132,472
Sellers Bros.
Palais Royal, Harbor Freight Tools
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
138,028
State of Texas
59,120
Trader Joe's
PetSmart
237,195
43,891
Randall’s
97,277
99 Ranch Market
Ashley Furniture, Cost Plus World Market, Barnes
& Noble, Michaels
99,078
Belden’s
Walgreens
121,000
Weingarten Realty Investors Corporate Office
Cullen Plaza Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
15.0%
(1)
84,517
Fiesta
283,381
Kroger
Family Dollar
Babies “R” Us
Cypress Pointe
Galveston Place
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Griggs Road Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
Harrisburg Plaza
Houston-The Woodlands-Sugar
Land, TX
HEB - Dairy Ashford &
Memorial
Houston-The Woodlands-Sugar
Land, TX
Heights Plaza Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
I45/Telephone Rd.
League City Plaza
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
100.0%
100.0%
15.0%
15.0%
100.0%
100.0%
15.0%
15.0%
(1)
(1)
(1)
(1)
210,370
Randall’s
Office Depot, Palais Royal, Spec's
80,091
93,438
36,874
H-E-B
Family Dollar, Citi Trends
dd's Discount
71,277
Kroger
Goodwill
171,599
Sellers Bros.
Famsa, Fallas Paredes, Harbor Freight Tools
129,500
Spec’s
20
Table of Contents
Center
CBSA (5)
Owned %
Market at Westchase
Shopping Center
Houston-The Woodlands-Sugar
Land, TX
Northbrook Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
Oak Forest Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
Randalls Center/Kings
Crossing
Houston-The Woodlands-Sugar
Land, TX
Richmond Square
River Oaks Shopping
Center - East
River Oaks Shopping
Center - West
Shoppes at Memorial
Villages
Shops at Kirby Drive
Shops at Three Corners
Southgate Shopping Center
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Stella Link Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
The Centre at Post Oak
Tomball Marketplace
Houston-The Woodlands-Sugar
Land, TX
Houston-The Woodlands-Sugar
Land, TX
Village Plaza at Bunker
Hill
Houston-The Woodlands-Sugar
Land, TX
West Gray
Houston-The Woodlands-Sugar
Land, TX
Westchase Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
Westhill Village Shopping
Center
Houston-The Woodlands-Sugar
Land, TX
Independence Plaza
Laredo, TX
North Creek Plaza
Laredo, TX
Plantation Centre
Laredo, TX
Foot
Notes
GLA
84,084
Grocer Anchor
( ) indicates owned
by others
Other Anchors
( ) indicates owned by others
174,181
Randall’s
Office Depot, Citi Trends, Dollar Tree
157,669
Kroger
Ross Dress for Less, Dollar Tree, PetSmart
126,997
Randall’s
CVS
92,657
Best Buy, Cost Plus
71,265
Kroger
247,673
Kroger
185,974
55,460
277,603
Fiesta
Barnes & Noble, Talbots, Ann Taylor, GAP, JoS.
A. Bank
Gulf Coast Veterinary Specialists
(Toys R Us), Freebirds Burrito
Ross Dress for Less, PetSmart, Office Depot, Big
Lots
124,454
Food-A-Rama
CVS, Family Dollar, Palais Royal
(1)
(1)
21,605
183,940
311,820
57.8%
(1)(3)
490,634
H-E-B
Spec’s
Marshalls, Old Navy, Grand Lux Café, Nordstrom
Rack, Arhaus
(Academy), (Kohl's), Ross Dress For Less,
Marshalls
PetSmart, Babies "R" Us, Academy, Nordstrom
Rack
37,278
Pier 1
350,320 Whole Foods Market
(Target), Ross Dress for Less, Palais Royal, Petco
130,851
Ross Dress for Less, Office Depot, 99 Cents Only
347,302
H-E-B
485,463
(H-E-B)
143,015
H-E-B
T.J. Maxx, Ross Dress for Less, Hobby Lobby,
Petco, Ulta Beauty
(Target), Marshalls, Old Navy, Best Buy, Bed Bath
& Beyond
(Target), Dick's Sporting Goods, Conn's, Ross
Dress for Less, Marshalls, Office Depot
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
70.0%
15.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Las Tiendas Plaza
McAllen-Edinburg-Mission, TX
50.0%
(1)(3)
500,084
Market at Nolana
McAllen-Edinburg-Mission, TX
50.0%
(1)(3)
244,602
(Walmart Supercenter)
Market at Sharyland Place
McAllen-Edinburg-Mission, TX
50.0%
(1)(3)
301,174
(Walmart Supercenter)
Kohl's, Dollar Tree
North Sharyland Crossing
McAllen-Edinburg-Mission, TX
50.0%
(1)(3)
Northcross
McAllen-Edinburg-Mission, TX
50.0%
(1)(3)
Old Navy Building
McAllen-Edinburg-Mission, TX
50.0%
(1)(3)
—
75,288
15,000
Raising Cane's
Barnes & Noble
Old Navy
Sharyland Towne Crossing
McAllen-Edinburg-Mission, TX
50.0%
(1)(3)
487,724
H-E-B
South 10th St. HEB
McAllen-Edinburg-Mission, TX
50.0%
(1)(3)
103,702
H-E-B
Trenton Crossing
McAllen-Edinburg-Mission, TX
100.0%
569,881
(Target), T.J. Maxx, Petco, Office Depot, Ross
Dress for Less
(Target), Hobby Lobby, Ross Dress for Less,
Marshalls, PetSmart
Starr Plaza
Rio Grande City, TX
50.0%
(1)(3)
176,693
H-E-B
Bealls
Fiesta Trails
San Antonio-New Braunfels, TX
100.0%
485,370
(H-E-B)
Act III Theatres, Marshalls, Office Max, Stein
Mart, Petco
Parliament Square II
San Antonio-New Braunfels, TX
100.0%
54,541
Incredible Pizza
San Antonio-New Braunfels, TX
15.0%
(1)
161,806
H-E-B
Bealls, Tuesday Morning
San Antonio-New Braunfels, TX
100.0%
Thousand Oaks Shopping
Center
Valley View Shopping
Center
Texas Total:
Utah
West Jordan Town Center
Salt Lake City, UT
100.0%
Utah Total:
Virginia
Hilltop Village Center
Washington-Arlington-Alexandria,
DC-VA-MD-WV
Virginia Total:
91,446
11,729,001
304,899
304,899
Marshalls, Dollar Tree
(Target), Petco
100.0%
(4)
250,811 Wegmans
L.A. Fitness
250,811
21
Table of Contents
Center
Washington
CBSA (5)
Owned %
Foot
Notes
GLA
Grocer Anchor
( ) indicates owned
by others
Other Anchors
( ) indicates owned by others
2200 Westlake
Seattle-Tacoma-Bellevue, WA
69.4%
(1)(3)
87,014 Whole Foods
Meridian Town Center
Seattle-Tacoma-Bellevue, WA
20.0%
(1)(3)
143,237
(Safeway)
Jo-Ann Fabric & Craft Store, Tuesday Morning
Queen Anne Marketplace
Seattle-Tacoma-Bellevue, WA
51.0%
(1)(3)
81,385 Metropolitan Market
Bartell's Drug
Rainer Square Plaza
Seattle-Tacoma-Bellevue, WA
20.0%
(1)(3)
111,736
Safeway
Ross Dress for Less
South Hill Center
Seattle-Tacoma-Bellevue, WA
20.0%
(1)(3)
134,010
Bed Bath & Beyond, Ross Dress for Less, Best
Buy
Washington Total:
Total Operating Properties
New Development
Virginia
557,382
41,227,302
Centro Arlington
West Alex
Virginia Total:
Washington
Washington-Arlington-Alexandria,
DC-VA-MD-WV
Washington-Arlington-Alexandria,
DC-VA-MD-WV
90.0% (1)(2)(3)
— Harris Teeter
100.0%
(2)
— Harris Teeter
—
The Whittaker
Seattle-Tacoma-Bellevue, WA
100.0%
(2)
52,106 Whole Foods
Washington Total:
Total New Developments
Operating & New Development Properties
___________________
52,106
52,106
41,279,408
(1) Denotes property is held by a real estate joint venture or partnership; however, the gross leasable area square feet figures include our
partners’ ownership interest in the property and property owned by others.
(2) Denotes property currently under development.
(3) Denotes properties that are not consolidated under generally accepted accounting principles.
(4) Denotes Hilltop Village Center, a 50/50 Joint Venture reflecting current 100% economics to WRI.
(5) CBSA represents the Core Based Statistical Area.
ITEM 3. Legal Proceedings
We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict
the amounts involved, our management and counsel believe that when such litigation is resolved, our resulting liability,
if any, will not have a material effect on our consolidated financial statements.
ITEM 4. Mine Safety Disclosures
Not applicable.
22
Table of Contents
PART II
ITEM 5. Market for Registrant’s Common Shares of Beneficial Interest, Related Shareholder Matters and Issuer
Purchases of Equity Securities
Our common shares are listed and traded on the New York Stock Exchange under the symbol “WRI.” As of January 31,
2018, the number of holders of record of our common shares was 1,784. The closing high and low sale prices per
common share as reported on the New York Stock Exchange, and dividends per share paid for the fiscal quarters
indicated were as follows:
2017:
2016:
Fourth
Third
Second
First
Fourth
Third
Second
First
High
Low
Dividends
$
33.60 $
30.45 $
33.46
35.27
36.70
29.48
29.37
31.37
$
38.25 $
34.17 $
43.44
40.82
37.84
38.53
36.54
32.48
1.135 (1)
.385
.385
.385
.365
.365
.365
.365
___________________
(1) Comprised of a regular dividend of $.385 per common share and a special dividend of $.75 per common share.
The following table summarizes the equity compensation plans under which our common shares may be issued as of
December 31, 2017:
Plan category
Equity compensation plans approved by shareholders
Equity compensation plans not approved by shareholders
Total
Number of
shares to
be issued
upon
exercise of
outstanding
options,
warrants
and rights
828,354
Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
$23.58
Number of
shares
remaining
available
for future
issuance
546,530
—
—
—
828,354
$23.58
546,530
23
Table of Contents
Performance Graph
The graph and table below provides an indicator of cumulative total shareholder returns for us as compared with the
S&P 500 Stock Index and the FTSE NAREIT Equity Shopping Centers Index, weighted by market value at each
measurement point. The graph assumes that on December 31, 2012, $100 was invested in our common shares and
that all dividends were reinvested by the shareholder.
Comparison of Five Year Cumulative Return
*$100 invested on December 31, 2012 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Source: SNL Financial LC
2013
2014
2015
2016
2017
Weingarten Realty Investors
$
106.73 $
132.39
142.40 $
150.51
146.93 $
158.07 $
152.59
170.84
155.79
208.14
S&P 500 Index
FTSE NAREIT Equity Shopping
Centers Index
104.99
136.45
142.89
148.14
131.31
There can be no assurance that our share performance will continue into the future with the same or similar trends
depicted in the graph above. We do not make or endorse any predications as to future share performance.
In October 2015, our Board of Trust Managers approved a $200 million share repurchase plan. Under this plan, we
may repurchase common shares from time-to-time in open-market or in privately negotiated purchases. The timing
and amount of any shares repurchased will be determined by management based on its evaluation of market conditions
and other factors. The repurchase plan may be suspended or discontinued at any time, and we have no obligations
to repurchase any amount of our common shares under the plan. As of the date of this filing, we have not repurchased
any shares under this plan.
24
Table of Contents
ITEM 6. Selected Financial Data
The following table sets forth our selected consolidated financial data 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)
Year Ended December 31,
2015
2014
2016
2013
2017
Operating Data:
Revenues (primarily real estate rentals)
$
573,163
$
549,555
$
512,844
$
514,406
$
489,195
Depreciation and Amortization
Operating Income
Interest Expense, net
Gain on Sale and Acquisition of Real Estate Joint
Venture and Partnership Interests
Benefit (Provision) for Income Taxes
Equity in Earnings of Real Estate Joint Ventures and
Partnerships, net
Income from Continuing Operations
Gain on Sale of Property
Net Income
Net Income Adjusted for Noncontrolling Interests
167,101
177,424
80,326
162,535
194,443
83,003
145,940
184,694
87,783
—
17
48,322
(6,856)
879
(52)
27,074
132,104
218,611
350,715
335,274
20,642
176,117
100,714
276,831
238,933
19,300
121,601
59,621
181,222
174,352
150,356
182,038
94,725
1,718
1,261
22,317
116,365
146,290
307,579
288,008
146,763
159,868
96,312
33,670
(7,046)
35,112
132,977
762
265,156
220,262
Net Income Attributable to Common Shareholders
$
335,274
$
238,933
$
160,835
$
277,168
$
184,145
Per Share Data - Basic:
Income from Continuing Operations Attributable to
Common Shareholders
Net Income Attributable to Common Shareholders
Weighted Average Number of Shares - Basic
Per Share Data - Diluted:
Income from Continuing Operations Attributable to
Common Shareholders
Net Income Attributable to Common Shareholders
$
$
$
$
2.62
2.62
127,755
2.60
2.60
$
$
$
$
1.90
1.90
126,048
1.87
1.87
$
$
$
$
1.31
1.31
123,037
1.29
1.29
$
$
$
$
1.91
2.28
121,542
1.89
2.25
$
$
$
$
.76
1.52
121,269
.75
1.50
Weighted Average Number of Shares - Diluted
130,071
128,569
124,329
124,370
122,460
Balance Sheet Data:
Property (at cost)
Total Assets
Debt, net
Other Data:
Cash Flows from Operating Activities (1)
Cash Flows from Investing Activities (1)
Cash Flows from Financing Activities (1)
Cash Dividends per Common Share
Funds from Operations Attributable to Common
Shareholders- Basic (2)
___________________
$ 4,498,859
$ 4,789,145
$ 4,262,959
$ 4,076,094
$ 4,289,276
4,196,639
4,426,928
3,901,945
3,805,915
4,212,520
$ 2,081,152
$ 2,356,528
$ 2,113,277
$ 1,930,009
$ 2,288,435
$
269,758
$
252,411
$
245,435
$
240,674
$
233,478
298,992
(366,172)
(197,132)
293,990
96,409
(588,695)
129,798
(126,248)
(527,555)
(297,509)
2.29
1.46
1.38
1.55
1.22
$
308,517
$
291,656
$
258,126
$
254,518
$
222,732
(1) The retrospective application of adopting certain Accounting Standard Updates on prior years' Consolidated Statements of Cash Flows
to the consolidated financial statements were made to conform to the current year presentation (see Notes 1 and 2 for additional
information).
(2) See Item 7 for the National Association of Real Estate Investment Trusts definition of funds from operations attributable to common
shareholders for this non-GAAP measure.
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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. Our results of operations and financial
condition, as reflected in the accompanying consolidated financial statements and related footnotes, are subject to
management’s evaluation and interpretation of business conditions, retailer performance, changing capital market
conditions and other factors which could affect the ongoing viability of our tenants.
Executive Overview
Weingarten Realty Investors is a REIT organized under the Texas Business Organizations Code. We, and our
predecessor entity, began the ownership of shopping centers and other commercial real estate in 1948. Our primary
business is leasing space to tenants in the shopping centers we own or lease. We also provide property management
services for which we charge fees to either joint ventures where we are partners or other outside owners.
We operate a portfolio of rental properties, primarily neighborhood and community shopping centers, totaling
approximately 41.3 million square feet of gross leaseable area, that is either owned by us or others. We have a
diversified tenant base with our largest tenant comprising only 2.8% of base minimum rental revenues during 2017.
At December 31, 2017, we owned or operated under long-term leases, either directly or through our interest in real
estate joint ventures or partnerships, a total of 204 properties, which are located in 17 states spanning the country
from coast to coast.
We also owned interests in 25 parcels of land held for development that totaled approximately 18.0 million square feet
at December 31, 2017.
We had approximately 5,400 leases with 3,700 different tenants at December 31, 2017. Leases for our properties
range from less than a year for smaller spaces to over 25 years for larger tenants. Rental revenues generally include
minimum lease payments, which often increase over the lease term, reimbursements of property operating expenses,
including real estate taxes, and additional rent payments based on a percentage of the tenants’ sales. Our anchor
tenants are supermarkets, value-oriented apparel/discount stores and other retailers or service providers who generally
sell basic necessity-type goods and services. Although there is a broad shift in shopping patterns, including Internet
shopping that continues to affect our tenants, we believe our anchor tenants drive foot traffic, combined with convenient
locations, attractive and well-maintained properties, high quality retailers and a strong tenant mix, should lessen the
effects of these conditions and maintain the viability of our portfolio.
Our goal is to remain a leader in owning and operating top-tier neighborhood and community shopping centers in
certain markets of the United States. Our strategic initiatives include: (1) raising net asset value and cash flow through
quality acquisitions, redevelopments and new developments, (2) maintaining a strong, flexible consolidated balance
sheet and a well-managed debt maturity schedule, (3) growing net operating income from our existing portfolio by
increasing occupancy and rental rates and (4) owning quality shopping centers in preferred locations that attract strong
tenants. We believe these initiatives will keep our portfolio of properties among the strongest in our sector. Due to
current capitalization rates in the market along with the uncertainty of the impact of increasing interest rates and various
other market conditions, we will continue to be very prudent in our evaluation of all new investment opportunities. We
believe the pricing of assets that we would like to sell remains reasonably firm at the same time that the pricing of our
common shares has dropped well below our net asset value. If this market phenomenon continues, our disposition
activity could increase accordingly.
In late August 2017, the Texas Gulf Coast, including the Houston metropolitan area, was subjected to extensive flooding
by Hurricane Harvey. Additionally in September 2017, much of Florida was faced with the damaging winds of Hurricane
Irma. We have assessed the impact of both hurricanes, which caused nominal damage to our properties within the
affected areas and temporarily interrupted the operations of some of our tenants. As of December 31, 2017, we have
recorded $1.8 million in costs related to the storms in operating expense. Although most of our tenants' operations
have resumed and repairs are almost completed, we will continue to monitor and adjust earnings as needed for storm
damage estimates related to insurance claims in future periods.
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Table of Contents
We intend to recycle non-core operating centers that no longer meet our ownership criteria and that will provide capital
for growth opportunities. During 2017, we disposed of real estate assets, which were owned by us either directly or
through our interest in real estate joint ventures or partnerships, with our share of aggregate gross sales proceeds
totaling $444.1 million. Subsequent to December 31, 2017, we sold real estate assets with our share of aggregate
gross sales proceeds totaling approximately $220.6 million. We have approximately $92 million of dispositions currently
under contracts or letters of intent; however, there are no assurances that these transactions will close at such prices
or at all. For 2018, we believe we will complete dispositions in amounts between $250 million and $450 million; however,
there are no assurances that this will actually occur, or at what values, or whether we may potentially exceed this
range.
We intend to continue to actively seek acquisition properties that meet our return hurdles and to actively evaluate other
opportunities as they enter the market. For 2018, we expect to invest in acquisition investments, which could potentially
range from $50 million to $150 million; however, there are no assurances that this will actually occur.
We intend to continue to focus on identifying new development projects as another source of growth, as well as continue
to look for internal growth opportunities. Although we have begun the development of mixed-use projects, the
opportunities for additional new development projects are limited at this time due to a lack of demand for new retail
space. During 2017, we invested $93.1 million in three new development projects that are partially or wholly owned.
Also during 2017, we invested $28.0 million in 16 redevelopment projects that were partially or wholly owned. For
2018, we expect to invest in new development and redevelopments in the range of $125 million to $175 million, but
we can give no assurances that this will actually occur.
We strive to maintain a strong, conservative capital structure which should provide ready access to a variety of attractive
long and short-term capital sources. We carefully balance lower cost, short-term financing with long-term liabilities
associated with acquired or developed long-term assets. We continue to look for transactions that will strengthen our
consolidated balance sheet and further enhance our access to various sources of capital, while reducing our cost of
capital. Due to the variability in the capital markets, there can be no assurance that favorable pricing and availability
will be available in the future.
Operational Metrics
In assessing the performance of our centers, management carefully monitors various operating metrics of the portfolio.
As a result of our strong leasing activity and low tenant fallout, the operating metrics of our portfolio remained strong
in 2017 as we focused on increasing rental rates and same property net operating income ("SPNOI" and see Non-
GAAP Financial Measures for additional information). Our portfolio delivered solid operating results with:
•
•
•
occupancy of 94.8% at December 31, 2017;
an increase of 2.6% in SPNOI including redevelopments for the twelve months ended December 31, 2017
over the same period of 2016; and
rental rate increases of 23.1% for new leases and 9.0% for renewals during the twelve months ended
December 31, 2017.
Below are performance metrics associated with our signed occupancy, SPNOI growth and leasing activity on a pro
rata basis:
Anchor (space of 10,000 square feet or greater)
Non-Anchor
Total Occupancy
SPNOI Growth including Redevelopments (1)
_______________
December 31,
2017
2016
97.3%
90.5%
94.8%
96.5%
90.6%
94.3%
Three Months Ended
December 31, 2017
Twelve Months Ended
December 31, 2017
2.4%
2.6%
(1) See Non-GAAP Financial Measures for a definition of the measurement of SPNOI and a reconciliation to operating income within this
section of Item 7.
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Number
of
Leases
Square
Feet
('000's)
Average
New
Rent per
Square
Foot ($)
Average
Prior
Rent per
Square
Foot ($)
Average Cost
of Tenant
Improvements
per Square
Foot ($)
Change in
Base Rent
on Cash
Basis
Leasing Activity:
Three Months Ended December 31, 2017
New leases (1)
Renewals
Not comparable spaces
Total
Twelve Months Ended December 31, 2017
New leases (1)
Renewals
56
159
32
247
202
705
Not comparable spaces
Total
_______________
136
1,043
107 $ 31.37 $ 26.76 $
18.95
17.86
574
87
36.74
—
17.2%
6.1%
768 $ 20.90 $ 19.26 $
5.77
8.6%
612 $ 23.42 $ 19.04 $
3,145
557
18.33
16.81
38.99
—
23.1%
9.0%
4,314 $ 19.16 $ 17.17 $
6.35
11.6%
(1) Average external lease commissions per square foot for the three and twelve months ended December 31, 2017 were $5.71 and $5.51,
respectively.
Changing shopping habits, driven by rapid expansion of Internet-driven procurement, has led to increased financial
problems for many retailers, which has had a negative impact on the retail real estate sector. We continue to monitor
the effects of these trends, including the impact of retail customer spending over the long-term. We believe the
desirability of our physical locations, the significant diversification of our portfolio, both geographically and by tenant
base, and the quality of our portfolio, along with its leading retailers or service providers that sell primarily grocery and
basic necessity-type goods and services, position us well to mitigate the impact of these changes. Despite recent
tenant bankruptcies, we continue to believe there is retailer demand for quality space within strong, strategically located
centers.
While we anticipate occupancy in 2018 to remain comparable with 2017, we may experience some fluctuations due
to announced bankruptcies and the repositioning of those spaces in the future. A reduction in quality retail space
available, as well as continued retailer demand, contributed to the increase in overall rental rates on a same-space
basis as we completed new leases and renewed existing leases. Leasing volume is anticipated to fluctuate due to the
uncertainty in tenant fallouts related to bankruptcies. Our expectation is that SPNOI growth including redevelopments
will average between 2.5% to 3.5% for 2018 assuming no significant tenant bankruptcies, although there are no
assurances that this will occur.
New Development/Redevelopment
At December 31, 2017, we had three projects in various stages of development that were partially or wholly owned.
We have funded $140.4 million through December 31, 2017 on these projects, and we estimate our aggregate net
investment upon completion to be $363.1 million. Overall, the average projected stabilized return on investment for
these multi-use properties, that include retail, office and residential components, is expected to approximate 5.5%
upon completion. Effective January 1, 2017, we stabilized the development in White Marsh, Maryland, moving it to
our operating property portfolio. This development was 100% leased with an investment of $46 million and an 8%
yield.
We have 16 redevelopment projects in which we plan to invest approximately $228.8 million, which include a 30-story,
high-rise residential tower at our River Oaks Shopping Center in Houston, Texas with an estimated investment of $150
million. Upon completion, the average projected stabilized return on our incremental investment on these redevelopment
projects is expected to average around 7.5% to 9.5%.
We had approximately $69.2 million in land held for development at December 31, 2017 that may either be developed
or sold. While we are experiencing some interest from retailers and other market participants in our land held for
development, opportunities for economically viable developments remain limited. We intend to continue to pursue
additional development and redevelopment opportunities in multiple markets; however, finding the right opportunities
remains challenging.
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Acquisitions
Acquisitions are a key component of our long-term growth strategy. The availability of quality acquisition opportunities
in the market remains sporadic in our targeted markets. Intense competition, along with a decline in the volume of
high-quality core properties on the market, has in many cases driven pricing to pre-recession highs. We intend to
remain disciplined in approaching these opportunities, pursuing only those that provide appropriate risk-adjusted
returns.
Dispositions
Dispositions are also a key component of our ongoing management process where we selectively prune properties
from our portfolio that no longer meet our geographic or growth targets. Dispositions provide capital, which may be
recycled into properties that are high barrier-to-entry locations within high growth metropolitan markets, and thus have
higher long-term growth potential. Additionally, proceeds from dispositions may be used to reduce outstanding debt,
further deleveraging our consolidated balance sheet or repurchasing our common shares, dependent upon our share
price.
Summary of Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations is based on our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities and contingencies as of the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate
our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. We believe the following
critical accounting policies require more significant judgments and estimates used in the preparation of our consolidated
financial statements.
