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Whitestone REIT Announces Operating Results For Fourth Quarter And Full Year 2011

Further, other REITs may use different methodologies for calculating FFO, and accordingly, the Company's FFO may not be comparable to other REITs. The Company presents FFO per diluted share calculations that are based on the outstanding dilutive common shares plus the outstanding OP units for the periods presented. Management considers FFO a useful additional measure of performance for an equity REIT because it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, management believes that FFO provides a more meaningful and accurate indication of the Company's performance and useful information for the investment community to compare Whitestone to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs.

FFO-Core: Management believes that the computation of FFO in accordance with NAREIT's definition includes certain items that are not indicative of the results provided by the Company's operating portfolio and affect the comparability of the Company's period-over-period performance. These items include, but are not limited to, legal and professional fees, gains and losses on insurance claim settlements and acquisition costs. Therefore, in addition to FFO, management uses FFO-Core, which the Company defines to exclude such items. Management believes that these adjustments are appropriate in determining FFO-Core as they are not indicative of the operating performance of the Company's assets. In addition, the Company believes that FFO-Core is a useful supplemental measure for the investing community to use in comparing the Company to other REITs as many REITs provide some form of adjusted or modified FFO.

NOI: Management believes that NOI is a useful measure of the Company's property operating performance. The Company defines NOI as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Other REITs may use different methodologies for calculating NOI, and accordingly, the Company's NOI may not be comparable to other REITs. Because NOI excludes general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes and gain or loss on sale or disposition of assets, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from net income. The Company uses NOI to evaluate its operating performance since NOI allows the Company to evaluate the impact that factors, such as occupancy levels, lease structure, lease rates and tenant base, have on the Company's results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about the Company's property and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of property performance in the real estate industry. However, NOI should not be viewed as a measure of the Company's overall financial performance since it does not reflect general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes, gain or loss on sale or disposition of assets, and the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties.

EBITDA: Management believes that EBITDA is an appropriate supplemental measure of operating performance to net income attributable to the Company. The Company defines EBITDA as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes) and general and administrative expenses. Other REITs may use different methodologies for calculating EBITDA, and accordingly, the Company's EBITDA may not be comparable to other REITs. Management believes that EBITDA provides useful information to the investment community about the Company's operating performance when compared to other REITs since EBITDA is generally recognized as a standard measure. However, EBITDA should not be viewed as a measure of the Company's overall financial performance since it does not reflect depreciation and amortization, involuntary conversion, interest expense, provision for income taxes, gain or loss on sale or disposition of assets, and the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties.

 
Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
                   
December 31,
2011       2010
ASSETS
Real estate assets, at cost:
Property $ 292,360 $ 204,954
Accumulated depreciation (45,472 )

(39,556

)

Total real estate assets 246,888 165,398
Cash and cash equivalents 5,695 17,591
Marketable securities 5,131

-

Escrows and acquisition deposits 4,996 4,385

Accrued rents and accounts receivable, net of allowance for doubtfulaccounts

6,053 4,726
Unamortized lease commissions and loan costs 3,755 3,598
Prepaid expenses and other assets 975   747  
Total assets $ 273,493   $ 196,445  
LIABILITIES AND EQUITY
Liabilities:
Notes payable $ 127,890 $ 100,941
Accounts payable and accrued expenses 9,017 7,292
Tenants' security deposits 2,232 1,796
Dividends and distributions payable 3,647   2,133  
Total liabilities 142,786   112,162  
Commitments and contingencies
Equity:
Preferred shares, $0.001 par value per share; 50,000,000 shares authorized;
none issued and outstanding at December 31, 2011 and December 31,

   2010

-

-

Class A common shares, $0.001 par value per share; 50,000,000 shares
authorized; 2,603,292 and 3,471,187 issued and outstanding as of
December 31, 2011 and 2010, respectively 2 3
Class B common shares, $0.001 par value per share; 350,000,000 shares
authorized; 8,834,563 and 2,200,000 issued and outstanding as of
December 31, 2011 and 2010, respectively 8 2
Additional paid-in capital 158,127 93,357
Accumulated other comprehensive loss (1,119 )

-

Accumulated deficit (41,060 )

(30,654

)

Total Whitestone REIT shareholders' equity

115,958 62,708
Noncontrolling interest in subsidiary 14,749   21,575  
Total equity 130,707   84,283  
Total liabilities and equity $ 273,493   $ 196,445  
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
 
