HOUSTON-In a move that shifts its growth strategy from acquisitions, Weingarten Realty Investors’ CEO Drew Alexander said the REIT would pursue two new initiatives–merchant building and joint ventures. The announcement was made during Weingarten’s fourth quarter and year-end 2005 earnings conference call.

Alexander said during the call that the change in strategy is compelled by changing market conditions. Specifically, continued demand from retailers, the competitive acquisition environment and higher construction costs.

Joint-venture programs will be finalized by mid-year, Alexander said. “These relationships will allow us to become more proactive in the acquisition market,” he noted, adding that the REIT plans to acquire $200 million to $250 million this year for its portfolio and more than $300 million for the joint-venture program.

On the development front, the REIT is bulking up its new development pipeline. This year, the pipeline is expected to reach $250 million, and by 2008, the REIT anticipates the pipeline will offer $1 billion in development opportunities including sales of pad sites and merchant development. The REIT expects to achieve FFO of 5 cents to 10 cents from the merchant development program.

Weingarten currently has 10 properties in various stages of construction with an estimated investment upon completion of $128 million. These projects will generate returns in excess of 9.5%, according to Alexander. The company also plans to accelerate its disposition program, which will have a negative impact on FFO in the short-term, Alexander said. However, he contended that dispositions are the best way to fund development and acquisition activities.

During 2006, the firm plans to sell off $250 million to $300 million in non-core assets in markets where it has only one or two properties. Alexander declined to disclose specific markets, but noted that the East and West Coast were the REIT’s strongest performing regions during 2005. In addition to the non-core dispositions, Weingarten plans to contribute $100 million to $150 million to joint ventures in 2006 to seed the programs, Alexander said. Last year, Weingarten sold 17 properties and an 80% interest in two shopping centers in Louisiana, representing 1.6 million sf and totaling $190.6 million. The sales generated gains of more than $87 million.

The strategy changes come on the heels of another strong quarter and year for the REIT with FFO, rental revenues and net income all increasing.

FFO for the fourth quarter 2005, on a diluted basis, totaled $63.2 million, or 68 cents per share, compared to $61.6 million, or 66 cents per share for the same period in 2004. FFO on a diluted basis, for the year ended Dec. 31, was $253 million or $2.72 per share, compared to $225.7 million, or $2.52 per share, in 2004, representing an increase of 12.1% or 7.9% on a per share basis.

Rental revenues for the fourth quarter 2005 increased to $136.6 million as compared to $125.8 million for the same period of 2004, an 8.6% increase. For the year ended 2005, rental revenues increased to $534.5 million as compared to $480.5 million for 2004, an 11.2% increase.

Net income available to common shareholders, on a diluted basis, for the fourth quarter 2005 totaled $50.2 million, or 54 cents per share, as compared to $43.2 million, or 46 cents per share for the fourth quarter 2004, an increase of $7 million, or 16.2% per share. For the full-year 2005, net income available to common shareholders, on a diluted basis, was $214.8 million as compared to $137.7 million for 2004, or $2.31 per share for 2005 as compared to $1.54 per share for 2004, an increase of 56%.

Same-property NOI for the REIT’s combined retail and industrial portfolios increased 5.8% for the fourth quarter of 2005, up from 2.2% in 2004. The retail portfolio showed growth of 5.7% compared to 3% in 2004. For the year, same-property NOI grew 4.7%, compared to 3.1% in 2004.

Overall occupancy at the close of 2005 was 94.2% for the portfolio, with the retail segment closing the year at a strong 94.6%, while the industrial segment improved its occupancy by 50 basis points over 2004 to 93.1%. During the fourth quarter, Weingarten purchased four shopping centers, a building adjacent to one of its shopping centers, and four industrial properties, representing an investment of $92.6 million and adding 1.8 million sf to its portfolio.

For the entire year, the REIT purchased 15 shopping centers and seven industrial properties, comprising 3.9 million sf and totaling $359 million with a weighted average stabilized return of more than 7.75%. For 2006, Weingarten expects to generate FFO per share in the range of $2.77 to $2.87. The REIT’s current portfolio of 360 properties includes 296 neighborhood and community shopping centers and 64 industrial properties, aggregating 48.7 million sf.

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