Property
Acquisitions of properties are accounted for utilizing the acquisition of an asset method and, accordingly, the results
of operations of an acquired property are included in our results of operations from the date of acquisition. Estimates
of fair values are based upon future cash flows and other valuation techniques in accordance with our fair value
measurements accounting policy. Fair values are used to record the purchase price of acquired property among land,
buildings on an “as if vacant” basis, tenant improvements, other identifiable intangibles and any goodwill or gain on
purchase. Other identifiable intangible assets and liabilities include the effect of out-of-market leases, the value of
having leases in place (“as is” versus “as if vacant” and absorption costs), out-of-market assumed mortgages and
tenant relationships. Depreciation and amortization is computed using the straight-line method, generally over
estimated useful lives of 40 years for buildings and over the lease term which includes bargain renewal options for
other identifiable intangible assets. The impact of these estimates, including incorrect estimates in connection with
acquisition values and estimated useful lives, could result in significant differences related to the purchased assets,
liabilities and resulting depreciation or amortization. Costs associated with the successful acquisition of an asset are
capitalized as incurred.
Real Estate Joint Ventures and Partnerships
To determine the method of accounting for partially owned real estate joint ventures and partnerships, management
determines whether an entity is a variable interest entity (“VIE”) and, if so, determines which party is the primary
beneficiary by analyzing whether we have both the power to direct the entity’s significant economic activities and the
obligation to absorb potentially significant losses or receive potentially significant benefits. Significant judgments and
assumptions inherent in this analysis include the design of the entity structure, the nature of the entity’s operations,
future cash flow projections, the entity’s financing and capital structure, and contractual relationships and terms. We
consolidate a VIE when we have determined that we are the primary beneficiary.
Primary risks associated with our involvement with our VIEs include the potential funding of the entities’ debt obligations
or making additional contributions to fund the entities’ operations or capital activities.
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Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling
financial interest are consolidated in our consolidated financial statements. In determining whether we have a controlling
financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out rights and
substantive participating rights. Partially owned real estate joint ventures and partnerships where we do not have a
controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity
method.
Management continually analyzes and assesses reconsideration events, including changes in the factors mentioned
above, to determine if the consolidation treatment remains appropriate. Decisions regarding consolidation of partially
owned entities frequently require significant judgment by our management. Errors in the assessment of consolidation
could result in material changes to our consolidated financial statements.
Impairment
Our property is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of
the property, including any capitalized costs and any identifiable intangible assets, may not be recoverable.
If such an event occurs, a comparison is made of the current and projected operating cash flows of each such property
into the foreseeable future, with consideration of applicable holding periods, on an undiscounted basis to the carrying
amount of such property. If we determine the carrying amount is not recoverable, our basis in the property is reduced
to its estimated fair value to reflect impairment in the value of the asset. Fair values are determined by management
utilizing cash flow models, market capitalization and discount rates, or by obtaining third-party broker or appraisal
estimates in accordance with our fair value measurements accounting policy.
We review current economic considerations each reporting period, including the effects of tenant bankruptcies, the
suspension of tenant expansion plans for new development projects, declines in real estate values and any changes
to plans related to our new development projects including land held for development, to identify properties where we
believe market values may be deteriorating. Determining whether a property is impaired and, if impaired, the amount
of write-down to fair value requires a significant amount of judgment by management and is based on the best information
available to management at the time of evaluation. The evaluations used in these analyses could result in incorrect
estimates when determining carrying values that could be material to our consolidated financial statements.
Our investment in partially owned real estate joint ventures and partnerships is reviewed for impairment each reporting
period. The ultimate realization is dependent on a number of factors, including the performance of each investment
and market conditions. We will record an impairment charge if we determine that a decline in the estimated fair value
of an investment below its carrying amount is other than temporary. A considerable amount of judgment by our
management is used in this evaluation. Our overall future plans for the investment, our investment partner’s financial
outlook and our views on current market and economic conditions may have a significant impact on the resulting factors
analyzed for these purposes.
Our investments in tax increment revenue bonds are reviewed for impairment, including the evaluation of changes in
events or circumstances that may indicate that the carrying amount of the investment may not be recoverable.
Realization is dependent on a number of factors, including investment performance, market conditions and payment
structure. We will record an impairment charge if we determine that a decline in the value of the investment below its
carrying amount is other than temporary, recovery of its cost basis is uncertain, and/or it is uncertain if the investment
will be held to maturity. A considerable amount of judgment by our management is used in this evaluation, which may
produce incorrect estimates that could be material to our consolidated financial statements.
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Table of Contents
Results of Operations
Comparison of the Year Ended December 31, 2017 to the Year Ended December 31, 2016
The following table is a summary of certain items from our Consolidated Statements of Operations, which we believe
represent items that significantly changed during 2017 as compared to the same period in 2016:
Year Ended December 31,
Revenues
Depreciation and amortization
Operating expenses
Real estate taxes, net
Impairment loss
Interest expense, net
Interest and other income
Gain on sale and acquisition of real estate joint
venture and partnership interests
Benefit (provision) for income taxes
Equity in earnings of real estate joint ventures and
partnerships, net
Change
% Change
2017
573,163 $
2016
549,555 $
$
167,101
109,310
75,636
15,257
80,326
7,915
162,535
98,855
66,358
98
83,003
2,569
23,608
4,566
10,455
9,278
15,159
(2,677)
5,346
—
17
48,322
(6,856)
(48,322)
6,873
4.3%
2.8
10.6
14.0
15,468.4
(3.2)
208.1
(100.0)
100.2
27,074
20,642
6,432
31.2
Revenues
The increase in revenues of $23.6 million is primarily attributable to our acquisitions and new development completions
that totaled $27.8 million. The existing portfolio and redevelopment properties contributed $18.1 million due to increases
in rental rates and changes in occupancy, which is offset by our dispositions of $22.3 million.
Depreciation and Amortization
The increase in depreciation and amortization of $4.6 million is primarily attributable to our acquisitions and new
development completions that totaled $11.7 million, which is offset by our dispositions and other capital activities.
Operating Expenses
The increase in operating expenses of $10.5 million is primarily attributable to our acquisitions and new development
completions of $5.3 million, a $3.1 million lease termination fee paid in 2017, insurance costs of $1.8 million primarily
associated with hurricanes, an increase of $2.4 million in costs associated with our deferred compensation plan, and
an overall increase at our existing portfolio and redevelopment properties associated primarily with the timing of repairs,
which is offset by our dispositions of $4.0 million and a $.9 million write-off of pre-development costs in 2016.
Real Estate Taxes, net
The increase in net real estate taxes of $9.3 million is primarily attributable to rate and valuation changes for the
portfolio, as well as our acquisitions and new development completions, which were offset by our dispositions of $2.7
million.
Impairment Loss
The increase in impairment losses of $15.2 million is primarily attributable to the losses in 2017 associated with the
completed or proposed disposition of four shopping centers, interests in two 50% unconsolidated joint ventures and
the disposition of an unimproved land parcel as compared to the losses in same period of 2016 associated with the
disposition of two unimproved land parcels.
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Table of Contents
Interest Expense, net
Net interest expense decreased $2.7 million or 3.2%. The components of net interest expense were as follows (in
thousands):
Gross interest expense
Gain on extinguishment of debt
Amortization of debt deferred costs, net
Over-market mortgage adjustment
Capitalized interest
Total
Year Ended December 31,
2017
2016
$
82,404 $
85,134
—
3,890
(1,100)
(4,868)
(2,037)
3,515
(953)
(2,656)
$
80,326 $
83,003
The decrease in gross interest expense is primarily attributable to a reduction in the weighted average interest rates
between the respective periods. For the year ended December 31, 2017, the weighted average debt outstanding was
$2.2 billion at a weighted average interest rate of 3.8% as compared to $2.2 billion outstanding at a weighted average
interest rate of 3.9% in the same period of 2016. The $2.0 million gain on debt extinguishment in 2016 was associated
with the refinancing of a secured note. The $2.2 million increase in capitalized interest is primarily attributable to an
increase in our new development activities in 2017.
Interest and Other Income
The increase in interest and other income of $5.3 million is primarily attributable to an increase in the fair value of
assets held in a grantor trust related to our deferred compensation plan of $3.6 million, a pre-development cost recovery
of $.9 million and $.7 million associated with gains from the sale of investments.
Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests
The gain in 2016 of $48.3 million is associated with the remeasurement of our 51% unconsolidated real estate
partnership interest to fair value associated with the exchange of properties among the partners, the acquisition of our
partner's 50% interest in a previously unconsolidated tenancy-in-common arrangement and the realization of changes
in fair value upon the consolidation of that entity, and the remeasurement of a land parcel from an unconsolidated real
estate joint venture to fair value.
Benefit (Provision) for Income Taxes
The increase in benefit (provision) for income taxes is primarily attributable to activities in our taxable REIT subsidiary.
In 2017, a tax benefit of $1.6 million was realized associated primarily with impairment losses and an NOL carryforward
from disposition activities as compared to a tax provision of $5.8 million in the same period of 2016 associated primarily
with the gain from the exchange of properties among the partners of an unconsolidated real estate joint venture and
the disposition of the development in Raleigh, North Carolina.
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
The increase of $6.4 million in the equity in earnings of real estate joint ventures and partnerships is primarily attributable
to an increase of $2.3 million in our share of the gain on sale from disposition activities within the respective periods,
an acquisition of a center in 2016, which contributed $1.8 million, and an increase in equity preferential earnings.
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Comparison of the Year Ended December 31, 2016 to the Year Ended December 31, 2015
The following table is a summary of certain items from our Consolidated Statements of Operations, which we believe
represent items that significantly changed during 2016 as compared to the same period in 2015:
Revenues
Depreciation and amortization
Real estate taxes, net
Interest expense, net
Interest and other income
Gain on sale and acquisition of real estate joint
venture and partnership interests
Provision for income taxes
Year Ended December 31,
2016
549,555 $
2015
512,844 $
$
162,535
66,358
83,003
2,569
48,322
6,856
145,940
60,289
87,783
4,563
879
52
Change
% Change
36,711
16,595
6,069
(4,780)
(1,994)
47,443
6,804
7.2%
11.4
10.1
(5.4)
(43.7)
5,397.4
13,084.6
Revenues
The increase in revenues of $36.7 million is primarily attributable to our acquisitions and new development completions
that totaled $34.5 million. The existing portfolio and redevelopment properties contributed $15.3 million, which is offset
by our dispositions of $13.1 million.
Depreciation and Amortization
The increase in depreciation and amortization of $16.6 million is primarily attributable to our acquisitions and new
development completions that totaled $18.1 million, which is offset by our dispositions and other capital activities.
Real Estate Taxes, net
The increase in net real estate taxes of $6.1 million is primarily attributable to our acquisitions and new development
completions that totaled $4.0 million, as well as rate and valuation changes for the portfolio, which were offset by our
dispositions of $.9 million.
Interest Expense, net
Net interest expense decreased $4.8 million or 5.4%. The components of net interest expense were as follows (in
thousands):
Gross interest expense
(Gain) loss on extinguishment of debt
Amortization of debt deferred costs, net
Over-market mortgage adjustment
Capitalized interest
Total
Year Ended December 31,
2016
2015
$
85,134 $
82,385
(2,037)
3,515
(953)
(2,656)
6,100
3,333
(783)
(3,252)
$
83,003 $
87,783
The decrease in net interest expense is primarily attributable to the $8.1 million decrease in debt extinguishment
activities within the respective periods. In 2016, a $2.0 million gain was realized as compared to a $6.1 million loss in
2015. For the year ended December 31, 2016, the weighted average debt outstanding was $2.2 billion at a weighted
average interest rate of 3.9% as compared to $2.0 billion outstanding at a weighted average interest rate of 4.2% in
the same period of 2015.
Interest and Other Income
The decrease in interest and other income of $2.0 million is primarily attributable to a $1.7 million litigation settlement
received in 2015.
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Table of Contents
Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests
The gain in 2016 of $48.3 million is primarily attributable to a $37.4 million gain associated with the remeasurement
of our 51% unconsolidated real estate partnership interest to fair value associated with the exchange of properties
among the partners, a $9.0 million gain associated with the fair value realization upon consolidation of our equity
associated with the acquisition of a partner's 50% interest in a previously unconsolidated tenancy-in-common
arrangement and a gain of $1.9 million associated with the remeasurement of a land parcel from an unconsolidated
real estate joint venture. The gain in 2015 of $.9 million is primarily attributable to our return of equity associated with
an unconsolidated joint venture's disposition of its real estate property.
Provision for Income Taxes
The increase of $6.8 million in the provision for income taxes is attributable to our taxable REIT subsidiary associated
primarily with the gain from the exchange of properties among the partners of an unconsolidated real estate joint
venture and the disposition of the development in Raleigh, North Carolina.
Effects of Inflation
We have structured our leases in such a way as to remain largely unaffected should significant inflation occur. Many
leases provide for increasing minimum rental rates during the terms of the leases through escalation provisions. In
addition, many of our leases are for terms of less than 10 years, allowing us to adjust rental rates to changing market
conditions when the leases expire. Many of our leases also contain percentage rent provisions whereby we receive
increased rentals based on the tenants’ gross sales. Most of our leases also require the tenants to pay their proportionate
share of operating expenses and real estate taxes. As a result of these lease provisions, increases in operating
expenses due to inflation, as well as real estate tax rate increases, generally do not have a significant adverse effect
upon our operating results as they are absorbed by our tenants. Under the current economic climate, inflation has
been rising very slowly.
Economic Conditions
We believe that underlying economic fundamentals continue to show positive, albeit slow, growth. We also believe
that consumer confidence is currently positive due in part to improvements in the labor market and changes in the tax
law. Furthermore, personal income and housing prices are continuing to increase in our primary markets. We believe
there is a direct correlation between housing wealth and consumption, and we expect rebounding home prices will
further strengthen retail fundamentals, including rent growth and net operating income. Our focus on supermarket-
anchored centers in densely populated major metropolitan areas should position our portfolio to take advantage of the
ever-changing retail landscape.
With respect to Houston and other markets that are energy dependent, increasing oil prices have positively impacted
the local economy and has begun to favorably affect the office and multifamily real estate sectors. If prices should
decline again for an extended duration, the performance of our centers in the Houston market could be impacted; we
believe however, that having most of our centers in dense, high income areas of Houston and the lack of retail
completions in the last five years, combined with population growth, and the diversification of Houston's industries,
reduces the potential negative impact to us in Houston of low oil prices.
As strengthening retail fundamentals drive demand for investments in top-tier retail real estate, we continue to dedicate
internal resources to identify and evaluate available assets in our markets so that we may purchase the best assets
and properties with the strongest upside potential. Also, we continue to look for redevelopment opportunities within
our existing portfolio by repositioning our anchor tenants and new development opportunities to spur growth.
Capital Resources and Liquidity
Our primary operating liquidity needs are paying our common share dividends, maintaining and operating our existing
properties, paying our debt service costs, excluding debt maturities, and funding capital expenditures. Under our 2018
business plan, cash flows from operating activities are expected to meet these planned capital needs.
The primary sources of capital for funding any debt maturities, acquisitions, new developments and redevelopments
are our excess cash flow generated by our operating properties; credit facilities; proceeds from both secured and
unsecured debt issuances; proceeds from common and preferred equity issuances; and cash generated from the sale
of property and the formation of joint ventures. Amounts outstanding under the unsecured revolving credit facility are
retired as needed with proceeds from the issuance of long-term debt, common and preferred equity, cash generated
from the disposition of properties and cash flow generated by our operating properties.
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As of December 31, 2017, we had available borrowing capacity of $493.6 million under our unsecured revolving credit
facility, and our debt maturities for 2018 total $113.4 million.
We believe net proceeds from planned capital recycling, combined with our available capacity under the revolving
credit and short-term borrowing facilities, will provide adequate liquidity to fund our capital needs, including acquisitions,
redevelopments and new development activities. In the event our capital recycling program does not progress as
expected, we believe other debt and equity alternatives are available to us. Although external market conditions are
not within our control, we do not currently foresee any impediment to our entering the capital markets if needed.
During 2017, aggregate gross sales proceeds from our dispositions totaled $444.1 million, which were owned by us
either directly or through our interest in real estate joint ventures or partnerships. Operating cash flows from dispositions
are included in net cash from operating activities in our Consolidated Statements of Cash Flows, while proceeds from
dispositions are included as investing activities.
We have a $200 million share repurchase plan. Under this plan, we may repurchase common shares from time-to-
time in open-market or in privately negotiated purchases. The timing and amount of any shares repurchased will be
determined by management based on its evaluation of market conditions and other factors. The repurchase plan may
be suspended or discontinued at any time, and we have no obligations to repurchase any amount of our common
shares under the plan. As of the date of this filing, we have not repurchased any shares under this plan.
We have non-recourse debt secured by acquired or developed properties held in several of our real estate joint ventures
and partnerships. Off-balance sheet mortgage debt for our unconsolidated real estate joint ventures and partnerships
totaled $298.1 million, of which our pro rata ownership is $108.0 million, at December 31, 2017. Scheduled principal
mortgage payments on this debt, excluding deferred debt costs and non-cash related items totaling $(.6) million, at
100% are as follows (in millions):
2018
2019
2020
2021
2022
Thereafter
Total
$
$
6.4
6.4
93.0
173.0
2.1
17.8
298.7
We hedge the future cash flows of certain debt transactions, as well as changes in the fair value of our debt instruments,
principally through interest rate swap contracts with major financial institutions. We generally have the right to sell or
otherwise dispose of our assets except in certain cases where we are required to obtain our joint venture partners’
consent or a third party consent for assets held in special purpose entities that are 100% owned by us.
Investing Activities
Dispositions
During 2017, we sold 20 centers and other property, including real estate assets owned through our interest in
unconsolidated real estate joint ventures and partnerships. Our share of aggregate gross sales proceeds from these
transactions totaled $444.1 million and generated our share of the gains of approximately $217.2 million.
New Development/Redevelopment
At December 31, 2017, we had three projects under development with approximately .3 million of total square footage
for retail and office space and 644 residential units, that were partially or wholly owned. We have funded $140.4 million
through December 31, 2017 on these projects. Upon completion, we expect our aggregate net investment in these
multi-use projects to be $363.1 million. Effective January 1, 2017, we stabilized the development in White Marsh,
Maryland, moving it to our operating property portfolio. This development was 100% leased with an investment of $46
million and an 8% yield.
At December 31, 2017, we had 16 redevelopment projects in which we plan to invest approximately $228.8 million,
which include a 30-story, high-rise residential tower at our River Oaks Shopping Center in Houston, Texas with an
estimated investment of $150 million. Upon completion, the average projected stabilized return on our incremental
investment on these redevelopment projects is expected to average around 7.5% to 9.5%.
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We typically finance our new development and redevelopment projects with proceeds from our unsecured revolving
credit facility, as it is our general practice not to use third party construction financing. Management monitors amounts
outstanding under our unsecured revolving credit facility and periodically pays down such balances using cash
generated from operations, from debt issuances, from common and preferred share issuances and from the disposition
of properties.
Capital Expenditures
Capital expenditures for additions to the existing portfolio, acquisitions, tenant improvements, new development,
redevelopment and our share of investments in unconsolidated real estate joint ventures and partnerships are as
follows (in thousands):
Acquisitions
Tenant Improvements
New Development
Redevelopment
Capital Improvements
Other
Total
Year Ended December 31,
2017
2016
$
— $
504,876
24,823
93,120
31,693
20,391
2,384
22,982
64,174
30,789
16,562
12,980
$
172,411 $
652,363
The decrease in capital expenditures is primarily attributable to the 2016 acquisition activity, which is partially offset
by the increase in new development activity associated primarily to the purchase of the retail portion of a mixed-use
project in Seattle, Washington and our share of the land parcel acquisition and development in Arlington, Virginia.
For 2018, we anticipate our acquisitions to total between $50 million and $150 million. Our new development and
redevelopment investment for 2018 is estimated to be approximately $125 million to $175 million. For 2018, capital
and tenant improvements is expected to be consistent with 2017 expenditures. No assurances can be provided that
our planned capital activities will occur. Further, we have entered into commitments aggregating $114.7 million
comprised principally of construction contracts which are generally due in 12 to 36 months and anticipated to be funded
under our unsecured revolving credit facility.
Capital expenditures for additions described above relate to cash flows from investing activities as follows (in
thousands):
Acquisition of real estate and land
Development and capital improvements
Real estate joint ventures and partnerships - Investments
Total
Year Ended December 31,
2017
2016
$
$
1,902 $
133,336
37,173
172,411 $
500,421
101,179
50,763
652,363
Capitalized soft costs, including payroll and other general and administrative costs, interest, insurance and real estate
taxes, totaled $13.4 million and $10.7 million for the year ended December 31, 2017 and 2016, respectively.
Financing Activities
Debt
Total debt outstanding was $2.1 billion at December 31, 2017 and consists of $2.1 billion, including the effect of $200
million of interest rate swap contracts, which bears interest at fixed rates, and $17.9 million, which bears interest at
variable rates. Additionally, of our total debt, $413.7 million was secured by operating centers while the remaining $1.7
billion was unsecured.
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At December 31, 2017, we have a $500 million unsecured revolving credit facility, which expires in March 2020 and
provides borrowing rates that float at a margin over LIBOR plus a facility fee. At December 31, 2017, the borrowing
margin and facility fee, which are priced off a grid that is tied to our senior unsecured credit ratings, were 90 and 15
basis points, respectively. The facility also contains a competitive bid feature that allows us to request bids for up to
$250 million. Additionally, an accordion feature allows us to increase the facility amount up to $850 million. As of
January 31, 2018, we had no amounts outstanding, and the available balance was $493.6 million, net of $6.4 million
in outstanding letters of credit.
At December 31, 2017, we have a $10 million unsecured short-term facility that we maintain for cash management
purposes. The facility, which matures in March 2018, provides for fixed interest rate loans at a 30-day LIBOR rate plus
borrowing margin, facility fee and an unused facility fee of 125, 10, and 5 basis points, respectively. As of January 31,
2018, we had no amounts outstanding under this facility.
During 2017, the maximum balance and weighted average balance outstanding under both facilities combined were
$245.0 million and $133.4 million, respectively, at a weighted average interest rate of 1.8%.
Our five most restrictive covenants, composed from both our public debt and revolving credit facility, include debt to
asset, secured debt to asset, fixed charge, unencumbered asset test and unencumbered interest coverage ratios. We
are not aware of any non-compliance with our public debt and revolving credit facility covenants as of December 31,
2017.
Our most restrictive public debt covenant ratios, as defined in our indenture and supplemental indenture agreements,
were as follows at December 31, 2017:
Covenant
Debt to Asset Ratio
Restriction
Less than 60.0%
Secured Debt to Asset Ratio
Less than 40.0%
Fixed Charge Ratio
Greater than 1.5
Actual
40.7%
8.1%
4.3
Unencumbered Asset Test
Greater than 150%
264.4%
At December 31, 2017, we had three interest rate swap contracts with an aggregate notional amount of $200 million
that were designated as cash flow hedges. These contracts mature March 2020 and fix the LIBOR component of the
interest rates at 1.5%. We have determined that these contracts are highly effective in offsetting future variable interest
cash flows.
We could be exposed to losses in the event of nonperformance by the counter-parties related to our interest rate swap
contracts; however, management believes such nonperformance is remote.
Equity
Common share dividends paid totaled $294.1 million for the year ended December 31, 2017, which includes a special
dividend paid in December 2017 in the amount of $.75 per common share, which was distributed due to the significant
gains on dispositions of property. Our dividend payout ratio (as calculated as dividends paid on common shares divided
by core funds from operations attributable to common shareholders - basic) for the year ended December 31, 2017
approximated 93.2% (see Non-GAAP Financial Measures for additional information). Our Board of Trust Managers
approved a first quarter 2018 dividend of $.395 per common share, an increase from $.385 per common share for the
respective quarter of 2017.
We have a $200 million share repurchase plan. Under this plan, we may repurchase common shares from time-to-
time in open-market or in privately negotiated purchases. The timing and amount of any shares repurchased will be
determined by management based on its evaluation of market conditions and other factors. The repurchase plan may
be suspended or discontinued at any time, and we have no obligations to repurchase any amount of our common
shares under the plan. As of the date of this filing, we have not repurchased any shares under this plan.
We have an effective universal shelf registration statement which expires in September 2020. We will continue to
closely monitor both the debt and equity markets and carefully consider our available financing alternatives, including
both public offerings and private placements.
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Contractual Obligations
We have debt obligations related to our mortgage loans and unsecured debt, including any draws on our credit facilities.
We have shopping centers that are subject to non-cancelable long-term ground leases where a third party owns and
has leased the underlying land to us to construct and/or operate a shopping center. In addition, we have non-cancelable
operating leases pertaining to office space from which we conduct our business. The table below excludes obligations
related to our new development projects because such amounts are not fixed or determinable, and commitments
aggregating $114.7 million comprised principally of construction contracts which are generally due in 12 to 36 months.
The following table summarizes our primary contractual obligations as of December 31, 2017 (in thousands):
Mortgages and Notes Payable (1)
Unsecured Debt
Secured Debt
Lease Payments
Other Obligations (2)
Payments due by period
Total
Less than 1
year
1 - 3 years
3 - 5 years
More than 5
years
$ 1,990,959
$
79,202
$
116,512
$
307,484
$ 1,487,761
498,264
114,971
107,903
120,004
116,170
2,889
75,485
5,337
32,418
43,220
4,682
218,870
102,063
Total Contractual Obligations
$ 2,712,097
$
277,580
$
270,437
$
355,386
$ 1,808,694
_______________
(1)
Includes principal and interest with interest on variable-rate debt calculated using rates at December 31, 2017, excluding the effect of
interest rate swaps. Also, excludes a $64.1 million debt service guaranty liability. See Note 6 for additional information.
(2) Other obligations include income and real estate tax payments, commitments associated with our secured debt and other employee
payments. Included in 2018, is the estimated contribution to our pension plan, which meets or exceeds the minimum statutory funding
requirements; however, we have the right to discontinue contributions at any time. See Note 17 for additional information.