        Year Ended December 31,
2011     2010     2009
 
Property revenues
Rental revenues $ 27,814 $ 25,901 $ 26,449
Other revenues 7,101   5,632   6,236  
Total property revenues 34,915   31,533   32,685  
 
Property expenses
Property operation and maintenance 8,659 8,358 8,519
Real estate taxes 4,668   3,925   4,472  
Total property expenses 13,327   12,283   12,991  
 
Other expenses (income)
General and administrative 6,648 4,992 6,072
Depreciation & amortization 8,365 7,225 6,958
Involuntary conversion

-

(558 ) (1,542 )
Interest expense 5,728 5,620 5,749
Interest, dividend and other investment income (460 ) (28 ) (36 )
Total other expense 20,281   17,251   17,201  
 
Income before loss on sale or disposal of assets and income taxes 1,307 1,999 2,493
 
Provision for income taxes (225 ) (264 ) (222 )
Loss on sale or disposal of assets (146 ) (160 ) (196 )
Income before gain on sale of property 936 1,575 2,075
 
Gain on sale of property 397  

-

 

-

 
Net income 1,333 1,575 2,075
 
Less: Net income attributable to noncontrolling interests 210   470   733  
 
Net income attributable to Whitestone REIT $ 1,123   $ 1,105   $ 1,342  
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
               
Year Ended December 31,
2011 2010 2009
 
Earnings per share - basic
Net income attributable to common shareholders excluding amounts attributable to
unvested restricted shares $ 0.12   $ 0.27 $ 0.41
 
Earnings per share - diluted
Net income attributable to common shareholders excluding amounts attributable to
unvested restricted shares $ 0.12   $ 0.27 $ 0.40
 
Weighted average number of common shares outstanding:
Basic

 

9,028

 

4,012

 

3,236

Diluted

 

9,042

 

4,041

 

3,302

 
Dividends declared per Class A common share $ 1.14 $ 1.19 $ 1.35
Dividends declared per Class B common share (1)

 

1.14

 

0.57

 

-

 

Condensed Consolidated Statements of Comprehensive Income
 
Net income $ 1,333 $ 1,575 $ 2,075
 
Other comprehensive gain (loss):
 
Unrealized loss on available-for-sale marketable securities

 

(1,329

)

 

-

 

-

 
Comprehensive income

 

4

 

1,575

 

2,075

 

Less: Comprehensive income attributable to noncontrolling interests

 

1

 

 

470

 

733

 

Comprehensive income attributable to Whitestone REIT $ 3   $ 1,105 $ 1,342
 

(1)  Class B common shares were issued on August 26, 2010 in connection with our initial public offering and listing on the

NYSE-Amex. Class B common shares received a pro-rated dividend in September 2010. From October 2010 forward,
Class A and Class B common shares received the same dividend.
 
 

Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

       
Three Months Ended Twelve Months Ended
December 31, December 31,
2011     2010 2011     2010
 
Property revenues
Rental revenues $ 7,352 $ 6,601 $ 27,814 $ 25,901
Other revenues 2,616   1,458   7,101   5,632  
Total property revenues 9,968   8,059   34,915   31,533  
 
Property expenses
Property operation and maintenance 2,331 2,285 8,659 8,358
Real estate taxes 1,278   923   4,668   3,925  
Total property expenses 3,609   3,208   13,327   12,283  
 
Other expenses (income)
General and administrative 1,911 1,257 6,648 4,992
Depreciation & amortization 2,239 1,902 8,365 7,225
Involuntary conversion

-

(558 )

-

(558 )
Interest expense 1,451 1,410 5,728 5,620
Interest, dividend and other investment income (81 ) (9 ) (460 ) (28 )
Total other expense 5,520   4,002   20,281   17,251  
 
Income before loss on sale or disposal of assets and income taxes 839 849 1,307 1,999
 
Provision for income taxes (60 ) (51 ) (225 ) (264 )
Loss on sale or disposal of assets (129 ) (47 ) (146 ) (160 )
Income before gain on sale of property 650 751 936 1,575
 
Gain on sale of property

-

 

-

  397  

-

 
Net income 650 751 1,333 1,575
 
Less: Net income attributable to noncontrolling interests 94   206   210   470  
 
Net income attributable to Whitestone REIT $ 556   $ 545   $ 1,123   $ 1,105  
 
 
Whitestone REIT and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

               
Three Months Ended Twelve Months Ended
December 31, December 31,
2011 2010 2011 2010
 
