Weingarten to Investors: Tenants Rule

Though the entire industry has seen similar declines in stock prices during the past year due to the economy, Weingarten president and CEO Drew Alexander took a tough, yet positive, stance on the situation. "It's pretty clear, I don't like it, but it's pretty clear, that the market questions if we can survive," he commented it. "I know that we can, and this presentation should go a long way to convincing you we will."

The key to the survival? An increase in cash on the balance sheet and a continued "focus on tenants that sell basic goods and services," Alexander commented. Those tenants include grocery stores, dry cleaners, quick-serve restaurants and value chains such as Ross, Marshall's and TJ Maxx.

On the cash flow end, Steve Richter, the company's senior vice president and CFO pointed out that the original cash projection for 2009 was $550 million, between new debt, dispositions, recapitalizations and debt extensions. In light of the financial crisis, however, that goal has changed.The plan is to generate more than $1 billion in liquidity by the end of 2009, Richter said. Though there are no changes in the company's FFO guidance, "we've seen some improvements in the market in the past month or so, and are optimistic we can outperform our original market plan," he said.

Richter has good reason to be optimistic, as the company has a locked interest rate on a $103 million loan with a life company, at a 55%-60% loan to value and a 7.49% interest rate. He said Weingarten is also in negotiation with other life companies and banks, with one of the loans scheduled to close this week. Furthermore, "we have more than $100 million in dispositions under contract and $35 million under letter of intent," Richter said. "Two closings are scheduled for today, in fact."

In previous earnings conference calls, Weingarten stated its intention not to start new development projects in 2009. It's estimated that the 25 active projects currently in the pipeline should stabilize between 2009 and 2012.

In the meantime, Weingarten executive vice president/asset management Johnny Hendrix said approximately 70% of leases expiring in 2009 have been renewed, with 20 meetings already taking place with local retailers. Hendrix said the plan is for 75 total meetings with retailers to take place by year-end. Lease deals are closing more quickly, too, though the past-due and problem tenants are making up approximately 8% of the total tenant base. Still, the portfolio remains just over 90% occupied.

Though Alexander and his colleagues didn't try to sugarcoat the situation, they did acknowledge lessons learned from the recession of the 1980s has given Weingarten an edge in a difficult market. Creativity with the tenant mix, combined with continued moves to deleverage the company through asset sales and other moves are what will keep Weingarten going, Alexander added.