Related to a development project in Sheridan, Colorado, we have provided a guaranty for the payment of any debt
service shortfalls on tax increment revenue bonds issued in connection with the project. The Sheridan Redevelopment
Agency ("Agency") issued Series A bonds used for an urban renewal project, of which $64.1 million remain outstanding
at December 31, 2017. The bonds are to be repaid with incremental sales and property taxes and a public improvement
fee ("PIF") to be assessed on current and future retail sales and, to the extent necessary, any amounts we may have
to provide under a guaranty. The incremental taxes and PIF are to remain intact until the earlier of the payment of the
bond liability in full or 2040. The debt associated with this guaranty has been recorded in our consolidated financial
statements as of December 31, 2017.
Off Balance Sheet Arrangements
As of December 31, 2017, none of our off-balance sheet arrangements had a material effect on our liquidity or availability
of, or requirement for, our capital resources. Letters of credit totaling $6.4 million were outstanding under the unsecured
revolving credit facility at December 31, 2017.
We have entered into several unconsolidated real estate joint ventures and partnerships. Under many of these
agreements, we and our joint venture partners are required to fund operating capital upon shortfalls in working capital.
As operating manager of most of these entities, we have considered these funding requirements in our business plan.
Reconsideration events, including changes in variable interests, could cause us to consolidate these joint ventures
and partnerships. We continuously evaluate these events as we become aware of them. Some triggers to be considered
are additional contributions required by each partner and each partner’s ability to make those contributions. Under
certain of these circumstances, we may purchase our partner’s interest. Our material unconsolidated real estate joint
ventures are with entities which appear sufficiently stable; however, if market conditions were to deteriorate and our
partners are unable to meet their commitments, there is a possibility we may have to consolidate these entities. If we
were to consolidate all of our unconsolidated real estate joint ventures, we would continue to be in compliance with
our debt covenants.
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As of December 31, 2017, one unconsolidated real estate joint venture was determined to be a VIE through the issuance
of a secured loan, since the lender had the ability to make decisions that could have a significant impact on the
profitability of the entity. Our maximum risk of loss associated with this VIE was limited to $34.0 million at December
31, 2017. Also at December 31, 2017, another joint venture arrangement for the future development of a mixed-use
project was determined to be a VIE. We are not the primary beneficiary as the substantive participating rights associated
with the entity are shared, and we do not have the power to direct the significant activities of the entity. We anticipate
funding approximately $93 million in equity and debt associated with the mixed-use project through 2020.
On January 1, 2018, a real estate limited partnership agreement with a foreign institutional investor was amended to
include a potential obligation to purchase up to $61 million of real estate assets through December 31, 2018 with the
option to extend for up to two additional years. Our ownership in this unconsolidated real estate limited partnership
agreement is 51%, and as of the date of this filing, no assets have been purchased under this agreement.
Non-GAAP Financial Measures
Certain of our key performance indicators are considered non-GAAP financial measures. Management uses these
measures along with our GAAP financial statements in order to evaluate our operating results. We believe these
additional measures provide users of our financial information additional comparable indicators of our industry, as well
as, our performance.
Funds from Operations Attributable to Common Shareholders
The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations attributable to
common shareholders ("NAREIT FFO") as net income (loss) attributable to common shareholders computed in
accordance with GAAP, excluding extraordinary items and gains or losses from sales of operating real estate assets
and interests in real estate equity investments and their applicable taxes, plus depreciation and amortization of operating
properties and impairment of depreciable real estate and in substance real estate equity investments, including our
share of unconsolidated real estate joint ventures and partnerships. We calculate NAREIT FFO in a manner consistent
with the NAREIT definition.
We believe NAREIT FFO is a widely recognized measure of REIT operating performance which provides our
shareholders with a relevant basis for comparison among other REITs. Management uses NAREIT FFO as a
supplemental internal measure to conduct and evaluate our business because there are certain limitations associated
with using GAAP net income by itself as the primary measure of our operating performance. Historical cost accounting
for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes
predictably over time. Since real estate values instead have historically risen or fallen with market conditions,
management believes that the presentation of operating results for real estate companies that uses historical cost
accounting is insufficient by itself. There can be no assurance that NAREIT FFO presented by us is comparable to
similarly titled measures of other REITs.
We also present core funds from operations attributable to common shareholders (“Core FFO”) as an additional
supplemental measure as it is more reflective of the core operating performance of our portfolio of properties. Core
FFO is defined as NAREIT FFO excluding charges and gains related to non-cash, non-operating and other transactions
or events that hinder the comparability of operating results. Specific examples of items excluded from Core FFO
include, but are not limited to, gains or losses associated with the extinguishment of debt or other liabilities, impairments
of land, transactional costs associated with acquisition and development activities, certain deferred tax provisions/
benefits, redemption costs of preferred shares and gains on the disposal of non-real estate assets.
NAREIT FFO and Core FFO should not be considered as alternatives to net income or other measurements under
GAAP as indicators of our operating performance or to cash flows from operating, investing or financing activities as
measures of liquidity. NAREIT FFO and Core FFO do not reflect working capital changes, cash expenditures for capital
improvements or principal payments on indebtedness.
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Table of Contents
NAREIT FFO and Core FFO is calculated as follows (in thousands):
Net income attributable to common shareholders
$
335,274 $
238,933 $
Depreciation and amortization of real estate
166,125
162,989
160,835
145,199
Year Ended December 31,
2017
2016
2015
Depreciation and amortization of real estate of unconsolidated real
estate joint ventures and partnerships
Impairment of operating properties and real estate equity
investments
Impairment of operating properties of unconsolidated real estate
joint ventures and partnerships
Gain on acquisition including associated real estate equity
investment
Gain on sale of property and interests in real estate equity
investments
Gain on dispositions of unconsolidated real estate joint ventures
and partnerships
Benefit for income taxes (1)
Noncontrolling interests (2)
Other
NAREIT FFO – basic
Income attributable to operating partnership units
NAREIT FFO – diluted
Adjustments to Core FFO:
Redemption costs of preferred shares
(Benefit) provision for income taxes
Acquisition costs
Other impairment loss
(Gain) loss on extinguishment of debt
Severance costs
Storm damage costs
Recovery of pre-development costs
Other
Core FFO – diluted
14,020
15,118
14,451
12,247
—
—
—
326
(46,398)
153
1,497
—
(217,659)
(101,124)
(60,472)
(6,187)
(711)
5,424
(16)
308,517
3,084
311,601
—
(729)
—
3,031
—
1,378
1,822
(949)
2,292
(3,693)
—
25,521
(16)
291,656
1,996
293,652
—
7,024
1,782
98
(1,679)
—
—
—
17
(1,558)
—
(1,969)
(10)
258,126
1,903
260,029
9,749
—
1,007
—
6,100
—
—
—
(2,113)
$
318,446 $
300,894 $
274,772
Weighted average shares outstanding – basic
127,755
126,048
123,037
Effect of dilutive securities:
Share options and awards
Operating partnership units
Weighted average shares outstanding – diluted
NAREIT FFO per common share – basic
NAREIT FFO per common share – diluted
Core FFO per common share – diluted
870
1,446
1,059
1,462
1,292
1,472
130,071
128,569
125,801
$
$
$
2.41 $
2.31 $
2.40 $
2.28 $
2.45 $
2.34 $
2.10
2.07
2.18
_______________
(1) Effective January 1, 2017 includes the applicable taxes related to gains and impairments of operating properties.
(2) Related to gains, impairments and depreciation on operating properties, where applicable.
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Same Property Net Operating Income
We consider SPNOI an important additional financial measure because it reflects only those income and expense
items that are incurred at the property level, and when compared across periods, reflects the impact on operations
from trends in occupancy rates, rental rates and operating costs. We calculate this most useful measurement by
determining our proportional share of SPNOI from all owned properties, including our share of SPNOI from
unconsolidated joint ventures and partnerships, which cannot be readily determined under GAAP measurements and
presentation. Although SPNOI is a widely used measure among REITs, there can be no assurance that SPNOI
presented by us is comparable to similarly titled measures of other REITs. Additionally, we do not control these
unconsolidated joint ventures and partnerships, and the assets, liabilities, revenues or expenses of these joint ventures
and partnerships, as presented, do not represent our legal claim to such items.
Properties are included in the SPNOI calculation if they are owned and operated for the entirety of the most recent
two fiscal year periods, except for properties for which significant redevelopment or expansion occurred during either
of the periods presented, and properties classified as discontinued operations. While there is judgment surrounding
changes in designations, we move new development and redevelopment properties once they have stabilized, which
is typically upon attainment of 90% occupancy. A rollforward of the properties included in our same property designation
is as follows:
Beginning of the period
Properties added:
Acquisitions
New Developments
Redevelopments
Properties removed:
Dispositions
Other
End of the period
Three Months Ended
December 31, 2017
Twelve Months Ended
December 31, 2017
190
—
—
—
(7)
—
183
193
4
1
6
(20)
(1)
183
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We calculate SPNOI using operating income as defined by GAAP excluding property management fees, certain non-
cash revenues and expenses such as straight-line rental revenue and the related reversal of such amounts upon early
lease termination, depreciation, amortization, impairment losses, general and administrative expenses, acquisition
costs and other items such as lease cancellation income, environmental abatement costs, demolition expenses and
lease termination fees. Consistent with the capital treatment of such costs under GAAP, tenant improvements, leasing
commissions and other direct leasing costs are excluded from SPNOI. A reconciliation of net income attributable to
common shareholders to SPNOI is as follows (in thousands):
Three Months Ended
December 31,
Twelve Months Ended
December 31,
Net income attributable to common shareholders
$ 167,967 $
2017
2016
44,142 $ 335,274 $ 238,933
2017
2016
Add:
Net income attributable to noncontrolling interests
Provision (benefit) for income taxes
Interest expense, net
Less:
Gain on sale of property
Equity in earnings of real estate joint ventures and
partnership interests
Gain on sale and acquisition of real estate joint venture and
partnership interests
Interest and other income
Operating Income
Less:
Revenue adjustments (1)
Add:
Property management fees
Depreciation and amortization
Impairment loss
General and administrative
Acquisition costs
Other (2)
Net Operating Income
Less: NOI related to consolidated entities not defined as
same property and noncontrolling interests
Add: Pro rata share of unconsolidated entities defined as
same property
Same Property Net Operating Income
2,686
2,018
25,034
15,441
(164)
(17)
18,921
21,711
80,326
37,898
6,856
83,003
(132,045)
(32,416)
(218,611)
(100,714)
(9,108)
(5,531)
(27,074)
(20,642)
—
(3,390)
47,049
(1,915)
(729)
—
(7,915)
(48,322)
(2,569)
50,132
177,424
194,443
(4,308)
(4,959)
(16,877)
(16,364)
649
681
2,902
2,854
40,986
43,374
167,101
162,535
245
7,868
—
(798)
55
7,193
614
(233)
15,257
28,435
—
3,586
98
27,266
1,350
129
91,691
96,857
377,828
372,311
(9,684)
(17,389)
(55,160)
(58,434)
8,094
90,101
8,500
87,968
32,903
32,715
355,571
346,592
Less: Redevelopment Net Operating Income
(8,762)
(8,502)
(34,914)
(32,932)
Same Property Net Operating Income excluding
Redevelopments
___________________
$
81,339 $
79,466 $ 320,657 $ 313,660
(1) Revenue adjustments consist primarily of straight-line rentals, lease cancellation income and fee income primarily from real estate joint
ventures and partnerships.
(2) Other includes items such as environmental abatement costs, demolition expenses and lease termination fees.
Newly Issued Accounting Pronouncements
See Note 2 to our consolidated financial statements in Item 8 for additional information related to recent accounting
pronouncements.
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ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We use fixed and floating-rate debt to finance our capital requirements. These transactions expose us to market risk
related to changes in interest rates. Derivative financial instruments are used to manage a portion of this risk, primarily
interest rate contracts with major financial institutions. These agreements expose us to credit risk in the event of non-
performance by the counter-parties. We do not engage in the trading of derivative financial instruments in the normal
course of business. At December 31, 2017, we had fixed-rate debt of $2.1 billion and variable-rate debt of $17.9 million,
after adjusting for the net effect of $200.0 million notional amount of interest rate contracts. In the event interest rates
were to increase 100 basis points and holding all other variables constant, annual net income and cash flows for the
following year would decrease by approximately $.2 million associated with our variable-rate debt, including the effect
of the interest rate contracts. The effect of the 100 basis points increase would decrease the fair value of our variable-
rate and fixed-rate debt by approximately $.1 million and $109.3 million, respectively.
43
Table of Contents
ITEM 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trust Managers of Weingarten Realty Investors
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Weingarten Realty Investors and subsidiaries (the
"Company") as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive
income, equity, and cash flows, for each of the three years in the period ended December 31, 2017, and the related
notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated February 28, 2018, expressed an unqualified opinion on the
Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Houston, Texas
February 28, 2018
We have served as the Company's auditor since 1963.
44
WEINGARTEN REALTY INVESTORS
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Table of Contents
Revenues:
Rentals, net
Other
Total
Expenses:
Depreciation and amortization
Operating
Real estate taxes, net
Impairment loss
General and administrative
Total
Operating Income
Interest Expense, net
Interest and Other Income
Year Ended December 31,
2017
2016
2015
$
560,643
$
537,265
$
502,464
12,520
573,163
12,290
549,555
10,380
512,844
167,101
109,310
75,636
15,257
28,435
395,739
177,424
(80,326)
7,915
—
17
27,074
132,104
218,611
350,715
(15,441)
335,274
—
—
162,535
98,855
66,358
98
27,266
355,112
194,443
(83,003)
2,569
48,322
(6,856)
20,642
176,117
100,714
276,831
(37,898)
238,933
—
—
145,940
94,244
60,289
153
27,524
328,150
184,694
(87,783)
4,563
879
(52)
19,300
121,601
59,621
181,222
(6,870)
174,352
(3,830)
(9,687)
Gain on Sale and Acquisition of Real Estate Joint Venture and
Partnership Interests
Benefit (Provision) for Income Taxes
Equity in Earnings of Real Estate Joint Ventures and Partnerships, net
Income from Continuing Operations
Gain on Sale of Property
Net Income
Less: Net Income Attributable to Noncontrolling Interests
Net Income Adjusted for Noncontrolling Interests
Dividends on Preferred Shares
Redemption Costs of Preferred Shares
Net Income Attributable to Common Shareholders
$
335,274
$
238,933
$
160,835
Earnings Per Common Share - Basic:
Net income attributable to common shareholders
Earnings Per Common Share - Diluted:
Net income attributable to common shareholders
$
$
2.62
$
1.90
$
1.31
2.60
$
1.87
$
1.29
See Notes to Consolidated Financial Statements.
45
Table of Contents
WEINGARTEN REALTY INVESTORS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net Income
Other Comprehensive Income (Loss):
Net unrealized gain (loss) on investments, net of taxes
Realized gain on investments
Realized (loss) gain on derivatives
Net unrealized gain (loss) on derivatives
Reclassification adjustment of derivatives and designated hedges into net
income
Retirement liability adjustment
Total
Comprehensive Income
Comprehensive Income Attributable to Noncontrolling Interests
Year Ended December 31,
2017
2016
2015
$
350,715
$
276,831
$
181,222
1,228
(651)
—
1,063
(42)
1,393
2,991
407
—
(2,084)
(1,204)
1,531
(167)
(1,517)
(99)
—
5,007
(3,061)
2,798
147
4,792
353,706
(15,441)
275,314
(37,898)
186,014
(6,870)
Comprehensive Income Adjusted for Noncontrolling Interests
$
338,265
$
237,416
$
179,144
See Notes to Consolidated Financial Statements.
46
Table of Contents
WEINGARTEN REALTY INVESTORS
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
ASSETS
Property
Accumulated Depreciation
Property Held for Sale, net
Property, net *
Investment in Real Estate Joint Ventures and Partnerships, net *
Total
Unamortized Lease Costs, net
Accrued Rent and Accounts Receivable (net of allowance for doubtful
accounts of $7,516 in 2017 and $6,700 in 2016) *
Cash and Cash Equivalents *
Restricted Deposits and Mortgage Escrows
Other, net
Debt, net *
Total Assets
LIABILITIES AND EQUITY
Accounts Payable and Accrued Expenses
Other, net
Total Liabilities
Commitments and Contingencies (see Note 19)
Deferred Compensation Share Awards
Equity:
Shareholders' Equity:
Common Shares of Beneficial Interest - par value, $.03 per share;
shares authorized: 275,000; shares issued and outstanding:
128,447 in 2017 and 128,072 in 2016
Additional Paid-In Capital
Net Income Less Than Accumulated Dividends
Accumulated Other Comprehensive Loss
Total Shareholders' Equity
Noncontrolling Interests
Total Equity
December 31,
2017
2016
$
4,498,859
$
4,789,145
(1,166,126)
(1,184,546)
54,792
479
3,387,525
3,605,078
317,763
289,192
3,705,288
3,894,270
181,047
208,063
104,357
13,219
8,115
184,613
94,466
16,257
25,022
188,850
4,196,639
$
4,426,928
2,081,152
$
2,356,528
116,463
189,182
116,859
191,887
2,386,797
2,665,274
—
—
—
44,758
$
$
3,897
3,885
1,772,066
1,718,101
(137,065)
(177,647)
(6,170)
(9,161)
1,632,728
1,535,178
177,114
181,718
1,809,842
1,716,896
Total Liabilities and Equity
$
4,196,639
$
4,426,928
* Consolidated variable interest entities' assets and debt included in the above balances (see Note 20):
Property, net
Accrued Rent and Accounts Receivable, net
Cash and Cash Equivalents
Debt, net
$
207,969
$
476,117
12,011
9,025
46,253
11,066
9,560
47,112
See Notes to Consolidated Financial Statements.
47
Table of Contents
WEINGARTEN REALTY INVESTORS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2016
2015
2017
Cash Flows from Operating Activities:
Net Income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Amortization of debt deferred costs and intangibles, net
Impairment loss
Equity in earnings of real estate joint ventures and partnerships, net
Gain on sale and acquisition of real estate joint venture and partnership
interests
Gain on sale of property
Distributions of income from real estate joint ventures and partnerships
Changes in accrued rent and accounts receivable, net
Changes in unamortized lease costs and other assets, net
Changes in accounts payable, accrued expenses and other liabilities, net
Other, net
Net cash provided by operating activities
Cash Flows from Investing Activities:
Acquisition of real estate and land
Development and capital improvements
Proceeds from sale of property and real estate equity investments
Real estate joint ventures and partnerships - Investments
Real estate joint ventures and partnerships - Distributions of capital
Purchase of investments
Proceeds from investments
Other, net
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Proceeds from issuance of debt
Principal payments of debt
Changes in unsecured credit facilities
Proceeds from issuance of common shares of beneficial interest, net
Redemption of preferred shares of beneficial interest
Common and preferred dividends paid
Debt issuance and extinguishment costs paid
Distributions to noncontrolling interests
Contributions from noncontrolling interests
Other, net
Net cash (used in) provided by financing activities
Net (decrease) increase in cash, cash equivalents and restricted cash
equivalents
Cash, cash equivalents and restricted cash equivalents at January 1
Cash, cash equivalents and restricted cash equivalents at December 31
Interest paid during the period (net of amount capitalized of $4,868, $2,656 and
$3,252, respectively)
Income taxes paid during the period
$
350,715
$
276,831
$
181,222
167,101
2,790
15,257
(27,074)
—
(218,611)
1,321
(18,964)
(13,299)
4,970
5,552
269,758
(1,902)
(133,336)
433,661
(37,173)
28,791
(5,730)
8,502
6,179
298,992
—
(28,723)
(245,000)
1,588
—
(294,073)
(488)
(19,342)
—
(2,657)
(588,695)
162,535
2,562
98
(20,642)
(48,322)
(100,714)
1,149
(14,488)
(16,900)
8,963
1,339
252,411
(500,421)
(101,179)
234,952
(52,834)
51,714
(4,740)
1,250
5,086
(366,172)
249,999
(144,788)
95,500
137,460
—
(185,100)
(5,396)
(9,563)
—
(8,314)
129,798
(19,945)
41,279
21,334
79,161
1,009
$
$
$
$
$
$
16,037
25,242
41,279
79,515
958
$
$
$
145,940
2,650
153
(19,300)
(879)
(59,621)
1,216
(8,884)
(14,617)
5,971
11,584
245,435
(221,779)
(83,702)
101,516
(30,053)
35,341
—
1,250
295
(197,132)
448,083
(240,505)
(39,500)
42,572
(150,000)
(174,628)
(9,878)
(5,478)
1,318
1,768
(126,248)
(77,945)
103,187
25,242
79,580
1,474
See Notes to Consolidated Financial Statements.
48
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T
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Business
Weingarten Realty Investors is a REIT organized under the Texas Business Organizations Code. We currently operate,
and intend to operate in the future, as a REIT.
We, and our predecessor entity, began the ownership of shopping centers and other commercial real estate in 1948.
Our primary business is leasing space to tenants in the shopping centers we own or lease. We also provide property
management services for which we charge fees to either joint ventures where we are partners or other outside owners.
We operate a portfolio of neighborhood and community shopping centers, totaling approximately 41.3 million square
feet of gross leaseable area, that is either owned by us or others. We have a diversified tenant base, with our largest
tenant comprising only 2.8% of base minimum rental revenues during 2017. Total revenues generated by our centers
located in Houston and its surrounding areas was 19.6% of total revenue for the year ended December 31, 2017, and
an additional 9.2% of total revenue was generated in 2017 from centers that are located in other parts of Texas. Also,
in Florida and California, an additional 17.5% and 16.7%, respectively, of total revenue was generated in 2017.
Basis of Presentation
Our consolidated financial statements include the accounts of our subsidiaries, certain partially owned real estate joint
ventures or partnerships and VIEs which meet the guidelines for consolidation. All intercompany balances and
transactions have been eliminated.
Our financial statements are prepared in accordance with GAAP. Such statements require management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. We have evaluated subsequent events for recognition
or disclosure in our consolidated financial statements.
Revenue Recognition
Rental revenue is generally recognized on a straight-line basis over the term of the lease, which generally begins the
date the tenant takes control of the space. Revenue from tenant reimbursements of taxes, maintenance expenses
and insurance is subject to our interpretation of lease provisions and is recognized in the period the related expense
is recognized. Revenue based on a percentage of tenants’ sales is recognized only after the tenant exceeds their
sales breakpoint. In circumstances where we provide a tenant improvement allowance for improvements that are
owned by the tenant, we recognize the allowance as a reduction of rental revenue on a straight-line basis over the
term of the lease. Other revenue is income from contractual agreements with third parties, tenants or partially owned
real estate joint ventures or partnerships, which is recognized as the related services are performed under the respective
agreements.
Property
Real estate assets are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line
method, generally over estimated useful lives of 18-40 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.
Acquisitions of properties are accounted for utilizing the acquisition of an asset method and, accordingly, the results
of operations of an acquired property are included in our results of operations from the date of acquisition. Estimates
of fair values are based upon estimated future cash flows and other valuation techniques in accordance with our fair
value measurements accounting policy. Fair values are used to allocate and record the purchase price of acquired
property among land, buildings on an “as if vacant” basis, tenant improvements, other identifiable intangibles and any
goodwill or gain on purchase. Other identifiable intangible assets and liabilities include the effect of out-of-market
leases, the value of having leases in place (“as is” versus “as if vacant” and absorption costs), out-of-market assumed
mortgages and tenant relationships. Depreciation and amortization is computed using the straight-line method,
generally over estimated useful lives of 40 years for buildings and over the lease term which includes bargain renewal
options for other identifiable intangible assets. Costs associated with the successful acquisition of an asset are
capitalized as incurred.
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Property also includes costs incurred in the development and redevelopment of operating properties. These properties
are carried at cost, and no depreciation is recorded on these assets until rent commences or no later than one year
from the completion of major construction. These costs include preacquisition costs directly identifiable with the specific
project, development and construction costs, interest, insurance and real estate taxes. Indirect development costs,
including salaries and benefits, travel and other related costs that are directly attributable to the development of the
property, are also capitalized. The capitalization of such costs ceases at the earlier of one year from the completion
of major construction or when the property, or any completed portion, becomes available for occupancy.
Property also includes costs for tenant improvements paid by us, including reimbursements to tenants for improvements
that are owned by us and will remain our property after the lease expires.
Property identified for sale is reviewed to determine if it qualifies as held for sale based on the following criteria:
management has approved and is committed to the disposal plan, the assets are available for immediate sale, an
active plan is in place to locate a buyer, the sale is probable and expected to qualify as a completed sale within a year,
the sales price is reasonable in relation to the current fair value, and it is unlikely that significant changes will be made
to the sales plan or that the sales plan will be withdrawn. Upon qualification, these properties are segregated and
classified as held for sale at the lower of cost or fair value less costs to sell. Our individual property disposals do not
qualify for discontinued operations presentation; thus, the results of these disposals remain in income from continuing
operations and any associated gains are included in gain on sale of property.
Some of our properties are held in single purpose entities. A single purpose entity is a legal entity typically established
at the request of a lender solely for the purpose of owning a property or group of properties subject to a mortgage.
There may be restrictions limiting the entity’s ability to engage in an activity other than owning or operating the property,
assuming or guaranteeing the debt of any other entity, or dissolving itself or declaring bankruptcy before the debt has
been repaid. Most of our single purpose entities are 100% owned by us and are consolidated in our consolidated
financial statements.
Real Estate Joint Ventures and Partnerships
To determine the method of accounting for partially owned real estate joint ventures and partnerships, management
determines whether an entity is a VIE and, if so, determines which party is the primary beneficiary by analyzing whether
we have both the power to direct the entity’s significant economic activities and the obligation to absorb potentially
significant losses or receive potentially significant benefits. Significant judgments and assumptions inherent in this
analysis include the design of the entity structure, the nature of the entity’s operations, future cash flow projections,
the entity’s financing and capital structure, and contractual relationships and terms. We consolidate a VIE when we
have determined that we are the primary beneficiary.
Primary risks associated with our involvement with our VIEs include the potential funding of the entities’ debt obligations
or making additional contributions to fund the entities’ operations or capital activities.
Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling
financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling
financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out rights and
substantive participating rights. Partially owned real estate joint ventures and partnerships where we do not have a
controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity
method.
Management continually analyzes and assesses reconsideration events, including changes in the factors mentioned
above, to determine if the consolidation or equity method treatment remains appropriate.
Unamortized Lease Costs, net
Lease costs represent the initial direct costs incurred in origination, negotiation and processing of a lease agreement.
Such costs include outside broker commissions and other independent third party costs, as well as salaries and
benefits, travel and other internal costs directly related to completing a lease and are amortized over the life of the
lease on a straight-line basis. Costs related to supervision, administration, unsuccessful origination efforts and other
activities not directly related to completed lease agreements are charged to expense as incurred. Also included are
in place lease costs which are amortized over the life of the applicable lease terms on a straight-line basis.
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Accrued Rent and Accounts Receivable, net
Receivables include base rents, tenant reimbursements and receivables attributable to the straight-lining of rental
commitments. An allowance for the uncollectible portion of accrued rents and accounts receivable is determined based
upon an analysis of balances outstanding, historical bad debt levels, tenant creditworthiness and current economic
trends. Additionally, estimates of the expected recovery of pre-petition and post-petition claims with respect to tenants
in bankruptcy are considered in assessing the collectibility of the related receivables. Management’s estimate of the
collectibility of accrued rents and accounts receivable is based on the best information available to management at
the time of evaluation.
Cash and Cash Equivalents
All highly liquid investments with original maturities of three months or less are considered cash equivalents. Cash
and cash equivalents are primarily held at major financial institutions in the U.S. We had cash and cash equivalents
in certain financial institutions in excess of federally insured levels. We have diversified our cash and cash equivalents
amongst several banking institutions in an attempt to minimize exposure to any one of these entities. We believe we
are not exposed to any significant credit risk and regularly monitor the financial stability of these financial institutions.
Restricted Deposits and Mortgage Escrows
Restricted deposits and mortgage escrows consist of escrow deposits held by lenders primarily for property taxes,
insurance and replacement reserves and restricted deposits that are held for a specific use or in a qualified escrow
account for the purposes of completing like-kind exchange transactions.
Our restricted deposits and mortgage escrows consists of the following (in thousands):
Restricted deposits (1)
Mortgage escrows
Total
___________________
December 31,
2017
2016
6,291
1,824
$
8,115 $
23,489
1,533
25,022
(1) The decrease between the periods presented is primarily attributable to $21.0 million of funds being released from a qualified escrow
account for the purpose of completing like-kind exchange transactions.
Other Assets, net
Other assets include an asset related to the debt service guaranty (see Note 6 for further information), tax increment
revenue bonds, investments, investments held in a grantor trust, deferred tax assets, prepaid expenses, interest rate
derivatives, the value of above-market leases and the related accumulated amortization, deferred debt costs associated
with our revolving credit facilities and other miscellaneous receivables. Investments held in a grantor trust and
investments in mutual funds are adjusted to fair value at each period with changes included in our Consolidated
Statements of Operations and Consolidated Statement of Comprehensive Income, respectively. The value of our
investments in mutual funds approximates the cost basis. Investments held to maturity are carried at amortized cost
and are adjusted using the interest method for amortization of premiums and accretion of discounts. Our tax increment
revenue bonds have been classified as held to maturity and are recorded at amortized cost offset by a recognized
credit loss (see Note 21 for further information). Above-market leases are amortized as adjustments to rental revenues
over terms of the acquired leases. Deferred debt costs, including those classified in debt, are amortized primarily on
a straight-line basis, which approximates the effective interest rate method, over the terms of the debt. Other
miscellaneous receivables have a reserve applied to the carrying amount when it becomes apparent that conditions
exist that may lead to our inability to fully collect on outstanding amounts due. Such conditions include delinquent or
late payments on receivables, deterioration in the ongoing relationship with the borrower and other relevant factors.
We would establish a reserve when expected loss conditions exist by reviewing the borrower’s ability to generate
revenues to meet debt service requirements and assessing the fair value of any collateral.
Derivatives and Hedging
We manage interest cost using a combination of fixed-rate and variable-rate debt. To manage our interest rate risk,
we occasionally hedge the future cash flows of our existing floating-rate debt or anticipated fixed-rate debt issuances,
as well as changes in the fair value of our existing fixed-rate debt instruments, principally through interest rate contracts
with major financial institutions. Interest rate contracts that meet specific criteria are accounted for as either a cash
flow or fair value hedge.
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Cash Flow Hedges of Interest Rate Risk:
Our objective in using interest rate derivatives is to add stability to interest expense and to manage our exposure to
interest rate movements. To accomplish this objective, we primarily use interest rate swap contracts as part of our
interest rate risk management strategy. Interest rate swap contracts designated as cash flow hedges involve the receipt
of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements
without exchange of the underlying notional amount.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is
recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that
the hedged forecasted transaction affects earnings. For hedges of fixed-rate debt issuances, the interest rate contracts
are cash settled upon the pricing of the debt, with amounts deferred in accumulated other comprehensive loss and
amortized as an increase/decrease to interest expense over the originally hedged period.
The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Sales of Real Estate
Sales of real estate include the sale of tracts of land within a shopping center development, property adjacent to
shopping centers, operating properties, newly developed properties, investments in real estate joint ventures and
partnerships and partial sales to real estate joint ventures and partnerships in which we participate.
Profits on sales of real estate are not recognized until (a) a sale is consummated; (b) the buyer’s initial and continuing
investments are adequate to demonstrate a commitment to pay; (c) the seller’s receivable is not subject to future
subordination; and (d) we have transferred to the buyer the usual risks and rewards of ownership in the transaction,
and we do not have a substantial continuing involvement with the property.
We recognize gains on the sale of real estate to joint ventures and partnerships in which we participate to the extent
we receive cash from the joint venture or partnership, if it meets the sales criteria in accordance with GAAP, and we
do not have a commitment to support the operations of the real estate joint venture or partnership to an extent greater
than our proportionate interest in the real estate joint venture or partnership.
Impairment
Our property is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of
the property, including any capitalized costs and any identifiable intangible assets, may not be recoverable.
If such an event occurs, a comparison is made of the current and projected operating cash flows of each such property
into the foreseeable future, with consideration of applicable holding periods, on an undiscounted basis to the carrying
amount of such property. If we determine the carrying amount is not recoverable, our basis in the property is reduced
to its estimated fair value to reflect impairment in the value of the asset. Fair values are determined by management
utilizing cash flow models, market capitalization rates and market discount rates, or by obtaining third-party broker or
appraisal estimates in accordance with our fair value measurements accounting policy.
We review economic considerations at each reporting period, including the effects of tenant bankruptcies, the
suspension of tenant expansion plans for new development projects, declines in real estate values, and any changes
to plans related to our new development properties including land held for development, to identify properties where
we believe market values may be deteriorating. Determining whether a property is impaired and, if impaired, the amount
of write-down to fair value requires a significant amount of judgment by management and is based on the best information
available to management at the time of evaluation. If market conditions deteriorate or management’s plans for certain
properties change, additional write-downs could be required in the future.
Our investment in partially owned real estate joint ventures and partnerships is reviewed for impairment each reporting
period. The ultimate realization is dependent on a number of factors, including the performance of each investment
and market conditions. We will record an impairment charge if we determine that a decline in the estimated fair value
of an investment below its carrying amount is other than temporary. There is no certainty that impairments will not
occur in the future if market conditions decline or if management’s plans for these investments change.
Our investments in tax increment revenue bonds are reviewed for impairment, including the evaluation of changes in
events or circumstances that may indicate that the carrying amount of the investment may not be recoverable.
Realization is dependent on a number of factors, including investment performance, market conditions and payment
structure. We will record an impairment charge if we determine that a decline in the value of the investment below its
carrying amount is other than temporary, recovery of its cost basis is uncertain, and/or it is uncertain if the investment
will be held to maturity.
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Interest Capitalization
Interest is capitalized on land under development and buildings under construction based on rates applicable to
borrowings outstanding during the period and the weighted average balance of qualified assets under development/
construction during the period.
Income Taxes
We have elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended. As a REIT, we
generally will not be subject to corporate level federal income tax on taxable income we distribute to our shareholders.
To be taxed as a REIT, we must meet a number of requirements including defined percentage tests concerning the
amount of our assets and revenues that come from, or are attributable to, real estate operations. As long as we distribute
at least 90% of the taxable income of the REIT (without regard to capital gains or the dividends paid deduction) to our
shareholders as dividends, we will not be taxed on the portion of our income we distribute as dividends unless we
have ineligible transactions.
The Tax Relief Extension Act of 1999 gave REITs the ability to conduct activities which a REIT was previously precluded
from doing as long as such activities are performed in entities which have elected to be treated as taxable REIT
subsidiaries under the IRS code. These activities include buying or developing properties with the express purpose
of selling them. We conduct certain of these activities in a taxable REIT subsidiary that we have created. We calculate
and record income taxes in our consolidated financial statements based on the activities in this entity. Deferred tax
assets and liabilities are recognized for the estimated future tax consequences attributable to differences between our
carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit
carry-forwards. These are measured using enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. A valuation allowance for deferred tax assets is established for those assets
when we do not consider the realization of such assets to be more likely than not.
On December 22, 2017, the U.S. government enacted the Tax Act. The Tax Act makes broad and complex changes
to the Internal Revenue Code including, but not limited to, (1) reducing the U.S. federal corporate income tax rate from
35% to 21%, (2) establishing a 20% deduction for REIT dividends (other than any portion that is a capital gain dividend),
(3) limiting the deductibility of business interest, (4) allowing full expensing of certain qualifying property, (5) eliminating
the corporate Alternative Minimum Tax (“AMT”) and changing how existing AMT credits can be realized, (6) limiting
current net operating loss deductions and providing an indefinite carryforward and (7) limiting the deductibility of certain
executive compensation. Management’s evaluation of deferred taxes and the associated valuation allowance includes
an estimate of the impact of the Tax Act and was based on the best information available to management at the time
(see Note 13 for additional information).
Additionally, GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition
of a tax position taken, or expected to be taken, in a tax return. A tax position may only be recognized in the consolidated
financial statements if it is more likely than not that the tax position will be sustained upon examination. We believe it
is more likely than not that our tax positions will be sustained in any tax examinations.
In addition, we are subject to the State of Texas business tax (“Texas Franchise Tax”), which is determined by applying
a tax rate to a base that considers both revenues and expenses. Therefore, the Texas Franchise Tax is considered
an income tax and is accounted for accordingly.
Share-Based Compensation
We have both share options and share awards outstanding. Since 2012, our employee long-term incentive program
under our Amended and Restated 2010 Long-Term Incentive Plan grants only awards that incorporate both service-
based and market-based measures for share awards to promote share ownership among the participants and to
emphasize the importance of total shareholder return. The terms of each grant vary depending upon the participant's
responsibilities and position within the Company. All awards are recorded at fair value on the date of grant and earn
dividends throughout the vesting period; however, the dividends are subject to the same vesting terms as the award.
Compensation expense is measured at the grant date and recognized over the vesting period. All share awards are
awarded subject to the participant’s continued employment with us.
The share awards are subject to a three-year cliff vesting basis. Service-based and market-based share awards are
subject to the achievement of select performance goals as follows:
• Service-based awards and accumulated dividends typically vest three years from the grant date. These grants
are subject only to continued employment and not dependent on future performance measures. Accordingly,
if such vesting criteria are not met, compensation cost previously recognized would be reversed.
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• Market-based awards vest based upon the performance metrics at the end of a three-year period. These
awards are based 50% on our three-year relative total shareholder return (“TSR”) as compared to the FTSE
NAREIT U.S. Shopping Center Index. The other 50% is tied to our three-year absolute TSR, which is currently
compared to an 8% hurdle. At the end of a three-year period, the performance measures are analyzed; the
actual number of shares earned is determined; and the earned shares and the accumulated dividends vest.
The probability of meeting the market criteria is considered when calculating the estimated fair value on the
date of grant using a Monte Carlo simulation. These awards are accounted for as awards with market criteria,
with compensation cost recognized over the service period, regardless of whether the market criteria are
achieved and the awards are ultimately earned and vest.
Restricted shares granted to trust managers and share awards granted to retirement eligible employees are expensed
immediately. Restricted shares and share awards have the same rights of a common shareholder, including the right
to vote and receive dividends, except as otherwise provided by our Management Development and Executive
Compensation Committee.
Options generally expire upon the earlier of termination of employment or 10 years from the date of grant, and all
restricted shares are granted at no purchase price. Our policy is to recognize compensation expense for equity awards
ratably over the vesting period, except for retirement eligible amounts.
Retirement Benefit Plans
Defined Benefit Plan:
We sponsor a noncontributory cash balance retirement plan (“Retirement Plan”) under which an account is maintained
for each participant. Annual additions to each participant’s account include a service credit ranging from 3%-5% of
compensation, depending on years of service, and an interest credit of 4.5%. Vesting generally occurs after three
years of service.
Investments of Plan Assets
Our investment policy for our plan assets has been to determine the objectives for structuring a retirement savings
program suitable to the long-term needs and risk tolerances of participants, to select appropriate investments to
be offered by the plan and to establish procedures for monitoring and evaluating the performance of the investments
of the plan. Our overall plan objectives for selecting and monitoring investment options are to promote and optimize
retirement wealth accumulation; to provide a full range of asset classes and investment options that are intended
to help diversify the portfolio to maximize return within reasonable and prudent levels of risk; to control costs of
administering the plan; and to manage the investments held by the plan.
The selection of investment options is determined using criteria based on the following characteristics: fund history,
relative performance, investment style, portfolio structure, manager tenure, minimum assets, expenses and
operation considerations. Investment options selected for use in the plan are reviewed at least on a semi-annual
basis to evaluate material changes from the selection criteria. Asset allocation is used to determine how the
investment portfolio should be split between stocks, bonds and cash. The asset allocation decision is influenced
by investment time horizon; risk tolerance; and investment return objectives. The primary factor in establishing
asset allocation is demographics of the plan, including attained age and future service. A broad market diversification
model is used in considering all these factors, and the percentage allocation to each investment category may
also vary depending upon market conditions. Re-balancing of the allocation of plan assets occurs semi-annually.
Defined Contribution Plans:
Effective January 1, 2012, we amended our two separate and independent nonqualified supplemental retirement plans
(“SRP”) for certain employees to be defined contribution plans. These unfunded plans provide benefits in excess of
the statutory limits of our noncontributory cash balance retirement plan. For active participants as of January 1, 2012,
annual additions to each participant’s account include an actuarially-determined service credit ranging from 3% to 5%
and an interest credit of 4.5%. Vesting generally occurs between five and 10 years of service. We have elected to use
the actuarial present value of the vested benefits to which the participant was entitled if the participant separated
immediately from the SRP, as permitted by GAAP.
The SRP participants' account balances, prior to January 1, 2012, were converted to a cash balance retirement plan
which no longer receives service credits but continues to receive a 7.5% interest credit for active participants and a
December 31, 90-day LIBOR rate plus .50% for inactive participants.
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We have a Savings and Investment Plan pursuant to which eligible employees may elect to contribute from 1% of their
salaries to the maximum amount established annually by the IRS. Employee contributions are matched by us at the
rate of 50% for the first 6% of the employee's salary. The employees vest in the employer contributions ratably over
a five-year period.
Deferred Compensation Plan
We have a deferred compensation plan for eligible employees allowing them to defer portions of their current cash
salary or share-based compensation. Deferred amounts are deposited in a grantor trust, which are included in net
other assets, and are reported as compensation expense in the year service is rendered. Cash deferrals are invested
based on the employee’s investment selections from a mix of assets selected using a broad market diversification
model.
Our deferred compensation plan was amended, effective April 1, 2016, to permit participants in this plan to diversify
their holdings of our common shares six months after vesting. Thus, as of April 1, 2016, the fully vested share awards
and the proportionate share of nonvested share awards eligible for diversification were reclassified from additional
paid-in capital to temporary equity in our Consolidated Balance Sheet. In February 2017, the deferred compensation
plan was amended to provide that participants in the plan would no longer have the right to diversify their common
shares six months after vesting. Thus, the fully vested share awards and the proportionate share of nonvested share
awards eligible for diversification at the amendment date were reclassified from temporary equity into additional paid-
in capital in our Consolidated Balance Sheet. Deferred share-based compensation cannot be diversified, and
distributions from this plan are made in the same form as the original deferral.
The following table summarizes the eligible share award activity since inception through the February 2017 plan
amendment date (in thousands):
December 31,
2017
2016
Balance at beginning of the period/inception
$
44,758 $
Change in redemption value
Change in classification
Diversification of share awards
Amendment reclassification
Balance at end of period
619
988
—
(46,365)
36,261
8,600
3,716
(3,819)
—
$
— $
44,758
Fair Value Measurements
Certain financial instruments, estimates and transactions are required to be calculated, reported and/or recorded at
fair value. The estimated fair values of such financial items, including debt instruments, impaired assets, acquisitions,
investment securities and derivatives, have been determined using a market-based measurement. This measurement
is determined based on the assumptions that management believes market participants would use in pricing an asset
or liability; including, market capitalization rates, discount rates, current operating income, local economics and other
factors. As a basis for considering market participant assumptions in fair value measurements, GAAP establishes a
fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from
sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within
Level 3 of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the
ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities
in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as
interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable
inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related
market activity. In instances where the determination of the fair value measurement is based on inputs from different
levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement
falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment
of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers
factors specific to the asset or liability. The fair value of such financial instruments, estimates and transactions was
determined using available market information and appropriate valuation methodologies as prescribed by GAAP.
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Internally developed and third party fair value measurements, including the unobservable inputs, are evaluated by
management with sufficient experience for reasonableness based on current market knowledge, trends and
transactional experience in the real estate and capital markets. Our valuation policies and procedures are determined
by our Accounting Group, which reports to the Chief Financial Officer and the results of significant impairment
transactions are discussed with the Audit Committee on a quarterly basis.
Fair value estimates are based on limited available market information for similar transactions, including our tax
increment revenue bonds, investments held to maturity and debt, and there can be no assurance that the disclosed
value of any financial instrument could be realized by immediate settlement of the instrument. The following provides
information about the methods used to estimate the fair value of our financial instruments, including their estimated
fair values:
Investments and Deferred Compensation Plan Obligations
Investments in mutual funds held in a grantor trust and mutual funds are valued based on publicly-quoted market
prices for identical assets. The deferred compensation plan obligations corresponds to the value of our investments
held in a grantor trust. Investments held to maturity are carried at amortized cost and are adjusted using the interest
method for amortization of premiums and accretion of discounts.
Derivative Instruments
We use interest rate contracts with major financial institutions to manage our interest rate risk. The valuation of
these instruments is determined based on assumptions that management believes market participants would use
in pricing, using widely accepted valuation techniques including discounted cash flow analysis on the expected
cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period
to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The
fair values of our interest rate contracts have been determined using the market standard methodology of netting
the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or
receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward
curves) derived from observable market interest rate curves.
We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the
respective counter-party’s nonperformance risk in the fair value measurements. In adjusting the fair value of our
derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any
applicable credit enhancements, such as collateral, thresholds and guarantees. An accounting policy election was
made to measure the credit risk of its derivative financial instruments that are subject to master netting agreements
on a net basis by counterparty portfolio.
Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the
fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such
as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counter-parties.
However, we have assessed the significance of the impact of the credit valuation adjustments on the overall
valuation of our derivative positions and have determined that the credit valuation adjustments are not significant
to the overall valuation of our derivatives. As a result, we have determined that the derivative valuations in their
entirety are classified in Level 2 of the fair value hierarchy.
Tax Increment Revenue Bonds
The fair value estimates of our held to maturity tax increment revenue bonds, which were issued by the Agency
in connection with our investment in a development project in Sheridan, Colorado, are based on assumptions that
management believes market participants would use in pricing, using widely accepted valuation techniques
including discounted cash flow analysis based on the expected future sales tax revenues of the development
project. This analysis reflects the contractual terms of the bonds, including the period to maturity, and uses
observable market-based inputs, such as market discount rates and unobservable market-based inputs, such as
future growth and inflation rates.
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Debt
The fair value of our debt may be based on quoted market prices for publicly-traded debt, on a third-party established
benchmark for inactively traded debt and on the discounted estimated future cash payments to be made for non-
traded debt. For inactively traded debt, our third-party provider establishes a benchmark for all REIT securities
based on the largest, most liquid and most frequent investment grade securities in the REIT bond market. This
benchmark is then adjusted to consider how a market participant would be compensated for risk premiums such
as, longevity of maturity dates, lack of liquidity and credit quality of the issuer. The discount rates used approximate
current lending rates for loans or groups of loans with similar maturities and credit quality, assumes the debt is
outstanding through maturity and considers the debt’s collateral (if applicable). We have utilized market information
as available or present value techniques to estimate the amounts required to be disclosed.
Reportable Segments
Our primary focus is to lease space to tenants in shopping centers that we own, lease or manage. We evaluate the
performance of the reportable segments based on net operating income, defined as total revenues less operating
expenses and real estate taxes. Management does not consider the effect of gains or losses from the sale of property
or interests in real estate joint ventures and partnerships in evaluating segment operating performance.
No individual property constitutes more than 10% of our revenues or assets, and we have no operations outside of
the United States of America. Therefore, our properties have been aggregated into one reportable segment since such
properties and the tenants thereof each share similar economic and operating characteristics.
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component consists of the following (in thousands):
Balance, December 31, 2016
Change excluding amounts reclassified from
accumulated other comprehensive loss
Amounts reclassified from accumulated
other comprehensive loss
Net other comprehensive (income) loss
Balance, December 31, 2017
$
(1,541)
$
Gain
on
Investments
(964)
$
Gain on
Cash Flow
Hedges
Defined
Benefit
Pension
Plan
Total
$
(6,403)
$
16,528
$
9,161
(1,228)
(1,063)
82
651 (1)
(577)
42 (2)
(1,021)
(7,424)
(1,475) (3)
(1,393)
$
15,135
$
(2,209)
(782)
(2,991)
6,170
Balance, December 31, 2015
Change excluding amounts reclassified from
accumulated other comprehensive loss
Amounts reclassified from accumulated
other comprehensive loss
Net other comprehensive (income) loss
Balance, December 31, 2016
$
___________________
Gain
on
Investments
(557)
$
Gain
on
Cash Flow
Hedges
Defined
Benefit
Pension
Plan
Total
$
(8,160)
$
16,361
$
7,644
(407)
3,288
1,719
4,600
(1,531) (2)
1,757
(1,552) (3)
167
$
(6,403)
$
16,528
$
(3,083)
1,517
9,161
(407)
(964)
(1) This reclassification component is included in interest and other income.
(2) This reclassification component is included in interest expense (see Note 7 for additional information).
(3) This reclassification component is included in the computation of net periodic benefit cost (see Note 17 for additional information).
Retrospective Application of Accounting Standard Update
The retrospective application of adopting Accounting Standard Update ("ASU") No. 2016-09, "Improvements to
Employee Share-Based Payment Accounting," ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash
Payments" and ASU No. 2016-18, "Restricted Cash" on prior years' Consolidated Statements of Cash Flows and
applicable notes to the consolidated financial statements were made to conform to the current year presentation (see
Notes 2 and 14 for additional information).
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Note 2. Newly Issued Accounting Pronouncements
Adopted
In March 2016, the FASB issued ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting."
This ASU was issued to simplify several aspects of share-based payment transactions, including: income tax
consequences, classification of awards as equity or a liability, an option to recognize share compensation forfeitures
as they occur and changes to classification within the statement of cash flows. The provisions of ASU No. 2016-09
were effective for us as of January 1, 2017. The adoption of this ASU resulted in a retrospective reclassification of $6.0
million and $1.8 million in the Consolidated Statements of Cash Flows for the year ended December 31, 2016 and
2015, respectively, from cash flows from operating activities in changes in accounts payable, accrued expenses and
other liabilities, net to cash flows from financing activities in other, net for shares used to pay employees' tax withholdings.
In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments."
This ASU amends guidance to either add or clarify the classification of certain cash receipts and payments in the
statement of cash flows. Eight specific issues were identified for further clarification and include: debt prepayment or
extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a
business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of company-
owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization
transactions and the classification of cash flows that have aspects of more than one class of cash flows. The provisions
of ASU No. 2016-15 are effective for us as of January 1, 2018 on a retrospective basis, and early adoption is permitted.
We have adopted this update as of December 31, 2017 on a retrospective basis. The adoption of this ASU resulted
in a retrospective reclassification of $.5 million and $.8 million in the Consolidated Statements of Cash Flows for the
year ended December 31, 2016 and 2015, respectively, from cash flows from operating activities in accrued rent and
accounts receivable, net to cash flows from investing activities in other, net for the settlement of insurance claims
associated with capital assets. Also, our distributions received from equity method investees are accounted for using
the cumulative earnings approach.
In October 2016, the FASB issued ASU No. 2016-17, "Interests Held through Related Parties That Are Under Common
Control." This ASU amends the consolidation guidance on how a reporting entity that is a single decision maker of a
VIE should treat indirect interests in the entity held through related parties that are under common control when
determining whether it is the primary beneficiary of that VIE. The provisions of ASU No. 2016-17 were effective for us
as of January 1, 2017 on a retrospective basis. We have adopted this update, and the adoption did not have any impact
to our consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, "Restricted Cash." This ASU amends prior guidance on
restricted cash presentation and requires that restricted cash and restricted cash equivalents be included in the
statement of cash flows. Changes in restricted cash and restricted cash equivalents that result from transfers between
different cash categories should not be presented as cash flow activities in the statement of cash flows. The ASU also
requires an entity to disclose information about the nature of restricted cash, as well as a reconciliation between the
statement of financial position and the statement of cash flows when the statement of financial position has more than
one line item for cash, cash equivalent, restricted cash and restricted cash equivalent. The provisions of ASU No.
