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Whitestone REIT Announces Operating Results For The Second Quarter 2012

Stocks in this article: WSR

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 share data)
 
        June 30, 2012         December 31, 2011
(unaudited)

ASSETS

 

Real estate assets, at cost
Property $ 304,517 $ 292,360
Accumulated depreciation   (48,999 )   (45,472 )
Total real estate assets 255,518 246,888
Cash and cash equivalents 3,863 5,695
Marketable securities 2,786 5,131
Escrows and acquisition deposits 3,767 4,996
 
Accrued rents and accounts receivable, net of allowance for doubtful accounts 6,727 6,053
Unamortized lease commissions and loan costs 4,495 3,755
Prepaid expenses and other assets   1,481     975  
Total assets $ 278,637   $ 273,493  
LIABILITIES AND EQUITY

 

 

Liabilities:
Notes payable $ 140,051 $ 127,890
Accounts payable and accrued expenses 7,034 9,017
Tenants' security deposits 2,393 2,232
Dividends and distributions payable   3,655     3,647  
Total liabilities   153,133     142,786  
Commitments and contingencies: - -
Equity:
Preferred shares, $0.001 par value per share; 50,000,000 shares authorized;
none issued and outstanding at June 30, 2012 and December 31, 2011,
respectively - -
Class A common shares, $0.001 par value per share; 50,000,000 shares
authorized; 0 and 2,603,292 issued and outstanding as of June 30, 2012 and
December 31, 2011, respectively - 2
Class B common shares, $0.001 par value per share; 350,000,000 shares
authorized; 12,024,821 and 8,834,563 issued and outstanding as of June 30,
2012 and December 31, 2011, respectively 10 8
Additional paid-in capital 164,231 158,127
Accumulated other comprehensive loss (497 ) (1,119 )
Accumulated deficit   (46,639 )   (41,060 )
Total Whitestone REIT shareholders' equity 117,105 115,958
Noncontrolling interest in subsidiary   8,399     14,749  
Total equity   125,504     130,707  
Total liabilities and equity $ 278,637   $ 273,493  
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
 
        Three Months Ended June 30,         Six Months Ended June 30,
2012         2011 2012         2011
Property revenues
Rental revenues $ 8,523 $ 6,705 $ 16,651 $ 13,376
Other revenues   2,464     1,365     4,762     2,780  
Total property revenues   10,987     8,070     21,413     16,156  
 
Property expenses
Property operation and maintenance 2,759 1,998 5,111 3,952
Real estate taxes   1,503     1,108     2,813     2,128  
Total property expenses   4,262     3,106     7,924     6,080  
 
Other expenses (income)
General and administrative 1,863 1,778 3,504 3,242
Depreciation and amortization 2,663 1,976 5,207 3,965
Interest expense 1,734 1,445 3,446 2,847
Interest, dividend and other investment income   (83 )   (55 )   (153 )   (115 )
Total other expense   6,177     5,144     12,004     9,939  
 
Income (loss) before loss on disposal of assets and income
taxes 548 (180 ) 1,485 137
 
Provision for income taxes (70 ) (58 ) (135 ) (111 )
Loss on sale or disposal of assets   (16 )   -     (28 )   (18 )
 
Net income (loss) 462 (238 ) 1,322 8
 
 
Less: Net income (loss) attributable to noncontrolling interests   31     (42 )   98     1  
 
Net income (loss) attributable to Whitestone REIT $ 431   $ (196 ) $ 1,224   $ 7  
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
 
        Three Months Ended June 30,         Six Months Ended June 30,
2012         2011 2012         2011
Basic and Diluted Earnings (Loss) Per Share:
 
Net income (loss) attributable to common shareholders excluding
amounts attributable to unvested restricted shares $ 0.04 $ (0.02 ) $ 0.10 $ -  
 
 
Weighted average number of common shares outstanding:
Basic 11,746 8,520 11,685 7,008
Diluted 11,754 8,520 11,696 7,008
 
