Jefferies Comments On Weingarten Realty Investors 5-Year Business Plan

According to Jefferies, Weingarten Realty Investors WRI provided an outline of its 5-year business plan with 2012 taking the spotlight as WRI expects 1) 5% SS NOI growth in 2012, 2) $500M in asset sales, and 3) 2012E FFO/sh of $1.91, a +7.6% YoY growth over 2011E FFO/sh of $1.77. Jefferies reported that WRI's 5-year business plan calls for the following by 2015. “1) commenced occupancy of 94.3% (currently 89.2% as of 4Q10), 2) ~$960M in acquisitions and $775M in dispositions spread over the 5-year period at a cap rate of 7% and 8%, respectively, and 3) recurring 2015 FFO/sh of $2.24, which if achievable, represents a 32% growth over 2010 FFO/sh. of $1.70. We believe this 5-year business plan makes sense, but worry that WRI may be optimistic in regards to its 2012 estimates of 1) +5% YoY growth in SS NOI, and 2) $500M in asset sales. While we agree with mgmt that the delta between signed and commenced occupancy should narrow and contribute to 2012 NOI growth, our concern is predicated on 1) the rise in retail bankruptcies in 1Q11, 2) vacancy rate projections to remain high in 2012 (~12% per CBRE), and 3) a higher interest rate environment, which would make financing more difficult for potential buyers of WRI's $500M in planned asset sales.” Weingarten Realty Investors closed yesterday at $24.69.