2016-18 are effective for us as of January 1, 2018 on a retrospective basis, and early adoption is permitted. We have
adopted this ASU as of December 31, 2017 on a retrospective basis, as reflected in our cash flow statement presentation
and related notes (see Notes 1 and 14 for additional information). For the year ended December 31, 2016 and 2015,
cash flows from investing activities in the Consolidated Statements of Cash Flows no longer reflects the change in
restricted deposits and mortgage escrows totaling $20.0 million and $76.6 million, respectively.
In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations." This ASU narrows the definition of a
business and provides a framework for evaluating whether a transaction is an acquisition of a business or an asset.
The amendment provides a screen to evaluate whether a transaction is a business and requires that when substantially
all of the fair value of the acquired assets can be concentrated in a single asset or identifiable group of similar assets,
then the assets acquired are not a business. If the screen is not met, then to be considered a business, the assets
must have an input and a substantive process to create outputs. The provisions of ASU No. 2017-01 are effective for
us as of January 1, 2018, and early adoption is permitted. We have adopted this ASU prospectively as of January 1,
2017. Under this guidance, we expect most acquisitions of property to be accounted for as an asset acquisition.
Additionally, certain acquisition costs that were previously expensed may be capitalized. For for the year ended
December 31, 2016, we expensed acquisition costs of $1.4 million.
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In May 2017, the FASB issued ASU No. 2017-09, "Compensation - Stock Compensation: Scope of Modification
Accounting." This ASU provides guidance about the types of changes to the terms or conditions of a share-based
payment award which would require an entity to apply modification accounting. This ASU requires an entity to account
for the effects of a modification in the terms or conditions of a share-based payment award, unless three criteria are
met relating to the fair value, vesting conditions and classification of the modified awards. The provisions of ASU No.
2017-09 are effective for us as of January 1, 2018 on a prospective basis, and early adoption is permitted. We have
adopted this update as of December 31, 2017, and the adoption did not have any impact to our consolidated financial
statements.
Not Yet Adopted
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." This ASU's core objective
is for an entity to recognize revenue based on the consideration it expects to receive in exchange for goods or services.
Additionally, this ASU requires entities to use a single model in accounting for revenues derived from contracts with
customers. ASU No. 2014-09 replaces prior guidance regarding the recognition of revenue from sales of real estate,
except for revenue from sales that are part of a sale-leaseback transaction. The provisions of ASU No. 2014-09, as
amended in subsequently issued amendments, are effective for us on January 1, 2018, and are required to be applied
either on a retrospective or a modified retrospective approach. We have elected to apply this guidance on a modified
retrospective approach upon adoption.
Our evaluation has resulted in the identification of primarily three types of customer contracts: (1) management contracts
with partially owned real estate joint ventures or partnerships or third parties, (2) licensing and occupancy agreements
and (3) certain non-tenant contracts. Based on our evaluation, we will continue to recognize these fees as we currently
do with the exception of the timing associated with the performance obligation in our management contracts related
to leasing and lease preparation related services. Upon adoption at January 1, 2018, we recognized the cumulative
effect for these fees which has increased retained earnings and contract assets by $.3 million, respectively. In addition,
we evaluated controls around the implementation of this ASU and have concluded there will be no significant impact
on our control structure. We are still evaluating the impact to the notes in our consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, "Recognition and Measurement of Financial Assets and Financial
Liabilities." This ASU will require equity investments, excluding those investments accounted for under the equity
method of accounting or those that result in consolidation of the investee, to be measured at fair value with the changes
in fair value recognized in net income; will simplify the impairment assessment of those investments; will eliminate the
disclosure of the method(s) and significant assumptions used to estimate the fair value for financial instruments
measured at amortized cost and change the fair value calculation for those investments; will change the disclosure in
other comprehensive income for financial liabilities that are measured at fair value in accordance with the fair value
options for financial instruments; and will clarify that a deferred asset related to available-for-sale securities should be
included in an entity's evaluation for a valuation allowance. The provisions of ASU No. 2016-01 are effective for us as
of January 1, 2018 and is required to be applied on a modified retrospective approach. Upon adoption, we recognized
the cumulative effect for the fair value of equity investments which has increased retained earnings and accumulated
other comprehensive loss each by $1.5 million and includes the effects of ASU No. 2018-02, "Reclassification of Certain
Tax Effects from Accumulated Other Comprehensive Income."
In February 2016, the FASB issued ASU No. 2016-02, "Leases." The ASU sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both lessees and lessors. The ASU requires lessees to adopt
a right-of-use asset approach that will bring substantially all leases onto the balance sheet, with the exception of short-
term leases. The subsequent accounting for this right-of-use asset will be based on a dual-model approach, under
which the lease will be classified as either a finance or an operating lease. The lessor accounting model under this
ASU is similar to current guidance, but certain underlying principles in the lessor model have been aligned with the
new revenue recognition standard. The provisions of ASU No. 2016-02 are effective for us as of January 1, 2019, are
required to be applied on a modified retrospective approach and early adoption is permitted. We anticipate adopting
this ASU on January 1, 2019.
In January 2018, the FASB issued an exposure draft ("2018 Exposure Draft") which, if adopted as written, would allow
lessors a practical expedient by class of underlying assets to account for lease and non-lease components as a single
lease component if certain criteria are met. Also, the 2018 Exposure Draft indicates that companies may be permitted
to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption in
lieu of the modified retrospective approach and provides other optional practical expedients.
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We are in the process of evaluating the impact to our 5,400 lessor leases and other lessee leases, if any, that the
adoption of this ASU will have on our consolidated financial statements. Within our lessor leases, we are entitled to
receive tenant reimbursements for operating expenses such as real estate taxes, insurance and common area
maintenance (“CAM”). Currently upon adoption of this ASU, CAM reimbursement revenue will be accounted for in
accordance with Topic 606 (ASU No. 2014-09 as discussed above). We have currently identified some areas we
believe may be impacted by this ASU. These include:
• The bifurcation of lease arrangements in which contractual amounts due are on a gross basis and the amount
under contract is not allocated between rental and expense reimbursements, such as real estate taxes and
insurance. This process would be based on the underlying fair values of these items.
• We have ground lease agreements in which we are the lessee for land underneath all or a portion of 13 centers
and three administrative office leases that we account for as operating leases. Rental expense associated
with these operating leases was, in millions: $2.9 in 2017; $3.0 in 2016 and $3.2 in 2015. We have one capital
lease in which we are the lessee of two centers with a $21 million lease obligation. We will record any rights
and obligations under these leases as an asset and liability at fair value in our consolidated balance sheets.
• Determination of costs to be capitalized associated with leases. This ASU will limit the capitalization associated
with certain costs, primarily certain internally-generated leasing and legal costs, of which we capitalized internal
costs of $10.8 million and $10.3 million for the year ended December 31, 2017 and 2016, respectively. We
believe we will be able to continue to capitalize internal leasing commissions that are a direct result of obtaining
a lease.
In June 2016, the FASB issued ASU No. 2016-13, "Measurement of Credit Losses on Financial Instruments." This
ASU amends prior guidance on the impairment of financial instruments, and adds an impairment model that is based
on expected losses rather than incurred losses with the recognition of an allowance based on an estimate of expected
credit losses. The provisions of ASU No. 2016-13 are effective for us as of January 1, 2020, and early adoption is
permitted for fiscal years beginning after December 15, 2018. We are currently assessing the impact, if any, that the
adoption of this ASU will have on our consolidated financial statements.
In February 2017, the FASB issued ASU No. 2017-05, "Clarifying the Scope of Asset Derecognition Guidance and
Accounting for Partial Sales of Nonfinancial Assets." The ASU clarifies that a financial asset is within the scope of
Subtopic 610-20 if it meets the definition, as amended, of an in substance nonfinancial asset. If substantially all of the
fair value of assets that are promised to a counterparty in a contract is concentrated in nonfinancial assets, then all of
the financial assets promised to the counterparty are in substance nonfinancial assets within the scope of Subtopic
610-20, including a parent transferring control of a nonfinancial asset through a transfer of ownership interests of a
consolidated subsidiary. The provisions of ASU No. 2017-05 are effective for us as of January 1, 2018 and depending
on the contract type may be recorded on a retrospective or modified retrospective approach. As a result of our contract
analysis under ASU 2014-09, the majority of our contracts relate to property sales to be accounted for under this ASU
and could result in future gains being recognized sooner. Upon adoption, we applied the modified retrospective approach
for all contract types. We recognized the cumulative effect for contracts in which gains would have been realized and
have increased retained earnings and other assets by $4.0 million, respectively, at January 1, 2018.
In March 2017, the FASB issued ASU No. 2017-07, "Improving the Presentation of Net Periodic Pensions Cost and
Net Periodic Postretirement Benefit Cost." The ASU requires the service cost component to be reported as
compensation costs arising from services rendered by pertinent employees during the period. The other components
of net periodic benefit cost are required to be presented in the income statement separately from the service cost
component and outside income from operations. Additionally, only the service cost component will be eligible for
capitalization when applicable. The provisions of ASU No. 2017-07 are effective for us as of January 1, 2018 on a
retrospective basis for the presentation within the income statement and prospectively for the capitalization of costs.
Upon adoption of this ASU, our income statement presentation and notes will be impacted, but it does not have a
material impact to our consolidated financial statements. For the year ended December 31, 2017, 2016 and 2015, net
periodic benefit cost, excluding the service cost component, of $.4 million, $.7 million and $.2 million, respectively, will
be restated as non-operating expenses in our Consolidated Statements of Operations.
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In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging - Targeted Improvements to Accounting
for Hedging Activities." The ASU amends current hedge accounting recognition and presentation requirements. Items
focused on include: alignment of an entity’s risk management activities and its financial reporting for hedging
relationships, the use of hedge accounting for risk components in hedging relationships involving nonfinancial risk and
interest rate risk, updates for designating fair value hedges of interest rate risk and measuring the related change in
fair value of the hedged item, alignment of the recognition and presentation of the effects of the hedging instrument
and the hedged item, and permits an entity to exclude certain amounts related to currency swaps. Lastly, the ASU
also provides additional relief on effectiveness testing methods and disclosures. The provisions of ASU No. 2017-12
are effective for us as of January 1, 2019, and early adoption is permitted. We have adopted this ASU as of January
1, 2018, which requires a modified retrospective transition method upon adoption. The adoption of this ASU will not
have a material impact to our consolidated financial statements.
In January 2018, the FASB issued ASU No. 2018-01, "Leases (Topic 842)-Land Easement Practical Expedient for
Transition to Topic 842." The ASU provides an optional transition practical expedient to not evaluate existing or expired
land easements under ASU No. 2016-02, if they were not previously accounted for as leases under prior guidance.
The provisions of ASU No. 2018-01 are effective for us as of January 1, 2019, are required to be applied on a modified
retrospective approach and early adoption is permitted. We anticipate adopting this ASU upon adoption of ASU No.
2016-02.
In February 2018, the FASB issued ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income." ASU No. 2018-02 allows for the reclassification of the stranded tax effects resulting from the
Tax Act to retained earnings. The provisions of ASU No. 2018-02 are effective for us as of January 1, 2019, may be
applied either at the beginning of the period of adoption or retrospectively, and early adoption is permitted. We anticipate
adopting this ASU upon adoption of ASU No. 2016-01.
Note 3. Property
Our property consists of the following (in thousands):
Land
Land held for development
Land under development
Buildings and improvements
Construction in-progress
Total
December 31,
2017
1,068,022 $
2016
1,107,072
$
69,205
48,985
82,953
51,761
3,232,074
3,489,685
80,573
57,674
$
4,498,859 $
4,789,145
During the year ended December 31, 2017, we sold 18 centers and other property. Aggregate gross sales proceeds
from these transactions approximated $446.6 million and generated gains of approximately $218.6 million. Also, for
the year ended December 31, 2017, we invested $57.2 million in new development projects, which includes the
purchase of the retail portion of a mixed-use project in Seattle, Washington that was subject to a contractual obligation
at December 31, 2016.
At December 31, 2017, three centers, totaling $78.7 million before accumulated depreciation, were classified as held
for sale. At December 31, 2016, one center, totaling $1.6 million before accumulated depreciation, was classified as
held for sale. None of these centers qualified to be reported in discontinued operations, and all but one have been
sold subsequent to the end of the applicable reporting period.
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Note 4. Investment in Real Estate Joint Ventures and Partnerships
We own interests in real estate joint ventures or limited partnerships and have tenancy-in-common interests in which
we exercise significant influence, but do not have financial and operating control. We account for these investments
using the equity method, and our interests ranged for the periods presented from 20% to 90% in 2017 and from 20%
to 75% in 2016. Combined condensed financial information of these ventures (at 100%) is summarized as follows (in
thousands):
Combined Condensed Balance Sheets
ASSETS
Property
Accumulated depreciation
Property, net
Other assets, net
Total Assets
LIABILITIES AND EQUITY
Debt, net (primarily mortgages payable)
Amounts payable to Weingarten Realty Investors and Affiliates
Other liabilities, net
Total Liabilities
Equity
Total Liabilities and Equity
Combined Condensed Statements of Operations
Revenues, net
Expenses:
Depreciation and amortization
Interest, net
Operating
Real estate taxes, net
General and administrative
Provision for income taxes
Impairment loss
Total
Gain on sale of non-operating property
Gain on dispositions
Net Income
63
December 31,
2017
2016
$ 1,241,004 $ 1,196,770
(285,033)
(261,392)
955,971
115,743
935,378
114,554
$ 1,071,714 $ 1,049,932
$
298,124 $
301,480
12,017
24,759
334,900
736,814
12,585
24,902
338,967
710,965
$ 1,071,714 $ 1,049,932
Year Ended December 31,
2017
2016
2015
$
137,419 $
138,316 $
148,875
34,818
11,836
23,876
18,865
623
112
—
38,242
16,076
26,126
17,408
816
113
1,303
37,771
17,053
26,797
18,525
839
197
7,487
90,130
100,084
108,669
—
373
12,492
14,816
—
5,171
$
59,781 $
53,421 $
45,377
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Our investment in real estate joint ventures and partnerships, as reported in our Consolidated Balance Sheets, differs
from our proportionate share of the entities’ underlying net assets due to basis differences, which arose upon the
transfer of assets to the joint ventures. The net positive basis differences, which totaled $2.2 million and $2.6 million
at December 31, 2017 and 2016, respectively, are generally amortized over the useful lives of the related assets.
Our real estate joint ventures and partnerships have determined from time to time that the carrying amount of certain
centers was not recoverable and that the centers should be written down to fair value. There was no impairment charge
for the year ended December 31, 2017. For the year ended December 31, 2016 and 2015, our unconsolidated real
estate joint ventures and partnerships recorded an impairment charge of $1.3 million and $7.5 million, respectively,
associated primarily with various centers that have been marketed and sold during the period.
Fees earned by us for the management of these real estate joint ventures and partnerships totaled $6.2 million in
2017, $5.1 million in 2016 and $4.5 million in 2015.
During 2017, two centers were sold with aggregate gross sales proceeds of approximately $19.6 million, of which our
share of the gain, included in equity earnings in real estate joint ventures and partnerships totaled $6.2 million. In June
2017, a venture acquired land with a gross purchase price of $23.5 million for a mixed-use development project, and
we simultaneously increased our ownership interest to 90% (See Note 20 for additional information).
During 2016, five centers and a land parcel were sold with aggregate gross sales proceeds of approximately $78.7
million, of which our share of the gain, included in equity earnings in real estate joint ventures and partnerships, totaled
$3.9 million. Additionally, a venture acquired one center with a gross purchase price of $73 million, of which our
aggregated interest was 69%.
In September 2016, we acquired our partner's 50% interest in an unconsolidated tenancy-in-common arrangement
for approximately $13.5 million that we had previously accounted for under the equity method. This transaction resulted
in the consolidation of the property in our consolidated financial statements. In October 2016, an unconsolidated joint
venture distributed land to both us and our partner, totaling $4.4 million.
As of December 31, 2015, we held a combined 51% interest in an unconsolidated real estate joint venture that owned
three centers in Colorado with total assets and debt of $43.7 million and $72.4 million, respectively. In February 2016,
in exchange for our partners' aggregate 49% interest in this venture and $2.5 million in cash, we distributed one center
to our partners. We have consolidated this venture as of the transaction date and re-measured our investment in this
venture to its fair value (See Note 22 for additional information).
Note 5. Identified Intangible Assets and Liabilities
Identified intangible assets and liabilities associated with our property acquisitions are as follows (in thousands):
Identified Intangible Assets:
Above-market leases (included in Other Assets, net)
Above-market leases - Accumulated Amortization
Below-market assumed mortgages (included in Debt, net)
Below-market assumed mortgages - Accumulated Amortization
In place leases (included in Unamortized Lease Costs, net)
In place leases - Accumulated Amortization
Identified Intangible Liabilities:
Below-market leases (included in Other Liabilities, net)
Below-market leases - Accumulated Amortization
Above-market assumed mortgages (included in Debt, net)
Above-market assumed mortgages - Accumulated Amortization
64
December 31,
2017
2016
$
44,231 $
44,595
(17,397)
(13,579)
—
—
224,201
(96,202)
1,671
(1,564)
232,528
(82,571)
154,833 $
181,080
105,794 $
110,878
(28,072)
10,063
(6,081)
(23,109)
10,375
(5,186)
$
$
$
81,704 $
92,958
Table of Contents
These identified intangible assets and liabilities are amortized over the applicable lease terms or the remaining lives
of the assumed mortgages, as applicable.
The net amortization of above-market and below-market leases increased (decreased) rental revenues by $3.7 million,
$2.1 million and $(.5) million in 2017, 2016 and 2015, respectively. The significant year over year change in rental
revenues in 2016 to 2015 is primarily due to acquisitions during 2016. The estimated net amortization of these intangible
assets and liabilities will increase rental revenues for each of the next five years as follows (in thousands):
2018
2019
2020
2021
2022
$
2,789
3,161
3,234
3,186
3,007
The amortization of the in place lease intangible assets recorded in depreciation and amortization, was $21.0 million,
$18.0 million and $12.3 million in 2017, 2016 and 2015, respectively. The significant year over year change in
depreciation and amortization from 2016 to 2015 is primarily due to acquisitions during 2016. The estimated amortization
of these intangible assets will increase depreciation and amortization for each of the next five years as follows (in
thousands):
2018
2019
2020
2021
2022
$
16,617
14,638
13,663
11,573
9,516
The net amortization of above-market and below-market assumed mortgages decreased net interest expense by $1.1
million, $1.0 million and $.7 million in 2017, 2016 and 2015, respectively. The estimated net amortization of these
intangible assets and liabilities will decrease net interest expense for each of the next five years as follows (in thousands):
2018
2019
2020
2021
2022
$
1,207
1,207
436
287
141
Note 6. Debt
Our debt consists of the following (in thousands):
Debt payable, net to 2038 (1)
Unsecured notes payable under credit facilities
Debt service guaranty liability
Obligations under capital leases
Total
___________________
December 31,
2017
1,996,007 $
$
—
64,145
21,000
2016
2,023,403
245,000
67,125
21,000
$
2,081,152 $
2,356,528
(1) At December 31, 2017, interest rates ranged from 2.6% to 7.9% at a weighted average rate of 4.0%. At December 31, 2016, interest
rates ranged from 1.7% to 7.9% at a weighted average rate of 4.0%.
65
Table of Contents
The allocation of total debt between fixed and variable-rate as well as between secured and unsecured is summarized
below (in thousands):
As to interest rate (including the effects of interest rate contracts):
Fixed-rate debt
Variable-rate debt
Total
As to collateralization:
Unsecured debt
Secured debt
Total
December 31,
2017
2016
$ 2,063,263 $ 2,089,769
17,889
266,759
$ 2,081,152 $ 2,356,528
$ 1,667,462 $ 1,913,399
413,690
443,129
$ 2,081,152 $ 2,356,528
We maintain a $500 million unsecured revolving credit facility, which was amended and extended on March 30, 2016.
This facility expires in March 2020, provides for two consecutive six-month extensions upon our request, and borrowing
rates that float at a margin over LIBOR plus a facility fee. At both December 31, 2017 and 2016, the borrowing margin
and facility fee, which are priced off a grid that is tied to our senior unsecured credit ratings, were 90 and 15 basis
points, respectively. The facility also contains a competitive bid feature that allows us to request bids for up to $250
million. Additionally, an accordion feature allows us to increase the facility amount up to $850 million.
Additionally, we have a $10 million unsecured short-term facility, which was amended and extended on March 27,
2017, that we maintain for cash management purposes, which matures in March 2018. At December 31, 2017, the
facility provided for fixed interest rate loans at a 30-day LIBOR rate plus a borrowing margin, facility fee and an unused
facility fee of 125, 10, and 5 basis points, respectively. At December 31, 2016, the borrowing margin, facility fee and
an unused facility fee was 125, 10, and 10 basis points, respectively.
The following table discloses certain information regarding our unsecured notes payable under our credit facilities (in
thousands, except percentages):
Unsecured revolving credit facility:
Balance outstanding
Available balance
Letter of credit outstanding under facility
Variable interest rate (excluding facility fee) at end date
Unsecured short-term facility:
Balance outstanding
Variable interest rate at end date
Both facilities:
Maximum balance outstanding during the year
Weighted average balance
December 31,
2017
2016
— $
245,000
493,610
6,390
250,140
4,860
—%
1.5%
— $
—%
—
—%
$
$
$
245,000
$
372,000
133,386
141,017
Year-to-date weighted average interest rate (excluding facility fee)
1.8%
1.3%
66
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Related to a development project in Sheridan, Colorado, we have provided a guaranty for the payment of any debt
service shortfalls until a coverage rate of 1.4x is met on tax increment revenue bonds issued in connection with the
project. The bonds are to be repaid with incremental sales and property taxes and a PIF to be assessed on current
and future retail sales and, to the extent necessary, any amounts we may have to provide under a guaranty. The
incremental taxes and PIF are to remain intact until the earlier of the date the bond liability has been paid in full or
2040. Therefore, a debt service guaranty liability equal to the fair value of the amounts funded under the bonds was
recorded. As of December 31, 2017 and 2016, we had $64.1 million and $67.1 million outstanding for the debt service
guaranty liability, respectively.
In December 2016, we repaid $75 million of fixed-rate unsecured medium term notes upon maturity at a weighted
average interest rate of 5.5%.
In August 2016, we issued $250 million of 3.25% senior unsecured notes maturing in 2026. The notes were issued at
99.16% of the principal amount with a yield to maturity of 3.35%. The net proceeds received of $246.3 million were
used to reduce the amount outstanding under our $500 million unsecured revolving credit facility.
In June 2016, we amended an existing $90 million secured note to extend the maturity to 2028 and reduce the interest
rate from 7.5% to 4.5% per annum. In connection with this transaction, we have recorded a $2.0 million gain on
extinguishment of debt that has been classified as net interest expense in our Consolidated Statements of Operations.
Various leases and properties, and current and future rentals from those leases and properties, collateralize certain
debt. At both December 31, 2017 and 2016, the carrying value of such assets aggregated $.7 billion.
Scheduled principal payments on our debt (excluding $21.0 million of certain capital leases, $(5.4) million net premium/
(discount) on debt, $(8.9) million of deferred debt costs, $4.0 million of non-cash debt-related items, and $64.1 million
debt service guaranty liability) are due during the following years (in thousands):
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Thereafter
Total
$
113,427
56,245
237,779
17,667
307,614
305,694
255,954
303,302
277,291
38,288
93,024
$ 2,006,285
Our various debt agreements contain restrictive covenants, including minimum interest and fixed charge coverage
ratios, minimum unencumbered interest coverage ratios, minimum net worth requirements and maximum total debt
levels. We are not aware of any non-compliance with our public debt and revolving credit facility covenants as of
December 31, 2017.
Note 7. Derivatives and Hedging
The fair value of all our interest rate swap contracts was reported as follows (in thousands):
Designated Hedges:
December 31, 2017
December 31, 2016
Assets
Liabilities
Balance Sheet
Location
Amount
Balance Sheet
Location
Amount
Other Assets, net $
2,035 Other Liabilities, net $
Other Assets, net
126 Other Liabilities, net
—
—
67
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The gross presentation, the effects of offsetting for derivatives with a right to offset under master netting agreements
and the net presentation of our interest rate swap contracts is as follows (in thousands):
Gross Amounts Not
Offset in Balance
Sheet
Gross
Amounts
Recognized
Gross
Amounts
Offset in
Balance
Sheet
Net
Amounts
Presented
in Balance
Sheet
Financial
Instruments
Cash
Collateral
Received
Net Amount
December 31, 2017
Assets
$
2,035 $
— $
2,035 $
— $
— $
2,035
December 31, 2016
Assets
126
—
126
—
—
126
Cash Flow Hedges
As of December 31, 2017 and 2016, we had three interest rate swap contracts, maturing through March 2020, with
an aggregate notional amount of $200 million that were designated as cash flow hedges and fix the LIBOR component
of the interest rates at 1.5%. We have determined that these contracts are highly effective in offsetting future variable
interest cash flows.
During 2016, we entered into and settled a forward-starting interest rate swap contract with an aggregate notional
amount of $200 million hedging future fixed-rate debt issuances, which fixed the 10-year swap rates at 1.5% per
annum. Upon settlement of this contract in August 2016, we paid $2.1 million resulting in a loss of $2.0 million in
accumulated other comprehensive loss.
As of December 31, 2017 and 2016, the net gain balance in accumulated other comprehensive loss relating to active
and previously terminated cash flow interest rate swap contracts was $7.4 million and $6.4 million, respectively. Within
the next 12 months, approximately $1.4 million in accumulated other comprehensive loss is expected to be reclassified
as a reduction to interest expense related to our interest rate contracts.