Earnings per share - basic

Net income attributable to common shareholders excluding amounts  attributable to unvested restricted shares

$ 0.05   $ 0.10   $ 0.12   $ 0.27
 
Earnings per share - diluted

Net income attributable to common shareholders excluding amounts  attributable to unvested restricted shares

$ 0.05   $ 0.10   $ 0.12   $ 0.27
 
Weighted average number of common shares outstanding:
Basic 11,232 5,479 9,028 4,012
Diluted 11,244 5,499 9,042 4,041
 
Dividends declared per Class A common share $ 0.29 $ 0.29 $ 1.14 $ 1.19
Dividends declared per Class B common share (1) 0.29 0.29 1.14 0.57
 
(1)

Class B common shares were issued on August 26, 2010 in connection with our initial public offering and listing on the   NYSE-Amex. Class B common shares received a pro-rated dividend in September 2010. From October 2010 forward,   Class A and Class B common shares received the same dividend.

 
 
Whitestone REIT and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
               
Year Ended December 31,
2011 2010 2009
Cash flows from operating activities:
Net income $ 1,333 $ 1,575 $ 2,075
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,749 6,805 6,518
Amortization of deferred loan costs 616 420 440
Gain on sale of marketable securities (192 )

-

-

Loss (gain) on sale or disposal of assets and properties (251 ) 160 196
Bad debt expense 615 536 877
Share-based compensation 310 297 1,013
Changes in operating assets and liabilities:
Escrows and acquisition deposits (519 ) 3,840 (3,700 )
Accrued rents and accounts receivable (1,939 ) (748 ) (511 )
Unamortized lease commissions and loan costs (995 ) (783 ) (634 )
Prepaid expenses and other assets 296 446 527
Accounts payable and accrued expenses 993 (2,319 ) 2,096
Tenants' security deposits 436   166   1  
Net cash provided by operating activities 8,452   10,395   8,898  
Cash flows from investing activities:
Acquisitions of real estate (65,910 ) (8,625 ) (5,619 )
Additions to real estate (7,568 ) (4,143 ) (3,611 )
Proceeds from sale of property 1,567

-

-

Investments in marketable securities (13,520 )

-

-

Proceeds from sales of marketable securities 7,252  

-

 

-

 
Net cash used in investing activities (78,179 ) (12,768 ) (9,230 )
Cash flows from financing activities:
Dividends paid (10,045 ) (5,158 ) (4,645 )
Distributions paid to OP unit holders (1,974 ) (2,249 ) (2,281 )
Proceeds from issuance of common shares, net of offering costs 59,683 22,970
Proceeds from notes payable 13,905 1,430 9,557
Repayments of notes payable (3,128 ) (2,957 ) (8,725 )
Payments of loan origination costs (610 ) (98 ) (288 )
Repurchase of common stock

-

  (249 )

-

 
Net cash provided by (used in) financing activities 57,831   13,689   (6,382 )
Net increase (decrease) in cash and cash equivalents (11,896 ) 11,316 (6,714 )
Cash and cash equivalents at beginning of period 17,591   6,275   12,989  
Cash and cash equivalents at end of period $ 5,695   $ 17,591   $ 6,275  
Supplemental disclosure of cash flow information:
Cash paid for interest $ 5,719 $ 5,621 $ 5,535
Cash paid for taxes 215 262 223
Non cash Investing and financing activities:
Disposal of fully depreciated real estate $ 238 $ 598 $ 564
Financed insurance premiums 649 616 568
Acquisition of real estate in exchange for OP units

-

-

3,625
Debt assumed with acquisitions of real estate 15,425

-

-

Value of shares issued under dividend reinvestment plan 37

-

-

Value of Class B shares exchanged for OP units 4,972

-

-

Change in par value of Class A common shares

-

7

-

Change in fair value of available-for-sale securities (1,329 )

-

-

Reclassification of dividend reinvestment shares with rescission rights

-

606

-

 
 
Whitestone REIT and Subsidiaries

RECONCILIATION OF NON-GAAP MEASURES

(in thousands, except per share and per unit data)

           
Three Months Ended Twelve Months Ended
December 31, December 31,
2011     2010 2011     2010

FFO AND FFO-CORE

Net income attributable to Whitestone REIT $ 556 $ 545 $ 1,123 $ 1,105
Depreciation and amortization of real estate assets 2,015 1,767 7,625 6,697
Loss (gain) on disposal of assets 129 47 (251 ) 160
Net income attributable to noncontrolling interests 94   206   210   470  
FFO $ 2,794   $ 2,565   $ 8,707   $ 8,432  
 