A summary of cash flow interest rate swap contract hedging activity is as follows (in thousands):
Amount of (Gain)
Loss
Recognized
in Other
Comprehensive
Income on
Derivative
(Effective
Portion)
Location of Gain
(Loss)
Reclassified
from
Accumulated
Other
Comprehensive
Loss into Income
Interest expense,
Amount of Gain
(Loss)
Reclassified
from
Accumulated
Other
Comprehensive
Loss into Income
(Effective
Portion)
Location of Gain
(Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)
Interest expense,
Derivatives in Cash Flow
Hedging Relationships
Amount of Gain
(Loss)
Recognized
in Income on
Derivative
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing)
Year Ended December 31, 2017
$
(1,063)
net
$
42
net
$
Year Ended December 31, 2016
Year Ended December 31, 2015
3,192
(1,946)
Interest expense,
net
Interest expense,
net
(1,435)
(2,798)
Interest expense,
net
Interest expense,
net
—
(96)
—
Fair Value Hedges:
Associated with the refinancing of a secured note, on June 24, 2016, we terminated two interest rate swap contracts
that were designated as fair value hedges and had an aggregate notional amount of $62.9 million. Upon settlement,
we received $2.2 million, which was recognized as part of the gain on extinguishment of debt related to the hedged
debt.
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Table of Contents
A summary of fair value interest rate swap contract hedging activity is as follows (in thousands):
Gain (Loss)
on
Contracts
Gain (Loss)
on
Borrowings
Net Settlements
and Accruals
on Contracts (1) (3)
Amount of Gain
(Loss)
Recognized in
Income (2) (3)
Year Ended December 31, 2016
Interest expense, net
$
(418) $
418
$
3,140
$
3,140
Year Ended December 31, 2015
Interest expense, net
_______________
(1,228)
1,228
2,030
2,030
(1) Amounts in this caption include gain (loss) recognized in income on derivatives and net cash settlements.
(2) No ineffectiveness was recognized during the respective periods.
(3)
Included in each caption for the year ended December 31, 2016 is $2.2 million received upon the termination of two interest rate swap
contracts.
Note 8. Preferred Shares of Beneficial Interest
On May 8, 2015, we redeemed the remaining outstanding Series F depositary shares totaling $150.0 million. Upon
redemption of these shares, $9.7 million was reported as a deduction in arriving at net income attributable to common
shareholders. The Series F Preferred Shares paid a 6.5% annual dividend and had a liquidation value of $2,500 per
share.
The following table discloses the cumulative redeemable preferred dividends declared per share:
Series of Preferred Shares:
Series F
Note 9. Common Shares of Beneficial Interest
Year Ended
December 31, 2015
$
64.55
We had an at-the-market ("ATM") equity offering program, which terminated on September 29, 2017, under which we
could sell up to $250 million of common shares, in amounts and at times as we determined, at prices determined by
the market at the time of sale. No common shares remain available for sale under this program.
No shares were sold under the ATM equity offering program during the year ended December 31, 2017. The following
shares were sold under the ATM equity offering programs during the year ended December 31, 2016 (in thousands,
except per share amounts):
Shares sold
Weighted average price per share
Gross proceeds
Year Ended
December 31, 2016
3,465
$
$
38.35
132,884
We have a $200 million share repurchase plan. Under this plan, we may repurchase common shares from time-to-
time in open-market or in privately negotiated purchases. The timing and amount of any shares repurchased will be
determined by management based on its evaluation of market conditions and other factors. The repurchase plan may
be suspended or discontinued at any time, and we have no obligations to repurchase any amount of our common
shares under the plan. As of the date of this filing, we have not repurchased any shares under this plan.
Common dividends declared per share were $2.29, $1.46 and $1.38 for the year ended December 31, 2017, 2016
and 2015, respectively. The regular dividend rate per share for our common shares for each quarter of 2017 and 2016
was $.385 and $.365, respectively. Also in December 2017, we paid a special dividend for our common shares in the
amount of $.75 per share, which was due to the significant gains on dispositions of property. Subsequent to
December 31, 2017, our Board of Trust Managers approved a first quarter dividend of $.395 per common share, an
increase from $.385 per common share for the respective quarter of 2017.
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Table of Contents
Note 10. Noncontrolling Interests
The following table summarizes the effect of changes in our ownership interest in subsidiaries on the equity attributable
to us as follows (in thousands):
Net income adjusted for noncontrolling interests
Transfers from the noncontrolling interests:
Increase in equity for operating partnership units
Net increase in equity for the acquisition of noncontrolling
interests
Change from net income adjusted for noncontrolling interests
and transfers from the noncontrolling interests
Note 11. Leasing Operations
Year Ended December 31,
2017
335,274 $
2016
238,933 $
2015
174,352
$
—
—
—
2,139
111
—
$
335,274 $
241,072 $
174,463
The terms of our leases range from less than one year for smaller tenant spaces to over 25 years for larger tenant
spaces. In addition to minimum lease payments, most of the leases provide for contingent rentals (payments for real
estate taxes, maintenance and insurance by lessees and an amount based on a percentage of the tenants’ sales).
Future minimum rental income from non-cancelable tenant leases, excluding leases associated with property held for
sale and estimated contingent rentals, at December 31, 2017 is as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
Total
$
392,337
342,151
289,691
231,199
166,880
533,824
$ 1,956,082
Contingent rentals for the year ended December 31, are as follows (in thousands):
2017
2016
2015
$
129,635
114,505
107,931
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Note 12. Impairment
The following impairment charges were recorded on the following assets based on the difference between the carrying
amount of the assets and the estimated fair value (see Note 21 for additional fair value information) (in thousands):
Continuing operations:
Properties held for sale, marketed for sale or sold (1)
Land held for development and undeveloped land (1)
Other
Total impairment charges
Other financial statement captions impacted by impairment:
Equity in earnings of real estate joint ventures and partnerships, net
Net income attributable to noncontrolling interests
Year Ended December 31,
2017
2016
2015
$ 12,203 $
98 $
153
2,719
335
15,257
—
21
—
—
98
326
—
—
—
153
1,497
—
Net impact of impairment charges
$ 15,278 $
424 $
1,650
___________________
(1) Amounts reported were based on changes in management's plans for the properties, third party offers, recent comparable market
transactions and/or a change in market conditions.
Note 13. Income Tax Considerations
We qualify as a REIT under the provisions of the Internal Revenue Code, and therefore, no tax is imposed on our
taxable income distributed to shareholders. To maintain our REIT status, we must distribute at least 90% of our ordinary
taxable income to our shareholders and meet certain income source and investment restriction requirements. Our
shareholders must report their share of income distributed in the form of dividends.
Taxable income differs from net income for financial reporting purposes primarily because of differences in the timing
of recognition of depreciation, rental revenue, repair expense, compensation expense, impairment losses and gain
from sales of property. As a result of these differences, the book value of our net fixed assets is in excess of tax basis
by $193.4 million and $268.7 million at December 31, 2017 and 2016, respectively.
The following table reconciles net income adjusted for noncontrolling interests to REIT taxable income (in thousands):
Net income adjusted for noncontrolling interests
Net loss (income) of taxable REIT subsidiary included above
Net income from REIT operations
Book depreciation and amortization
Tax depreciation and amortization
Book/tax difference on gains/losses from capital transactions
Deferred/prepaid/above and below-market rents, net
Impairment loss from REIT operations
Other book/tax differences, net
REIT taxable income
Dividends paid deduction (1)
Dividends paid in excess of taxable income
___________________
Year Ended December 31,
2017
335,274 $
2016
238,933 $
2015
174,352
$
4,220
339,494
162,964
(14,497)
224,436
162,534
(95,512)
(104,734)
6,261
(11,146)
5,071
(244)
406,888
(64,917)
(13,114)
369
(2,694)
201,880
340
174,692
145,940
(87,416)
(53,902)
(5,375)
1,536
(1,679)
173,796
(406,888)
(201,880)
(174,628)
$
— $
— $
(832)
(1) For 2017 and 2016, the dividends paid deduction includes designated dividends of $112.8 million and $16.8 million from 2018 and 2017,
respectively.
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Table of Contents
For federal income tax purposes, the cash dividends distributed to common shareholders are characterized as follows:
Ordinary income
Capital gain distributions
Return of capital (nontaxable distribution)
Total
Year Ended December 31,
2017
2016
2015
23.0%
77.0%
—%
80.7%
19.3%
—%
92.7%
4.3%
3.0%
100.0%
100.0%
100.0%
Our deferred tax assets and liabilities, including a valuation allowance, consisted of the following (in thousands):
Deferred tax assets (1):
Impairment loss (2)
Allowance on other assets
Interest expense
Net operating loss carryforwards (3)
Straight-line rentals
Book-tax basis differential
Other
Total deferred tax assets
Valuation allowance (4)
Total deferred tax assets, net of allowance
Deferred tax liabilities (1):
Book-tax basis differential (2)
Other
Total deferred tax liabilities
___________________
December 31,
2017
2016
$
$
$
$
7,220 $
15
5,703
7,428
916
1,676
188
13,476
117
9,246
8,413
813
4,380
348
23,146
(15,587)
36,793
(25,979)
7,559 $
10,814
6,618 $
10,998
517
553
7,135 $
11,551
(1) As of December 31, 2017 and 2016, deferred tax assets and liabilities were measured at the statutory rate of 21% and 35%, respectively,
(2)
as a result of the enactment of the Tax Act on December 22, 2017.
Impairment losses and book-tax basis differential liabilities will not be recognized until the related properties are sold. Realization of
impairment losses is dependent upon generating sufficient taxable income in the year the property is sold.
(3) We have net operating loss carryforwards of $35.4 million that expire between the years of 2029 and 2037.
(4) Management believes it is more likely than not that a portion of the deferred tax assets, which primarily consists of impairment losses,
interest expense and net operating losses, will not be realized and established a valuation allowance. However, the amount of the deferred
tax asset considered realizable could be reduced if estimates of future taxable income are reduced.
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Table of Contents
We are subject to federal, state and local income taxes and have recorded an income tax (benefit) provision as follows
(in thousands):
Net (loss) income before taxes of taxable REIT subsidiary
Federal (benefit) provision at statutory rate of 35%
Valuation allowance decrease
Effect of change in statutory rate on net deferrals
Other
Federal income tax (benefit) provision of taxable REIT subsidiary (1)
Texas franchise tax
Total
___________________
(1) All periods presented are open for examination by the IRS.
Year Ended December 31,
2017
2016
2015
$
$
(5,788) $
20,295 $
(2,026) $
7,103 $
—
282
176
(1,568)
1,551
(1,251)
—
(54)
5,798
1,058
$
(17) $
6,856 $
(989)
(346)
(309)
—
6
(649)
701
52
Also, a current tax obligation of $1.6 million and $1.0 million has been recorded at December 31, 2017 and 2016,
respectively, in association with these taxes.
Note 14. Supplemental Cash Flow Information
Cash, cash equivalents and restricted cash equivalents consists of the following (in thousands):
Cash and cash equivalents
Restricted deposits and mortgage escrows (see Note 1)
Total
December 31,
2017
2016
2015
$
$
13,219 $
16,257 $
8,115
25,022
21,334 $
41,279 $
22,168
3,074
25,242
Non-cash investing and financing activities are summarized as follows (in thousands):
Year Ended December 31,
2017
2016
2015
Accrued property construction costs
$
7,728 $
5,738 $
9,566
Increase in equity for the acquisition of noncontrolling interests in
consolidated real estate joint ventures
Exchange of operating partnership units for common shares
Reduction of debt service guaranty liability
Property acquisitions and investments in unconsolidated real estate
joint ventures:
Increase in property, net
Decrease in real estate joint ventures and partnerships -
investments
Increase in debt, net
Consolidation of joint ventures (see Note 22):
Increase in property, net
Increase in security deposits
Increase in debt, net
—
—
(2,980)
—
—
—
—
—
—
2,139
—
(2,710)
10,573
(2,315)
—
58,665
169
48,727
Increase (decrease) in equity associated with deferred
compensation plan (see Note 1)
44,758
(44,758)
73
—
111
(2,270)
—
—
20,966
—
—
—
—
Table of Contents
Note 15. Earnings Per Share
Earnings per common share – basic is computed using net income attributable to common shareholders and the
weighted average number of shares outstanding – basic. Earnings per common share – diluted includes the effect of
potentially dilutive securities. Income from continuing operations attributable to common shareholders includes gain
on sale of property in accordance with SEC guidelines. Earnings per common share – basic and diluted components
for the periods indicated are as follows (in thousands):
Numerator:
Continuing Operations:
Income from continuing operations
Gain on sale of property
Net income attributable to noncontrolling interests
Dividends on preferred shares
Redemption costs of preferred shares
Income from continuing operations attributable to
common shareholders – basic
Income attributable to operating partnership units
Income from continuing operations attributable to
common shareholders – diluted
Denominator:
Year Ended December 31,
2017
2016
2015
$
132,104 $
176,117 $
121,601
218,611
(15,441)
100,714
(37,898)
—
—
—
—
59,621
(6,870)
(3,830)
(9,687)
335,274
3,084
238,933
1,996
160,835
—
$
338,358 $
240,929 $
160,835
Weighted average shares outstanding – basic
127,755
126,048
123,037
Effect of dilutive securities:
Share options and awards
Operating partnership units
Weighted average shares outstanding – diluted
870
1,446
1,059
1,462
1,292
—
130,071
128,569
124,329
Anti-dilutive securities of our common shares, which are excluded from the calculation of earnings per common share
– diluted, are as follows (in thousands):
Share options (1)
Operating partnership units
Total anti-dilutive securities
___________________
Year Ended December 31,
2017
2016
2015
—
—
—
2
—
2
463
1,472
1,935
(1) Exclusion results as exercise prices were greater than the average market price for each respective period.
Note 16. Share Options and Awards
In April 2011, our Long-Term Incentive Plan for the issuance of options and share awards expired, and issued options
of .4 million remain outstanding as of December 31, 2017.
In May 2010, our shareholders approved the adoption of the Amended and Restated 2010 Long-Term Incentive Plan,
under which 3.0 million of our common shares were reserved for issuance, and options and share awards of .5 million
are available for future grant at December 31, 2017. This plan expires in May 2020.
Compensation expense, net of forfeitures, associated with share options and restricted shares totaled $8.6 million in
2017, $8.5 million in 2016 and $7.4 million in 2015, of which $1.7 million in 2017, $1.9 million in 2016 and $1.5 million
in 2015 was capitalized.
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Options
The fair value of share options issued prior to 2012 was estimated on the date of grant using the Black-Scholes option
pricing method based on the expected weighted average assumptions.
Following is a summary of the option activity for the three years ended December 31, 2017:
Outstanding, January 1, 2015
Forfeited or expired
Exercised
Outstanding, December 31, 2015
Forfeited or expired
Exercised
Outstanding, December 31, 2016
Forfeited or expired
Exercised
Outstanding, December 31, 2017
Shares
Under
Option
2,897,123 $
(435,840)
(94,633)
2,366,650
(460,722)
(971,727)
934,201
(4,042)
(101,805)
828,354 $
Weighted
Average
Exercise
Price
28.76
37.37
26.55
27.26
47.42
21.95
22.85
43.37
16.11
23.58
The total intrinsic value of options exercised was $1.7 million in 2017, $14.9 million in 2016 and $.9 million in 2015.
All share options were vested, and there was no unrecognized compensation cost related to share options.
The following table summarizes information about share options outstanding and exercisable at December 31, 2017:
Range of
Exercise Prices
Number
Outstanding
Exercisable
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
(000’s)
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
(000’s)
Number
$11.85 - $17.78
166,981
1.2 years
$17.79 - $26.69
465,214
2.9 years
$26.70 - $40.05
196,159
0.2 years
Total
828,354
1.9 years
$
$
$
$
11.85
24.14
32.22
166,981
1.2 years
465,214
2.9 years
196,159
0.2 years
23.58
$
7,695
828,354
1.9 years
$
$
$
$
11.85
24.14
32.22
23.58
$
7,695
Share Awards
The fair value of the market-based share awards was estimated on the date of grant using a Monte Carlo valuation
model based on the following assumptions:
Dividend yield
Expected volatility (1)
Expected life (in years)
Risk-free interest rate
_______________
Year Ended December 31, 2017
Minimum
Maximum
0.0%
16.1%
N/A
0.7%
4.1%
19.1%
3
1.5%
(1)
Includes the volatility of the FTSE NAREIT U.S. Shopping Center Index and Weingarten Realty Investors.
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A summary of the status of unvested share awards for the year ended December 31, 2017 is as follows:
Outstanding, January 1, 2017
Granted:
Service-based awards
Market-based awards relative to FTSE NAREIT U.S. Shopping Center
Index
Market-based awards relative to three-year absolute TSR
Trust manager awards
Vested
Forfeited
Outstanding, December 31, 2017
Unvested
Share
Awards
Weighted
Average
Grant
Date Fair
Value
590,854 $
32.52
124,549
54,454
54,454
28,280
(231,056)
(1,929)
619,606 $
35.77
39.00
25.65
32.77
30.77
34.00
33.81
As of December 31, 2017 and 2016, there was approximately $2.2 million and $2.0 million, respectively, of total
unrecognized compensation cost related to unvested share awards, which is expected to be amortized over a weighted
average of 1.7 years and 1.8 years, respectively.
Note 17. Employee Benefit Plans
Defined Benefit Plan:
The following tables summarize changes in the benefit obligation, the plan assets and the funded status of our pension
plan as well as the components of net periodic benefit costs, including key assumptions (in thousands). The
measurement dates for plan assets and obligations were December 31, 2017 and 2016.
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial loss(1)
Benefit payments
Benefit obligation at end of year
Change in Plan Assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefit payments
Fair value of plan assets at end of year
Unfunded status at end of year (included in accounts payable and accrued
expenses in 2017 and 2016)
Accumulated benefit obligation
Net loss recognized in accumulated other comprehensive loss
___________________
December 31,
2017
2016
$
52,975 $
49,715
1,223
2,123
4,502
1,277
2,078
1,976
(1,825)
(2,071)
58,998 $
52,975
45,498 $
42,341
7,635
2,500
(1,825)
3,228
2,000
(2,071)
53,808 $
45,498
(5,190) $
(7,477)
58,860 $
52,824
15,135 $
16,528
$
$
$
$
$
$
(1) The change in actuarial loss is associated primarily to census and mortality table updates and a decrease in the discount rate in 2017.
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The following is the required information for other changes in plan assets and benefit obligation recognized in other
comprehensive (income) loss (in thousands):
Net loss
Amortization of net loss (1)
Total recognized in other comprehensive (income) loss
Total recognized in net periodic benefit cost and other
comprehensive (income) loss
___________________
Year Ended December 31,
2017
2016
2015
82 $
1,719 $
(1,475)
(1,393) $
(1,552)
167 $
1,276
(1,423)
(147)
213 $
2,103 $
1,262
$
$
$
(1) The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next
fiscal year is $1.1 million.
The following is the required information with an accumulated benefit obligation in excess of plan assets (in thousands):
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
The components of net periodic benefit cost are as follows (in thousands):
December 31,
2017
2016
$
58,998 $
58,860
53,808
52,975
52,824
45,498
Service cost
Interest cost
Expected return on plan assets
Amortization of net loss
Total
Year Ended December 31,
2017
2016
2015
$
$
1,223 $
1,277 $
2,123
(3,215)
1,475
2,078
(2,971)
1,552
1,606 $
1,936 $
1,252
1,899
(3,165)
1,423
1,409
The assumptions used to develop net periodic benefit cost are shown below:
Discount rate
Salary scale increases
Long-term rate of return on assets
Year Ended December 31,
2017
2016
2015
4.01%
3.50%
7.00%
4.11%
3.50%
7.00%
3.83%
3.50%
7.50%
The selection of the discount rate is made annually after comparison to yields based on high quality fixed-income
investments. The salary scale is the composite rate which reflects anticipated inflation, merit increases, and promotions
for the group of covered participants. The long-term rate of return is a composite rate for the trust. It is derived as the
sum of the percentages invested in each principal asset class included in the portfolio multiplied by their respective
expected rates of return. We considered the historical returns and the future expectations for returns for each asset
class, as well as the target asset allocation of the pension portfolio. This analysis resulted in the selection of 7.00%
as the long-term rate of return assumption for 2017.
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The assumptions used to develop the actuarial present value of the benefit obligation are shown below:
Discount rate
Salary scale increases
Year Ended December 31,
2017
2016
2015
3.50%
3.50%
4.01%
3.50%
4.11%
3.50%
The expected contribution to be paid for the Retirement Plan by us during 2018 is approximately $2.0 million. The
expected benefit payments for the next 10 years for the Retirement Plan is as follows (in thousands):
2018
2019
2020
2021
2022
2023-2027
$
2,185
2,339
2,383
2,545
2,690
15,226
The participant data used in determining the liabilities and costs for the Retirement Plan was collected as of January
1, 2017, and no significant changes have occurred through December 31, 2017.
At December 31, 2017, our investment asset allocation compared to our benchmarking allocation model for our plan
assets was as follows:
Cash and Short-Term Investments
U.S. Stocks
International Stocks
U.S. Bonds
International Bonds
Other
Total
Portfolio
Benchmark
4%
52%
13%
25%
4%
2%
3%
57%
10%
27%
3%
—%
100%
100%
The fair value of plan assets was determined based on publicly quoted market prices for identical assets, which are
classified as Level 1 observable inputs. The allocation of the fair value of plan assets was as follows:
Cash and Short-Term Investments
Large Company Funds
Mid Company Funds
Small Company Funds
International Funds
Fixed Income Funds
Growth Funds
Total
December 31,
2017
2016
17%
36%
6%
6%
10%
16%
9%
18%
36%
6%
6%
10%
16%
8%
100%
100%
Concentrations of risk within our equity portfolio are investments classified within the following sectors: technology,
financial services, healthcare, consumer cyclical goods and industrial, which represents approximately 23%, 18%,
15%, 13% and 11% of total equity investments, respectively.
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Defined Contribution Plans:
Compensation expense related to our defined contribution plans was $3.9 million in 2017, $3.5 million in 2016 and
$3.7 million in 2015.
Note 18. Related Parties
Through our management activities and transactions with our real estate joint ventures and partnerships, we had net
accounts receivable of $2.0 million and $2.2 million outstanding as of December 31, 2017 and 2016, respectively. We
also had accounts payable and accrued expenses of $.4 million and $.3 million outstanding as of December 31, 2017
and 2016, respectively. We recorded joint venture fee income included in Other Revenue for the year ended
December 31, 2017, 2016 and 2015 of $6.2 million, $5.1 million and $4.5 million, respectively.
In September 2016, we acquired a partner's 50% interest in an unconsolidated tenancy-in-common arrangement for
approximately $13.5 million that we had previously accounted for under the equity method. This transaction resulted
in the consolidation of the property in our consolidated financial statements, and we recognized a gain of $9.0 million
on the fair value remeasurement of our equity method investment. (See Note 22 for additional information).
In October 2016, an unconsolidated joint venture distributed land to both us and our partner, and we recognized a
gain of $1.9 million associated with the remeasurement of a land parcel. Also, we paid a payable totaling $4.8 million
due to the unconsolidated joint venture. In November 2016, we acquired our partner’s interest in two consolidated joint
ventures for an aggregate amount of $3.3 million.
As of December 31, 2015, we held a combined 51% interest in an unconsolidated real estate joint venture that owned
three centers in Colorado with total assets and debt of $43.7 million and $72.4 million, respectively. In February 2016,
in exchange for our partners' aggregate 49% interest in this venture and $2.5 million in cash, we distributed one center
to our partners. We have consolidated this venture as of the transaction date and re-measured our investment in this
venture to its fair value, and recognized a gain of $37.4 million (See Note 22 for additional information).
Note 19. Commitments and Contingencies
Leases
We are engaged in the operation of shopping centers, which are either owned or, with respect to certain shopping
centers, operated under long-term ground leases. These ground leases expire at various dates through 2069, with
renewal options. Space in our shopping centers is leased to tenants pursuant to agreements that provide for terms
ranging generally from one year to 25 years and, in some cases, for annual rentals subject to upward adjustments
based on operating expense levels, sales volume, or contractual increases as defined in the lease agreements.
Scheduled minimum rental payments under the terms of all non-cancelable operating leases in which we are the
lessee, principally for shopping center ground leases, for the subsequent five years and thereafter ending December 31,
are as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
Total
$
2,889
2,810
2,527
2,378
2,304
102,063
$
114,971
Rental expense for operating leases was, in millions: $2.9 in 2017; $3.0 in 2016 and $3.2 in 2015.
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The scheduled future minimum revenues under subleases, applicable to the ground lease rentals, under the terms of
all non-cancelable tenant leases, assuming no new or renegotiated leases or option extensions for the subsequent
five years and thereafter ending December 31, are as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
Total
$
28,392
24,184
20,712
17,352
14,031
57,869
$
162,540
Property under capital leases that is included in buildings and improvements consisted of two centers totaling $16.8
million at December 31, 2017 and 2016. Amortization of property under capital leases is included in depreciation and
amortization expense, and the balance of accumulated depreciation associated with these capital leases at
December 31, 2017 and 2016 was $15.5 million and $14.2 million, respectively. Future minimum lease payments
under these capital leases total $31.2 million, of which $10.2 million represents interest. Accordingly, the present value
of the net minimum lease payments was $21.0 million at December 31, 2017.
The annual future minimum lease payments under capital leases as of December 31, 2017 are as follows (in thousands):
2018
2019
2020
2021
2022
Thereafter
Total
$
$
1,683
1,692
1,700
1,708
1,717
22,726
31,226
Commitments and Contingencies
As of December 31, 2017 and 2016, we participated in two real estate ventures structured as DownREIT partnerships
that have centers in Arkansas, North Carolina and Texas. We have operating and financial control over these ventures
and consolidate them in our consolidated financial statements. These ventures allow the outside limited partners to
put their interest in the partnership to us, and we have the option to redeem the interest in cash or a fixed number of
our common shares, at our discretion. We also participate in a real estate venture that has a property in Texas that
allows its outside partner to put operating partnership units to us. We have the option to redeem these units in cash
or a fixed number of our common shares, at our discretion. The aggregate redemption value of these interests was
approximately $47 million and $52 million as of December 31, 2017 and 2016, respectively.