Acquisition costs $ 339 $ 35 $ 666 $ 46
Gain on insurance claim settlement

-

(558 )

-

(558 )
Legal and professional costs (recoveries), net

-

 

-

  254  

-

 
FFO-Core $ 3,133   $ 2,042   $ 9,627   $ 7,920  
 

FFO PER SHARE AND OP UNIT CALCULATION

Numerator:
FFO $ 2,794 $ 2,565 $ 8,707 $ 8,432

Dividends paid on unvested restricted Class A common shares

(4 ) (6 ) (17 ) (27 )

FFO excluding amounts attributable to unvested restricted   Class A common shares

$ 2,790   $ 2,559   $ 8,690   $ 8,405  

FFO-Core excluding amounts attributable to unvested restricted   Class A common shares

$ 3,129   $ 2,036   $ 9,610   $ 7,893  
 
Denominator:
Weighted average number of total common shares - basic 11,232 5,479 9,028 4,012

Weighted average number of total noncontrolling   OP units - basic

1,381   1,815   1,705   1,815  

Weighted average number of total commons shares and   noncontrolling OP units - basic

12,613 7,294 10,733 5,827
Effect of dilutive securities:
Unvested restricted shares 12   20   14   29  

Weighted average number of total common shares and   noncontrolling OP units - dilutive

12,625   7,314   10,747   5,856  
 
FFO per share and unit - basic $ 0.22 $ 0.35 $ 0.81 $ 1.44
FFO per share and unit - diluted $ 0.22 $ 0.35 $ 0.81 $ 1.44
 
FFO-Core per share and unit - basic $ 0.25 $ 0.28 $ 0.90 $ 1.35
FFO-Core per share and unit - diluted $ 0.25 $ 0.28 $ 0.89 $ 1.35
 
           

Whitestone REIT and Subsidiaries

RECONCILIATION OF NON-GAAP MEASURES

(in thousands, except per share and per unit data)

 

Three Months Ended December 31,

Twelve Months Ended December 31,

2011

   

2010

2011

   

2010

   

2009

 

PROPERTY NET OPERATING INCOME ("NOI")

 
Net income attributable to Whitestone REIT $ 556 $ 545 $ 1,123 $ 1,105 $ 1,342
General and administrative expenses 1,911 1,257 6,648 4,992 6,072
Depreciation and amortization 2,239 1,902 8,365 7,225 6,958
Involuntary conversion

-

(558 )

-

(558 ) (1,542 )
Interest expense 1,451 1,410 5,728 5,620 5,749
Interest, dividend and other investment income (81 ) (9 ) (460 ) (28 ) (36 )
Provision for income taxes 60 51 225 264 222
Loss on disposal of assets 129 47 146 160 196
Gain on sale of property

-

-

(397 )

-

-

Net income (loss) attributable to noncontrolling   interests

94   206   210   470   733  
NOI $ 6,359   $ 4,851   $ 21,588   $ 19,250   $ 19,694  
 

EARNINGS BEFORE INTEREST, INCOME TAX,   DEPRECIATION AND AMORTIZATION   ("EBITDA")

 
Net income attributable to Whitestone REIT $ 556 $ 545 $ 1,123 $ 1,105 $ 1,342
Depreciation and amortization 2,239 1,902 8,365 7,225 6,958
Involuntary conversion

-

(558 )

-

(558 ) (1,542 )
Interest expense 1,451 1,410 5,728 5,620 5,749
Provision for income taxes 60 51 225 264 222
Loss (gain) on disposal of assets 129 47 146 160 196
Net income attributable to noncontrolling interests 94   206   210   470   733  
EBITDA $ 4,529   $ 3,603   $ 15,797   $ 14,286   $ 13,658  
 
Three Months Ended
December 31,   September 30,   June 30,   March 31,
2011 2011 2011 2011
Net income (loss) attributable to Whitestone REIT $ 556 $ 578 $ (196 ) $ 185
Depreciation and amortization 2,239 2,161 1,976 1,989
Interest expense 1,451 1,430 1,445 1,402
Provision for income taxes 60 54 58 53
Loss (gain) on disposal of assets 129 (1 )

-

18

Net income (loss) attributable to noncontrolling   interests

94   97   (42 ) 61  
EBITDA $ 4,529   $ 4,319   $ 3,241   $ 3,708  




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