As of December 31, 2017, we have entered into commitments aggregating $114.7 million comprised principally of
construction contracts which are generally due in 12 to 36 months.
We issue letters of intent signifying a willingness to negotiate for acquisitions, dispositions or joint ventures, as well
as other types of potential transactions, during the ordinary course of our business. Such letters of intent and other
arrangements are non-binding to all parties unless and until a definitive contract is entered into by the parties. Even
if definitive contracts relating to the acquisition or disposition of property are entered into, these contracts generally
provide the purchaser a time period to evaluate the property and conduct due diligence. The purchaser, during this
time, will have the ability to terminate a contract without penalty or forfeiture of any deposit or earnest money. No
assurance can be provided that any definitive contracts will be entered into with respect to any matter covered by
letters of intent, or that we will consummate any transaction contemplated by a definitive contract. Additionally, due
diligence periods for property transactions are frequently extended as needed. An acquisition or disposition of property
becomes probable at the time the due diligence period expires and the definitive contract has not been terminated.
Our risk is then generally extended only to any earnest money deposits associated with property acquisition contracts,
and our obligation to sell under a property sales contract.
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We are subject to numerous federal, state and local environmental laws, ordinances and regulations in the areas where
we own or operate properties. We are not aware of any contamination which may have been caused by us or any of
our tenants that would have a material effect on our consolidated financial statements.
As part of our risk management activities, we have applied and been accepted into state sponsored environmental
programs which will limit our expenses if contaminants need to be remediated. We also have an environmental insurance
policy that covers us against third party liabilities and remediation costs.
While we believe that we do not have any material exposure to environmental remediation costs, we cannot give
absolute assurance that changes in the law or new discoveries of contamination will not result in additional liabilities
to us.
Litigation
We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict
the amounts involved, our management and counsel are of the opinion that, when such litigation is resolved, any
additional liability, if any, will not have a material effect on our consolidated financial statements.
Note 20. Variable Interest Entities
Consolidated VIEs:
At both December 31, 2017 and 2016, nine of our real estate joint ventures, whose activities primarily consisted of
owning and operating 22 and 25 neighborhood/community shopping centers, respectively, were determined to be
VIEs. Based on a financing agreement by one of our real estate joint ventures that has a bottom dollar guaranty, which
is disproportionate to our ownership, we have determined that we are the primary beneficiary and have consolidated
this joint venture. For the remaining real estate joint ventures, we concluded we are the primary beneficiary based
primarily on our significant power to direct the entities' activities without any substantive kick-out or participating rights.
At December 31, 2016, in conjunction with the acquisition of a property with a net book value of $249.5 million, we
had a like-kind exchange agreement with a third party intermediary for tax purposes. The third party purchased the
property via our financing, and then leased the property to us. Based on the associated agreements, we had determined
that the entity was a VIE, and we were the primary beneficiary based on our significant power to direct the entity's
activities without any substantive kick-out or participating rights. Accordingly, we consolidated the property and its
operations as of the respective acquisition date. During the year ended December 31, 2017, the ownership of this
property was conveyed to us in accordance with the terms of the like-kind exchange agreement, and we no longer
have a VIE.
A summary of our consolidated VIEs is as follows (in thousands):
Assets Held by VIEs (1)
Assets Held as Collateral for Debt (2)
Maximum Risk of Loss (2)
___________________
December 31,
2017
2016
$
235,713 $
504,293
42,979
29,784
46,136
29,784
(1) $249.5 million of assets at December 31, 2016 ceased to be considered a VIE (see above).
(2) Represents the amount of debt and related assets held as collateral associated with the bottom dollar guaranty at one real estate joint
venture.
Restrictions on the use of these assets can be significant because they may serve as collateral for debt. Further, we
are generally required to obtain our partner's approval in accordance with the joint venture agreement for any major
transactions. Transactions with these joint ventures on our consolidated financial statements have primarily been
positive as demonstrated by the generation of net income and operating cash flows, as well as the receipt of cash
distributions. We and our partners are subject to the provisions of the joint venture agreements which include provisions
for when additional contributions may be required to fund operating cash shortfalls, development expenditures and
unplanned capital expenditures. During 2017, $.1 million in additional contributions were made primarily to fund an
operating shortfall. During 2016, $2.5 million in additional contributions were made primarily for capital activities. We
currently anticipate that $.1 million of additional contributions will be made for 2018.
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Unconsolidated VIEs:
At both December 31, 2017 and 2016, two unconsolidated real estate joint ventures were determined to be VIEs. We
have determined that one entity was a VIE through the issuance of a secured loan, since the lender had the ability to
make decisions that could have a significant impact on the success of the entity. Based on the associated agreements
for the future development of a mixed-use project, we concluded that the other entity was a VIE, but we are not the
primary beneficiary as the substantive participating rights associated with the entity are shared, and we do not have
the power to direct the significant activities of the entity. Our analysis considered that all major decisions require
unanimous member consent and those decisions include significant activities such as development, financing, leasing
and operations of the entity.
A summary of our unconsolidated VIEs is as follows (in thousands):
Investment in Real Estate Joint Ventures and Partnerships, net (1) (2)
Maximum Risk of Loss (3)
___________________
December 31,
2017
2016
$
36,784 $
34,000
886
34,000
(1) The carrying amount of the investment represents our contributions to the real estate joint ventures, net of any distributions made and
our portion of the equity in earnings of the joint ventures. The increase between the periods represents new development funding of a
mixed-use project. See Note 4 for additional information.
(2) As of December 31, 2017 and 2016, the carrying amount of the investment for one VIE is $(6) million and $(9) million, respectively, which
is included in Other Liabilities and results from the distribution of proceeds from the issuance of debt.
(3) The maximum risk of loss has been determined to be limited to our debt exposure for the real estate joint ventures.
We and our partners are subject to the provisions of the joint venture agreements that specify conditions, including
operating shortfalls, development expenditures and unplanned capital expenditures, under which additional
contributions may be required. With respect to our future development of a mixed-used project, we anticipate funding
approximately $93 million in equity and debt through 2020.
Note 21. Fair Value Measurements
Recurring Fair Value Measurements:
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 and 2016, aggregated by
the level in the fair value hierarchy in which those measurements fall, are as follows (in thousands):
Quoted Prices
in Active
Markets for
Identical
Assets
and Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value at
December 31,
2017
Assets:
Investments, mutual funds held in a grantor trust
Investments, mutual funds
Derivative instruments:
Interest rate contracts
Total
Liabilities:
Deferred compensation plan obligations
Total
31,497
7,206
$
38,703 $
2,035
2,035 $
31,497
31,497 $
— $
$
— $
$
— $
31,497
7,206
2,035
40,738
31,497
31,497
$
$
$
$
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Assets:
Investments, mutual funds held in a grantor trust
Investments, mutual funds
Derivative instruments:
Interest rate contracts
Total
Liabilities:
Deferred compensation plan obligations
Total
Quoted Prices
in Active
Markets for
Identical
Assets
and Liabilities
(Level 1)
$
$
$
$
26,328
7,670
$
33,998 $
26,328
26,328 $
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value at
December 31,
2016
$
— $
$
— $
26,328
7,670
126
34,124
26,328
26,328
126
126 $
— $
Nonrecurring Fair Value Measurements:
Property and Property Held for Sale Impairments
Property is reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the
property, including any identifiable intangible assets, site costs and capitalized interest, 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. If we conclude that an impairment
may have occurred, estimated fair values are determined by management utilizing cash flow models, market
capitalization rates and market discount rates, or by obtaining third-party broker valuation estimates, appraisals, bona
fide purchase offers or the expected sales price of an executed sales agreement in accordance with our fair value
measurements accounting policy. Market capitalization rates and market discount rates are determined by reviewing
current sales of similar properties and transactions, and utilizing management’s knowledge and expertise in property
marketing.
No assets were measured at fair value on a nonrecurring basis at December 31, 2016. Assets measured at fair value
on a nonrecurring basis at December 31, 2017 aggregated by the level in the fair value hierarchy in which those
measurements fall, are as follows (in thousands):
Quoted Prices
in Active
Markets for
Identical
Assets
and Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
$
12,901
$
— $
12,901
Significant
Unobservable
Inputs
(Level 3)
Fair Value
Total Gains
(Losses) (1)
$
$
4,184
4,184
$
$
17,085
17,085
$
$
(7,828)
(7,828)
Property (2)
Total
____________
(1) Total gains (losses) exclude impairments on disposed assets because they are no longer held by us.
(2)
In accordance with our policy of evaluating and recording impairments on the disposal of long-lived assets, property with a carrying
amount of $24.9 million was written down to a fair value of $17.1 million, resulting in a loss of $7.8 million, which was included in earnings
for the first quarter of 2017. Management’s estimate of fair value of these properties was determined using a bona fide purchase offer
for the Level 2 inputs. See the quantitative information about the significant unobservable inputs used for our Level 3 fair value
measurements table below.
Fair Value Disclosures:
Unless otherwise listed below, short-term financial instruments and receivables are carried at amounts which
approximate their fair values based on their highly-liquid nature, short-term maturities and/or expected interest rates
for similar instruments.
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Schedule of our fair value disclosures is as follows (in thousands):
December 31,
2017
Fair Value
Using
Significant
Other
Observable
Inputs
(Level 2)
Fair Value
Using
Significant
Unobservable
Inputs
(Level 3)
Carrying Value
2016
Fair Value
Using
Significant
Other
Observable
Inputs
(Level 2)
Fair Value
Using
Significant
Unobservable
Inputs
(Level 3)
Carrying Value
$
22,097
$
25,000 $
23,910
$
23,910
4,489 $
4,479
5,240 $
5,248
2,063,263
17,889
2,109,658
2,089,769
16,393
266,759
2,132,082
265,230
Other Assets:
Tax increment revenue
bonds (1)
Investments, held to
maturity (2)
Debt:
Fixed-rate debt
Variable-rate debt
___________________
(1) At December 31, 2017 and 2016, the credit loss balance on our tax increment revenue bonds was $31.0 million.
(2)
Investments held to maturity are recorded at cost. As of December 31, 2017 and 2016, a $10 thousand unrealized loss and an $8 thousand
unrealized gain was recognized, respectively.
The quantitative information about the significant unobservable inputs used for our Level 3 fair value measurements
as of December 31, 2017 and 2016 reported in the above tables, is as follows:
Fair Value at
December 31,
2017
2016
Description
(in thousands)
Property
$
4,184
$
Valuation
Technique
— Discounted cash
flows
Unobservable
Inputs
Discount rate
Range
Minimum
Maximum
2017
2016
2017
2016
10.5%
Capitalization rate
8.8%
Holding period
(years)
5
Expected future
inflation rate (1)
Market rent growth
rate (1)
12.0%
10.0%
10
2.0%
3.0%
2.0%
20.0%
70.0%
Tax increment
revenue bonds
25,000
23,910
Discounted cash
flows
Expense growth
rate (1)
Vacancy rate (1)
Renewal rate (1)
Average market
rent rate (1)
Average leasing
cost per square
foot (1)
Discount rate
Expected future
growth rate
Expected future
inflation rate
$11.00
$16.00
$10.00
$35.00
6.5%
6.5%
7.5%
7.5%
1.0%
1.0%
2.3%
2.0%
1.0%
1.0%
3.0%
3.0%
Fixed-rate debt
2,109,658
2,132,082
Variable-rate
debt
_______________
16,393
265,230
(1) Only applies to one property valuation.
Discounted cash
flows
Discounted cash
flows
Discount rate
3.0%
3.0%
5.3%
5.2%
Discount rate
2.4%
1.6%
3.2%
2.4%
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Note 22. Business Combination
Effective February 12, 2016, we acquired a partner’s 49% interest in an unconsolidated joint venture associated with
two centers in Colorado, which resulted in the consolidation of these centers (see Note 18 for additional information).
Management has determined that this transaction qualified as a business combination to be accounted for under the
acquisition method. Accordingly, the assets and liabilities of this transaction were recorded in our Consolidated Balance
Sheet at their estimated fair values as of the effective date. Fair value of assets acquired, liabilities assumed and equity
interests were estimated using market-based measurements, including cash flow and other valuation techniques. The
fair value measurements are based on both significant inputs for similar assets and liabilities in comparable markets
and significant inputs that are not observable in the markets in accordance with our fair value measurements accounting
policy. Key assumptions include third-party appraisals; a minority interest discount rate of 20%; cash flow discount
rates ranging from 6.5% to 8%; a terminal capitalization rate for similar properties ranging from 6% to 7.5%; and factors
that we believe market participants would consider in estimating fair value. The result of this transaction is included in
our Consolidated Statements of Operations beginning February 12, 2016.
The following table summarizes the business combination, including the assets acquired and liabilities assumed as
indicated (in thousands):
Fair value of our equity interest before business combination
Gain recognized on equity interest remeasured to fair value
Amounts recognized for assets and liabilities assumed:
Assets:
Property
Unamortized lease costs
Accrued rent and accounts receivable
Cash and cash equivalents
Other, net
Liabilities:
Debt, net
Accounts payable and accrued expenses
Other, net
Total net assets
___________________
February 12, 2016
22,514 (1)
37,383 (2)
58,665
8,936
102
3,555
4,992
(48,727)
(1,339)
(3,670)
22,514
$
$
$
$
Includes $2.5 million of cash received from the partner.
(1)
(2) Amount is included in Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests in our Consolidated Statement
of Operations.
85
Table of Contents
During 2016, we acquired three shopping centers located in Arizona and Florida, and we consolidated a partner's 50%
interest in an unconsolidated tenancy-in-common arrangement related to a property in Colorado. The following table
summarizes the transactions related to these acquisitions, including the assets acquired and liabilities assumed as
indicated (in thousands):
Fair value of our equity interest before acquisition
Fair value of consideration transferred
Acquisition costs (included in operating expenses)
Gain on acquisition
Amounts recognized for assets and liabilities assumed:
Assets:
Property
Unamortized lease costs
Accrued rent and accounts receivable
Cash and cash equivalents
Other, net
Liabilities:
Accounts payable and accrued expenses
Other, net
Total net assets
_______________
December 31, 2016
$
$
$
$
$
$
13,579
443,745
936
9,015 (1)
433,055
80,951
122
556
6,812
(6,383)
(62,254)
452,859
(1) Amount is included in Gain on Sale and Acquisition of Real Estate Joint Venture and Partnership Interests in our Consolidated Statement
of Operations.
The following table summarizes the impact to revenues and net income attributable to common shareholders from our
business combination and acquisitions (in thousands):
Increase in revenues
Increase in net income attributable to common shareholders
Year Ended December 31,
2016
$
23,337
230
The following table details the weighted average amortization and net accretion periods of intangible assets and
liabilities arising from our business combination and acquisitions (in years):
Assets:
In place leases
Above-market leases
Liabilities:
Below-market leases
Above-market assumed mortgages
86
December 31, 2016
18.4
29.7
20.3
4.8
Table of Contents
The following unaudited supplemental pro forma data is presented for the periods ended December 31, 2016 and
2015, as if these transactions occurring in 2016 were completed on January 1, 2015. The gains and acquisition costs
related to these transactions were adjusted to the assumed acquisition date. The unaudited supplemental pro forma
data is not necessarily indicative of what the actual results of our operations would have been assuming the transactions
had been completed as set forth above, nor does it purport to represent our results of operations for future periods (in
thousands, except per share amounts):
Revenues
Net income
Net income attributable to common shareholders - basic
Net income attributable to common shareholders - diluted
Earnings per share – basic
Earnings per share – diluted
___________________
Pro Forma
2016 (1)
Pro Forma
2015 (1)
$
567,985 $
236,461
198,563
200,559
1.58
1.56
547,381
234,307
213,920
215,823
1.74
1.72
(1) There are no non-recurring pro forma adjustments included within or excluded from the amounts in the preceding table.
87
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Note 23. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data is as follows (in thousands):
2017
Revenues
Net income
Net income attributable to
common shareholders
Earnings per common
share – basic
Earnings per common
share – diluted
2016
Revenues
Net income
Net income attributable to
common shareholders
Earnings per common
share – basic
Earnings per common
share – diluted
___________________
First
Second
Third
Fourth
$
143,663
$
146,023
$
144,110
$
139,367
(1)(2)
(4)
(1)(2)
(3)(4)
(1)(2)
(3)(4)
(1)(2)
(3)(4)
36,396
30,826
.24
.24
69,193
(1)
63,852 (1)(3)
.50 (1)(3)
.49 (1)(3)
74,473
72,629
.57
.56
(1)
(1)
(1)
(1)
170,653 (1)(4)
167,967 (1)(4)
1.31 (1)(4)
1.30 (1)(4)
$
132,417
108,667 (1)(4)
$
135,676
37,651 (1)(5)
$
138,599
61,337 (1)(4)
$
142,863
69,176
(1)
107,074 (1)(4)
35,816 (1)(5)
51,901 (1)(3)(4)
44,142 (1)(3)
.87 (1)(4)
.85 (1)(4)
.28 (1)(5)
.28 (1)(5)
.41 (1)(3)(4)
.40 (1)(3)(4)
.35 (1)(3)
.34 (1)(3)
(1) The quarter results include significant gains on the sale of properties and real estate joint venture and partnership interests and on
acquisitions, including gains in equity in earnings from real estate joint ventures and partnerships, net. Gain amounts are: $15.8 million,
$34.2 million, $38.6 million and $136.3 million for the three months ended March 31, 2017, June 30, 2017, September 30, 2017 and
December 31, 2017, respectively, and $82.8 million, $4.2 million, $31.1 million and $34.9 million for the three months ended March 31,
2016, June 30, 2016, September 30, 2016 and December 31, 2016, respectively.
(2) The quarter results include a $3.1 million lease termination fee and $15.0 million of impairment losses for the quarter ended March 31,
2017.
(3) The quarter results include gains discussed in (1) above in net income attributable to noncontrolling interests. Gain amounts in net income
attributable to noncontrolling interests are: $3.9 million and $3.6 million for the three months ended March 31, 2017 and June 30, 2017,
respectively, and $5.8 million and $23.1 million for the three months ended September 30, 2016 and December 31, 2016, respectively.
(4) Deferred tax (benefit) amounts at our taxable REIT subsidiary include $(3.3) million and $1.5 million for the three months ended March 31,
2017 and December 31, 2017, respectively and $5.9 million and $1.1 million for the three months ended March 31, 2016 and September 30,
2016, respectively. These tax amounts result from gains associated with the disposition of centers, land and an exchange of properties.
Additionally, a change in the statutory rate was recognized as a result of the enactment of the Tax Act on December 22, 2017.
(5) The quarter results include a gain on extinguishment of debt totaling $(2.0) million for the three months ended June 30, 2016.
Note 24. Subsequent Events
Subsequent to December 31, 2017, we sold five centers and other property with approximate aggregate gross sales
proceeds totaling $220.6 million, which were owned by us either directly or through our interest in real estate joint
ventures or partnerships. No impairment losses will be realized associated with these dispositions.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
* * * * *
Not applicable.
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Table of Contents
ITEM 9A. Controls and Procedures
Under the supervision and with the participation of our principal executive officer and principal financial officer,
management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures
(as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of December 31, 2017. Based
on that evaluation, our principal executive officer and our principal financial officer have concluded that our disclosure
controls and procedures were effective as of December 31, 2017.
There has been no change to our internal control over financial reporting during the quarter ended December 31, 2017
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Weingarten Realty Investors and its subsidiaries (“WRI”) maintain a system of internal control over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act, which is a process designed under
the supervision of WRI’s principal executive officer and principal financial officer and effected by WRI’s Board of Trust
Managers, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles.
WRI’s internal control over financial reporting includes those policies and procedures that:
• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of WRI’s assets;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of WRI are being made only in accordance with authorizations of management and trust
managers of WRI; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of WRI’s assets that could have a material effect on the financial statements.
WRI’s management has responsibility for establishing and maintaining adequate internal control over financial reporting
for WRI. Management, with the participation of WRI’s Chief Executive Officer and Chief Financial Officer, conducted
an evaluation of the effectiveness of WRI’s internal control over financial reporting as of December 31, 2017 based
on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
Based on their evaluation of WRI’s internal control over financial reporting, WRI’s management along with the Chief
Executive Officer and Chief Financial Officer believe that WRI’s internal control over financial reporting is effective as
of December 31, 2017.
Deloitte & Touche LLP, WRI’s independent registered public accounting firm that audited the consolidated financial
statements and financial statement schedules included in this Form 10-K, has issued an attestation report on the
effectiveness of WRI’s internal control over financial reporting.
February 28, 2018
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trust Managers of Weingarten Realty Investors
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Weingarten Realty Investors and subsidiaries (the
“Company”) as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements and financial statement schedules as of and for the year ended
December 31, 2017, of the Company and our report dated February 28, 2018, expressed an unqualified opinion on
those financial statements and financial statement schedules.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management's Annual Report On Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Deloitte & Touche LLP
Houston, Texas
February 28, 2018
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Table of Contents
ITEM 9B. Other Information
Not applicable.
PART III
ITEM 10. Trust Managers, Executive Officers and Corporate Governance
Information with respect to our trust managers and executive officers is incorporated herein by reference to the “Election
of Trust Managers - Proposal One," “Compensation Discussion and Analysis - Overview” and “Share Ownership of
Beneficial Owners and Management” sections of our definitive Proxy Statement for the Annual Meeting of Shareholders
to be held April 24, 2018.
Code of Conduct and Ethics
We have adopted a code of business and ethics for trust managers, officers and employees, known as the Code of
Conduct and Ethics. The Code of Conduct and Ethics is available on our website at www.weingarten.com. Shareholders
may request a free copy of the Code of Conduct and Ethics from:
Weingarten Realty Investors
Attention: Investor Relations
2600 Citadel Plaza Drive, Suite 125
Houston, Texas 77008
(713) 866-6000
www.weingarten.com
We have also adopted a Code of Ethical Conduct for Officers and Senior Financial Associates setting forth a code of
ethics applicable to our principal executive officer, principal financial officer, chief accounting officer and financial
associates, which is available on our website at www.weingarten.com. Shareholders may request a free copy of the
Code of Conduct for Officers and Senior Financial Associates from the address and phone number set forth above.
Governance Guidelines
We have adopted governance guidelines, known as the Governance Policies, which are available on our website at
www.weingarten.com. Shareholders may request a free copy of the Governance Policies from the address and phone
number set forth above under “Code of Conduct and Ethics.”
ITEM 11. Executive Compensation
Information with respect to executive compensation is incorporated herein by reference to the “Compensation
Discussion and Analysis,” “Trust Manager Compensation” including the "Trust Manager Compensation Table” section,
“Compensation Committee Report” and “Summary Compensation Table” sections of our definitive Proxy Statement
for the Annual Meeting of Shareholders to be held April 24, 2018.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The “Share Ownership of Beneficial Owners and Management” section of our definitive Proxy Statement for the Annual
Meeting of Shareholders to be held April 24, 2018 is incorporated herein by reference.
The following table summarizes the equity compensation plans under which our common shares of beneficial interest
may be issued as of December 31, 2017:
Equity compensation plans approved by shareholders
Plan category
Number of
shares to
be issued upon
exercise
of outstanding
options,
warrants and
rights
828,354
Weighted
average
exercise price
of outstanding
options,
warrants and
rights
$23.58
Equity compensation plans not approved by shareholders
—
—
Number of
shares
remaining
available
for future
issuance
546,530
—
Total
828,354
$23.58
546,530
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Table of Contents
ITEM 13. Certain Relationships and Related Transactions, and Trust Manager Independence
The “Governance,” "Compensation Committee Interlocks and Insider Participation” and "Certain Transactions" sections
of our definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 24, 2018 are incorporated
herein by reference.
ITEM 14. Principal Accountant Fees and Services
The “Accounting Firm Fees” section within “Ratification of Independent Registered Public Accounting Firm - Proposal
Three” of our definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 24, 2018 is incorporated
herein by reference.
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Report:
Page
(A) Report of Independent Registered Public Accounting Firm
(B) Financial Statements:
(i) Consolidated Statements of Operations for the year ended December 31, 2017, 2016 and
2015
(ii) Consolidated Statements of Comprehensive Income for the year ended December 31, 2017,
2016 and 2015
(iii) Consolidated Balance Sheets as of December 31, 2017 and 2016
(iv) Consolidated Statements of Cash Flows for the year ended December 31, 2017, 2016 and
2015
(v) Consolidated Statements of Equity for the year ended December 31, 2017, 2016 and 2015
(vi) Notes to Consolidated Financial Statements
(C) Financial Statement Schedules:
Valuation and Qualifying Accounts
II
III Real Estate and Accumulated Depreciation
IV Mortgage Loans on Real Estate
44
45
46
47
48
49
50
100
101
108
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 thereto.
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Table of Contents
(b)
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
Exhibits:
— Restated Declaration of Trust (filed as Exhibit 3.1 to WRI’s Form 8-A dated January 19, 1999 and
incorporated herein by reference).
— Amendment of the Restated Declaration of Trust (filed as Exhibit 3.2 to WRI’s Form 8-A dated January
19, 1999 and incorporated herein by reference).
— Second Amendment of the Restated Declaration of Trust (filed as Exhibit 3.3 to WRI’s Form 8-A
dated January 19, 1999 and incorporated herein by reference).
— Third Amendment of the Restated Declaration of Trust (filed as Exhibit 3.4 to WRI’s Form 8-A dated
January 19, 1999 and incorporated herein by reference).
— Fourth Amendment of the Restated Declaration of Trust dated April 28, 1999 (filed as Exhibit 3.5 to
WRI’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein
by reference).
— Fifth Amendment of the Restated Declaration of Trust dated April 20, 2001 (filed as Exhibit 3.6 to
WRI’s Annual Report on Form 10-K for the year ended December 31, 2001 and incorporated herein
by reference).
— Amended and Restated Bylaws of WRI (filed as Exhibit 99.2 to WRI’s Form 8-A dated February 23,
1998 and incorporated herein by reference).
— Sixth Amendment of the Restated Declaration of Trust dated May 6, 2010 (filed as Exhibit 3.1 to
WRI’s Form 8-K dated May 6, 2010 and incorporated herein by reference).
— Amendment of Bylaws-Direct Registration System, Section 7.2(a) dated May 3, 2007 (filed as Exhibit
3.8 to WRI’s Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference).
— Second Amended and Restated Bylaws of Weingarten Realty Investors (filed as Exhibit 3.1 to WRI’s
Form 8-K on February 26, 2010 and incorporated herein by reference).
— Form of Indenture between Weingarten Realty Investors and The Bank of New York Mellon Trust
Company, N.A. (successor to J.P. Morgan Trust Company, National Association, successor to Texas
Commerce Bank National Association) (filed as Exhibit 4(a) to WRI’s Registration Statement on Form
S-3 (No. 33-57659) dated February 10, 1995 and incorporated herein by reference).
— Form of Indenture between Weingarten Realty Investors and The Bank of New York Mellon Trust
Company, N.A. (successor to J.P. Morgan Trust Company, National Association, successor to Texas
Commerce Bank National Association) (filed as Exhibit 4(b) to WRI’s Registration Statement on Form
S-3 (No. 33-57659) dated Feibruray 10, 1995 and incorporated herein by reference).
— First Supplemental Indenture, dated August 2, 2006, between Weingarten Realty Investors and The
Bank of New York Mellon Trust Company, N.A. (successor to J.P. Morgan Trust Company, National
Association, successor to Texas Commerce Bank National Association) (filed as Exhibit 4.1 to WRI’s
Form 8-K on August 2, 2006 and incorporated herein by reference).
— Second Supplemental Indenture, dated October 9, 2012, between Weingarten Realty Investors and
The Bank of New York Mellon Trust Company, N.A. (successor to J.P. Morgan Trust Company,
National Association, successor to Texas Commerece Bank National Association) (filed as Exhibit
4.1 to WRI’s Form 8-K on October 9, 2012 and incorporated herein by reference).
— 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).
— 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).
— 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).
— 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).
— Form of 3.375% Senior Note due 2022 (filed as Exhibit 4.2 to WRI’s Form 8-K on October 9, 2012
and incorporated herein by reference).
— Form of 3.50% Senior Note due 2023 (filed as Exhibit 4.1 to WRI’s Form 8-K on March 22, 2013 and
incorporated herein by reference).
— Form of 4.450% Senior Note due 2024 (filed as Exhibit 4.1 to WRI’s Form 8-K on October 15, 2013
and incorporated herein by reference).
— Form of 3.850% Senior Note due 2025 (filed as Exhibit 4.1 to WRI's Form 8-K on May 14, 2015 and
incorporated herein by reference).
— Form of 3.250% Senior Note due 2026 (filed as Exhibit 4.1 to WRI’s Form 8-K on August 11, 2016
and incorporated herein by reference).
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Table of Contents
10.1†
— 2001 Long Term Incentive Plan (filed as Exhibit 10.7 to WRI’s Annual Report on Form 10-K for the
year ended December 31, 2001 and incorporated herein by reference).
10.2†
10.3†
10.4†
10.5†
10.6†
10.7†
10.8†
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†
10.15†
10.16†
10.17†
10.18†
— Restatement of the Weingarten Realty Investors Supplemental Executive Retirement Plan dated
August 4, 2006 (filed as Exhibit 10.35 to WRI’s Form 10-Q for the quarter ended September 30, 2006
and incorporated herein by reference).
— Restatement of the Weingarten Realty Investors Deferred Compensation Plan dated August 4, 2006
(filed as Exhibit 10.36 to WRI’s Form 10-Q for the quarter ended September 30, 2006 and incorporated
herein by reference).
— Restatement of the Weingarten Realty Investors Retirement Benefit Restoration Plan dated August
4, 2006 (filed as Exhibit 10.37 to WRI’s Form 10-Q for the quarter ended September 30, 2006 and
incorporated herein by reference).
— Amendment No. 1 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated
December 15, 2006 (filed as Exhibit 10.38 to WRI’s Annual Report on Form 10-K for the year ended
December 31, 2006 and incorporated herein by reference).
— Amendment No. 1 to the Weingarten Realty Investors Retirement Benefit Restoration Plan dated
December 15, 2006 (filed as Exhibit 10.39 to WRI’s Annual Report on Form 10-K for the year ended
December 31, 2006 and incorporated herein by reference).
— Amendment No. 1 to the Weingarten Realty Investors Deferred Compensation Plan dated December
15, 2006 (filed as Exhibit 10.40 to WRI’s Annual Report on Form 10-K for the year ended December
31, 2006 and incorporated herein by reference).
— Amendment No. 2 to the Weingarten Realty Investors Retirement Benefit Restoration Plan dated
November 9, 2007 (filed as Exhibit 10.43 to WRI’s Annual Report on Form 10-K for the year ended
December 31, 2007 and incorporated herein by reference).
— Amendment No. 2 to the Weingarten Realty Investors Deferred Compensation Plan dated November
9, 2007 (filed as Exhibit 10.44 to WRI’s Annual Report on Form 10-K for the year ended December
31, 2007 and incorporated herein by reference).
— Amendment No. 2 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated
November 9, 2007 (filed as Exhibit 10.45 to WRI’s Annual Report on Form 10-K for the year ended
December 31, 2007 and incorporated herein by reference).
— Amendment No. 3 to the Weingarten Realty Investors Retirement Benefit Restoration Plan dated
November 17, 2008 (filed as Exhibit 10.1 to WRI’s Form 8-K on December 4, 2008 and incorporated
herein by reference).
— Amendment No. 3 to the Weingarten Realty Investors Deferred Compensation Plan dated November
17, 2008 (filed as Exhibit 10.2 to WRI’s Form 8-K on December 4, 2008 and incorporated herein by
reference).
— Amendment No. 3 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated
November 17, 2008 (filed as Exhibit 10.3 to WRI’s Form 8-K on December 4, 2008 and incorporated
herein by reference).
— Amendment No. 1 to the Weingarten Realty Investors 2001 Long Term Incentive Plan dated November
17, 2008 (filed as Exhibit 10.4 to WRI’s Form 8-K on December 4, 2008 and incorporated herein by
reference).
— First Amendment to the Weingarten Realty Retirement Plan, amended and restated, dated December
2, 2009 (filed as Exhibit 10.51 to WRI’s Annual Report on Form 10-K for the year ended December
31, 2009 and incorporated herein by reference).
— First Amendment to the Master Nonqualified Plan Trust Agreement dated March 12, 2009 (filed as
Exhibit 10.53 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2009 and
incorporated herein by reference).
— Second Amendment to the Master Nonqualified Plan Trust Agreement dated August 4, 2009 (filed
as Exhibit 10.54 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2009 and
incorporated herein by reference).
— Non-Qualified Plan Trust Agreement for Recordkept Plans dated September 1, 2009 (filed as Exhibit
10.55 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2009 and incorporated
herein by reference).
10.19†
— Amended and Restated 2010 Long-Term Incentive Plan (filed as Exhibit 99.1 to WRI’s Form 8-K
dated April 26, 2010 and incorporated herein by reference).
10.20†
— Amendment No. 4 to the Weingarten Realty Investors Deferred Compensation Plan dated February
26, 2010 (filed as Exhibit 10.57 to WRI’s Form 10-Q for the quarter ended March 31, 2010 and
incorporated herein by reference).
94
Table of Contents
10.21†
— Amendment No. 4 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated
May 6, 2010 (filed as Exhibit 10.58 to WRI’s Form 10-Q for the quarter ended March 31, 2010 and
incorporated herein by reference).
10.22†
— 2002 WRI Employee Share Purchase Plan dated May 6, 2003 (filed as Exhibit 10.60 to WRI’s Form
10-Q for the quarter ended June 30, 2010 and incorporated herein by reference).
10.23†
10.24†
10.25†
10.26†
10.27†
10.28†
10.29†
10.30†
10.31†
10.32†
10.33†
10.34†
10.35†
10.36†
10.37†
10.38†
10.39†
10.40†
10.41†
— Amended and Restated 2002 WRI Employee Share Purchase Plan dated May 10, 2010 (filed as
Exhibit 10.61 to WRI’s Form 10-Q for the quarter ended June 30, 2010 and incorporated herein by
reference).
— Weingarten Realty Investors Executive Medical Reimbursement Plan and Summary Plan Description
(filed as Exhibit 10.59 to WRI’s Annual Report on Form 10-K dated December 31, 2010 and
incorporated herein by reference).
— Second Amendment to the Weingarten Realty Retirement Plan dated March 14, 2011 (filed as Exhibit
10.59 to WRI’s Form 10-Q for the quarter ended March 31, 2011 and incorporated herein by reference).
— Third Amendment to the Weingarten Realty Retirement Plan dated May 4, 2011 (filed as Exhibit 10.60
to WRI’s Form 10-Q for the quarter ended March 31, 2011 and incorporated herein by reference).
— Third Amendment to the Master Nonqualified Plan Trust Agreement dated April 26, 2011 (filed as
Exhibit 10.1 to WRI’s Form 10-Q for the quarter ended June 30, 2011 and incorporated herein by
reference).
— Fourth Amendment to the Weingarten Realty Retirement Plan dated March 2, 2012 (filed as Exhibit
10.2 to WRI's Form 10-Q for the quarter ended March 31, 2012 and incorporated herein by reference).
— Amendment No. 4 to the Weingarten Realty Investors Retirement Benefit Restoration Plan dated
August 10, 2012 (filed as Exhibit 10.1 to WRI's Form 10-Q for the quarter ended September 30, 2012
and incorporated herein by reference).
— Amendment No. 5 to the Weingarten Realty Investors Supplemental Executive Retirement Plan dated
August 10, 2012 (filed as Exhibit 10.2 to WRI's Form 10-Q for the quarter ended September 30, 2012
and incorporated herein by reference).
— Master Nonqualified Plan Trust Agreement dated August 23, 2006 (filed as Exhibit 10.53 to WRI's
Annual Report on Form 10-K for the year ended December 31, 2012 and incorporated herein by
reference).
— Restatement of the Weingarten Realty Retirement Plan dated November 17, 2008 (filed as Exhibit
10.54 to WRI's Annual Report on Form 10-K for the year ended December 31, 2012 and incorporated
herein by reference).
— Restatement of the Weingarten Realty Investors Retirement Plan dated December 23, 2013 (filed
as Exhibit 10.57 to WRI's Annual Report on Form 10-K for the year ended December 31, 2013 and
incorporated herein by reference).
— First Amendment to Weingarten Realty Investors Retirement Plan dated December 16, 2014 (filed
as Exhibit 10.59 to WRI's Annual Report on Form 10-K for the year ended December 31, 2014 and
incorporated herein by reference).
— Amended and Restated Weingarten Realty Investors Deferred Compensation Plan effective April 1,
2016 (filed as Exhibit 10.2 to WRI's Form 10-Q for the quarter ended March 31, 2016 and incorporated
herein by reference).
— Second Amendment to Weingarten Realty Investors Retirement Plan dated December 30, 2016 (filed
as Exhibit 10.49 to WRI's Annual Report on Form 10-K for the year ended December 31, 2016 and
incorporated herein by reference).
— Amendment No. 1 to Weingarten Realty Investors Deferred Compensation Plan as Restated Effective
April 1, 2016 (filed as Exhibit 10.51 to WRI's Annual Report on Form 10-K for the year ended December
31, 2016 and incorporated herein by reference).
— Severance and Change to Control Agreement for Johnny Hendrix dated November 11, 1998 (filed
as Exhibit 10.54 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2008 and
incorporated herein by reference).
— Severance and Change to Control Agreement for Stephen C. Richter dated November 11, 1998 (filed
as Exhibit 10.55 to WRI’s Annual Report on Form 10-K for the year ended December 31, 2008 and
incorporated herein by reference).
— Amendment No. 1 to Severance and Change to Control Agreement for Johnny Hendrix dated
December 20, 2008 (filed as Exhibit 10.56 to WRI’s Annual Report on Form 10-K for the year ended
December 31, 2008 and incorporated herein by reference).
— Amendment No. 1 to Severance and Change to Control Agreement for Stephen Richter dated
December 31, 2008 (filed as Exhibit 10.57 to WRI’s Annual Report on Form 10-K for the year ended
December 31, 2008 and incorporated herein by reference).
95
Table of Contents
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
10.52*
12.1*
21.1*
23.1*
31.1*
31.2*
— Term Loan Agreement dated March 2, 2015 among Weingarten Realty Investors, the Lenders Party
Hereto and Regions Bank, as Administrative Agent, Region Capital Markets, a division of Regions
Bank and U.S. Bank National Association, as Joint Lead Arrangers and Joint Bookrunners, and U.S.
Bank National Association, as Syndication Agent (filed as Exhibit 10.1 to WRI’s Form 8-K on March
3, 2015 and incorporated herein by reference).
— Amended and Restated Credit Agreement dated March 30, 2016 among Weingarten Realty Investors,
the Lenders Party Hereto and JPMorgan Chase Bank, N.A., as administrative agent, and Bank of
America, N.A., as syndication agent, and Wells Fargo Bank, National Association, PNC Bank, National
Association, Regions Bank, U.S. Bank National Association and The Bank of Nova Scotia, as
documentation agents, and J.P.Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as joint book runners and joint lead arrangers (filed as Exhibit 10.1 to WRI's Form 8-
K filed on March 31, 2016 and incorporated herein by reference).
— Promissory Note with Reliance Trust Company, Trustee of the Trust under the Weingarten Realty
Investors Deferred Compensation Plan, Supplemental Executive Retirement Plan and Retirement
Benefit Restoration Plan dated March 12, 2009 (filed as Exhibit 10.57 to WRI’s Form 10-Q for the
quarter ended March 31, 2009 and incorporated herein by reference).
— First Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master
Nonqualified Plan Trust under Weingarten Realty Investors Supplemental Executive Retirement Plan
and Weingarten Realty Investors Retirement Benefit Restoration Plan dated March 11, 2010 (filed
as Exhibit 10.59 to WRI’s Form 10-Q for the quarter ended June 30, 2010 and incorporated herein
by reference).
— Second Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master
Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement
Plan and Weingarten Realty Investors Retirement Benefit Restoration Plan dated March 11, 2011
(filed as Exhibit 10.58 to WRI’s Form 10-Q for the quarter ended March 31, 2011 and incorporated
herein by reference).
— Third Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master
Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement
Plan and Weingarten Realty Investors Retirement Benefit Restoration Plan dated February 15, 2012
(filed as Exhibit 10.1 to WRI's Form 10-Q for the quarter ended March 31, 2012 and incorporated
herein by reference).
— Fourth Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master
Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement
Plan and Weingarten Realty Investors Retirement Benefit Restoration Plan dated March 11, 2013
(filed as Exhibit 10.2 to WRI's Form 10-Q for the quarter ended March 31, 2013 and incorporated
herein by reference).
— Fifth Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master
Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement
Plan and Weingarten Realty Investors Retirement Benefit Restoration Plan dated March 11, 2014
(filed as Exhibit 10.1 to WRI's Form 10-Q for the quarter ended March 31, 2014 and incorporated
herein by reference).
— Sixth Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master
Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement
Plan and Weingarten Realty Investors Retirement Benefit Restoration Plan dated March 11, 2015
(filed as Exhibit 10.2 to WRI's Form 10-Q for the quarter ended March 31, 2015 and incorporated
herein by reference).
— Seventh Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master
Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement
Plan and Retirement Benefit Restoration Plan, dated March 8, 2016 (filed as Exhibit 10.50 to WRI's
Annual Report on Form 10-K for the year ended December 31, 2016 and incorporated herein by
reference).
— Eighth Amendment to Promissory Note with Reliance Trust Company, Trustee of the Master
Nonqualified Plan Trust under the Weingarten Realty Investors Supplemental Executive Retirement
Plan and Retirement Benefit Restoration Plan, dated March 11, 2017.
— Computation of Ratios.
— Listing of Subsidiaries of the Registrant.
— Consent of Deloitte & Touche LLP.
— Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
— Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).
32.1**
— Certification pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-
Oxley Act of 2002 (Chief Executive Officer).
96
Table of Contents
32.2**
— Certification pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-
Oxley Act of 2002 (Chief Financial Officer).
101.INS** — XBRL Instance Document
101.SCH** — XBRL Taxonomy Extension Schema Document
101.CAL** — XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF** — XBRL Taxonomy Extension Definition Linkbase Document
101.LAB** — XBRL Taxonomy Extension Labels Linkbase Document
101.PRE** — XBRL Taxonomy Extension Presentation Linkbase Document
*
**
†
Filed with this report.
Furnished with this report.
Management contract or compensation plan or arrangement.
97
Table of Contents
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: February 28, 2018
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of Weingarten Realty Investors, a real estate
investment trust organized under the Texas Business Organizations Code, and the undersigned trust managers and
officers of Weingarten Realty Investors hereby constitute and appoint Andrew M. Alexander, Stanford Alexander,
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.
98
Table of Contents
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/ Andrew M. Alexander
Andrew M. Alexander
Chief Executive Officer,
President and Trust Manager
February 28, 2018
By:
/s/ Stanford Alexander
Stanford Alexander
By:
/s/ Shelaghmichael Brown
Shelaghmichael Brown
By:
/s/ James W. Crownover
James W. Crownover
By:
/s/ Stephen A. Lasher
Stephen A. Lasher
By:
/s/ Stephen C. Richter
Stephen C. Richter
By:
/s/ Thomas L. Ryan
Thomas L. Ryan
By:
/s/ Douglas W. Schnitzer
Douglas W. Schnitzer
By:
By:
By:
/s/ Joe D. Shafer
Joe D. Shafer
/s/ C. Park Shaper
C. Park Shaper
/s/ Marc J. Shapiro
Marc J. Shapiro
Chairman
and Trust Manager
February 28, 2018
Trust Manager
February 28, 2018
Trust Manager
February 28, 2018
Trust Manager
February 28, 2018
Executive Vice President and
Chief Financial Officer
February 28, 2018
Trust Manager
February 28, 2018
Trust Manager
February 28, 2018
Senior Vice President/Chief Accounting Officer
(Principal Accounting Officer)
February 28, 2018
Trust Manager
February 28, 2018
Trust Manager
February 28, 2018
99
Table of Contents
WEINGARTEN REALTY INVESTORS
VALUATION AND QUALIFYING ACCOUNTS
December 31, 2017, 2016, and 2015
(Amounts in thousands)
Schedule II
Description
2017
Allowance for Doubtful Accounts
Tax Valuation Allowance
2016
Allowance for Doubtful Accounts
Tax Valuation Allowance
2015
Allowance for Doubtful Accounts
Tax Valuation Allowance
___________________
Balance at
beginning
of period
Charged
to costs
and
expenses
Deductions(1)
Balance
at end of
period
$
$
$
6,700 $
4,255 $
3,439 $
25,979
—
10,392
6,072 $
2,427 $
1,799 $
27,230
—
1,251
7,680 $
1,179 $
2,787 $
27,539
—
309
7,516
15,587
6,700
25,979
6,072
27,230
(1) The tax valuation allowance deductions for the year ended December 31, 2017 represents the effect of the change in the statutory tax
rate as a result of the enactment of the Tax Act on December 22, 2017. For other periods presented, deductions included write-offs of
amounts previously reserved.
100
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Table of Contents
WEINGARTEN REALTY INVESTORS
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 2017
(Amounts in thousands)
Schedule IV
State
Interest
Rate
Final
Maturity
Date
Periodic
Payment
Terms
Face
Amount of
Mortgages
Carrying
Amount of
Mortgages
(1)
Shopping Centers:
First Mortgages:
College Park Realty Company
NV
7.00%
10/31/2053
At Maturity
Total Mortgage Loans on
Real Estate
___________________
$
$
3,410
3,410
$
$
3,410
3,410
(1) The aggregate cost at December 31, 2017 for federal income tax purposes is $3.4 million, and there are no prior liens to be disclosed.
As this is an interest only mortgage loan, there have been no changes in its carrying amount for each year ended December 31, 2017,
2016 and 2015.
108
2 0 1 7 A N N U A L R E P O R T
SHAREHOLDER INFORMATION & SERVICES
BOARD OF TRUST MANAGERS
Stock Listings
New York Stock Exchange
• Common Shares – WRI
Counsel
Dentons US LLP
Dallas, Texas
Andrew M. Alexander
President/Chief Executive Officer,
Weingarten Realty Investors
Chairperson of Executive Committee
Thomas L. Ryan
President/Chief Executive Officer,
Service Corporation International
Chairperson of Audit Committee
Memberships
National Association of
Real Estate Investment Trusts, and
International Council of
Shopping Centers
Transfer Agent & Registrar
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
800-550-4689
Auditors
Deloitte & Touche LLP
Houston, Texas
TTY for Hearing Impaired:
Main: 800-952-9245
Foreign: 781-575-4592
Foreign Shareholders:
+1-312-499-7078
Direct Stock Purchase & Dividend Reinvestment
We offer a convenient way to purchase our common shares of
beneficial interest and to automatically reinvest dividends. For a
complete information package on our Investor Services Program,
please contact:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-43078
800-550-4689
www.computershare.com
Direct Deposit
We offer shareholders direct deposit of dividends. Interested
shareholders should contact Computershare Trust Company,
N.A. at 800-550-4689 or visit the investor Web site at www.
computershare.com.
Form 10-K
A copy of the Annual Report on Form 10-K filed with the
Securities and Exchange Commission is available without charge,
via our Web site. Simply go to www.weingarten.com, then go to
the “Investor Relations” tab. You can also contact our Investor
Relations department directly at 800-298-9974 or 713-866-6000
to request a copy.
Certifications
We filed a Section 12 (a) CEO certification with the New York
Stock Exchange (“NYSE”) without qualification regarding our
compliance with NYSE corporate governance listing standards
on May 2, 2017. In addition, we filed with the Securities and
Exchange Commission the CEO and CFO certifications regarding
the quality of the Company’s public disclosure as exhibits to our
Form 10-K for the year ended December 31, 2017 as required by
Section 302 of the Sarbanes-Oxley Act.
Stanford Alexander
Chairman, Weingarten Realty Investors
Member of Executive Committee
Shelaghmichael Brown
Former Senior Executive Vice President
and Executive Officer,
BBVA Compass Retail Banking
Chairperson of Governance and
Nominating Committee and
Member of Executive Committee
James W. Crownover
Former Director, McKinsey & Company
Member of Governance and
Nominating Committee and
Management Development and
Executive Compensation Committee
Stephen A. Lasher
President, The GulfStar Group, Inc.
Member of Audit Committee,
Management Development and
Executive Compensation Committee
and Executive Committee
Douglas W. Schnitzer
Chairman/Chief Executive Officer,
Senterra LLC
Member of Audit Committee
C. Park Shaper
Former President of Kinder Morgan, Inc.,
Kinder Morgan Energy Partners, L.P.,
Kinder Morgan Management, LLC
Chairperson of Management Development
and Executive Compensation Committee
and Member of Audit Committee
Marc J. Shapiro
Former Vice Chairman,
J.P. Morgan Chase & Co.,
Non-executive Chairman,
J.P. Morgan Chase & Co. of Texas
Member of Management Development
and Executive Compensation Committee,
Governance and Nominating Committee
and Executive Committee
FORWARD – LOOKING STATEMENTS
This Annual Report on Form 10-K, together with other statements and information
publicly disseminated by us, contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. We intend such forward-
looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 and
include this statement for purposes of complying with those safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use of the
words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar
expressions. You should not rely on forward-looking statements since they involve
known and unknown risks, uncertainties and other factors, which are, in some cases,
beyond our control and which could materially affect actual results, performances
or achievements. Factors which may cause actual results to differ materially from
current expectations include, but are not limited to, (i) disruptions in financial
markets, (ii) general economic and local real estate conditions, (iii) the inability of
major tenants to continue paying their rent obligations due to bankruptcy, insolvency
or general downturn in their business, (iv) financing risks, such as the inability to
obtain equity, debt, or other sources of financing on favorable terms and changes in
LIBOR availability, (v) changes in governmental laws and regulations, (vi) the level and
volatility of interest rates, (vii) the availability of suitable acquisition opportunities, (viii)
the ability to dispose of properties, (ix) changes in expected development activity, (x)
increases in operating costs, (xi) tax matters, including the effect of changes in tax
laws and the failure to qualify as a real estate investment trust, and (xii) investments
through real estate joint ventures and partnerships, which involve risks not present
in investments in which we are the sole investor. Accordingly, there is no assurance
that our expectations will be realized. For further discussion of the factors that could
materially affect the outcome of our forward-looking statements and our future results
and financial condition, see “Item 1A. Risk Factors.”
Annual Report Cover - 2018-v2.indd 3
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2017
ANNUAL
REPORT
2600 CITADEL PLAZA DR., STE. 125
HOUSTON, TEXAS 77008 • PH: 713.866.6000
FAX: 713.866.6049 • WWW.WEINGARTEN.COM
C O R P O R AT E P R O F I L E : Incorporated in 1948, Weingarten Realty Investors (NYSE:
WRI) is one of the oldest real estate investment trusts listed on the New York Stock
Exchange. As a commercial real estate owner, manager and developer for over 60 years,
Weingarten remains focused on delivering solid returns to shareholders as the Company
actively acquires, develops and intensively manages properties that span the United
States from coast-to-coast. The Company owns or operates under long-term leases,
either directly or through its interest in real estate joint ventures or partnerships, a total
of 204 properties which are located in 17 states that span the United States from coast-
to-coast. The Company’s portfolio totals approximately 41.3 million square feet of gross
leasable area, of which our interest in these properties aggregate approximately 26.4
million square feet. To learn more about the Company’s operations and growth strategies,
please visit www.weingarten.com.
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