Distributions declared per common share / OP unit $ 0.2850 $ 0.2850 $ 0.5700 $ 0.5700
 
 
Consolidated Statements of Comprehensive Income (Loss)
 
Net income (loss) $ 462 $ (238 ) $ 1,322 $ 8
 
Other comprehensive gain (loss)
 
Unrealized gain (loss) on available-for-sale marketable
securities   33   (209 )   799   (209 )
 
Comprehensive income (loss)

495

(447

)

2,121

(201

)
 
Less: Comprehensive income (loss) attributable to
noncontrolling interests   30   (78 )   157   (41 )
 
Comprehensive income (loss) attributable to Whitestone
REIT $

465

$

(369

) $

1,964

$

(160

)
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
        Six Months Ended June 30,
2012         2011
 
Cash flows from operating activities:
Net income $ 1,322 $ 8
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 4,573 3,736
Amortization of deferred loan costs 634 229
Gain on sale of marketable securities (32 ) (38 )
Loss on sale or disposal of assets 28 18
Bad debt expense 358 214
Share-based compensation 266 155
Changes in operating assets and liabilities:
Escrows and acquisition deposits 1,229 1,986
Accrued rent and accounts receivable (1,064 ) (544 )
Unamortized lease commissions (600 ) (402 )
Prepaid expenses and other assets 298 495
Accounts payable and accrued expenses (1,917 ) (1,758 )
Tenants' security deposits   161     49  
Net cash provided by operating activities   5,256     4,148  
 
Cash flows from investing activities:
Acquisitions of real estate (6,400 ) (8,650 )
Additions to real estate (6,465 ) (2,066 )
Investments in marketable securities (750 ) (10,461 )
Proceeds from sales of marketable securities   3,926     909  
Net cash used in investing activities   (9,689 )   (20,268 )
 
Cash flows from financing activities:
Distributions paid to common shareholders (6,684 ) (3,737 )
Distributions paid to OP unit holders (559 ) (1,030 )
Proceeds from issuance of common shares - 60,066
Payments of exchange offer costs (306 ) -
Proceeds from notes payable 13,156 2,905
Repayments of notes payable (1,819 ) (1,540 )
Payments of loan origination costs   (1,187 )   (359 )
Net cash provided by financing activities   2,601     56,305  
 
Net increase (decrease) in cash and cash equivalents (1,832 ) 40,185
Cash and cash equivalents at beginning of period   5,695     17,591  
Cash and cash equivalents at end of period $ 3,863   $ 57,776  
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
        Six Months Ended June 30,
2012         2011
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,375 $ 2,838
Cash paid for taxes $ 225 $ 215
Non cash investing and financing activities:
Disposal of fully depreciated real estate $ 523 $ 21
Financed insurance premiums 780 649
Value of shares issued under dividend reinvestment plan 45 -
Accrued offering costs 28 305
Value of Class B shares exchanged for OP units 6,224 -
Change in fair value of available-for-sale securities 799 (209 )
 
 
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, expect per share and per unit data)
 
        Three Months Ended June 30,         Six Months Ended June 30,
2012         2011 2012         2011
FFO AND FFO-CORE
Net income (loss) attributable to Whitestone REIT $ 431 $ (196 ) $ 1,224 $ 7
 
Depreciation and amortization of real estate assets 2,254 1,827 4,503 3,677
Loss on disposal of assets 16 - 28 18
Net income (loss) attributable to noncontrolling
interests   31     (42

)

  98     1  
FFO 2,732 1,589 5,853 3,703
 
Acquisition costs 130 141 $ 194 $ 142
Legal settlement   -     293     (131 )   356  
FFO-Core $ 2,862   $ 2,023   $ 5,916   $ 4,201  
 
FFO PER SHARE AND OP UNIT CALCULATION:
Numerator:
FFO $ 2,732 $ 1,589 $ 5,853 $ 3,703
Distributions paid on unvested restricted common
shares   (2 )   (4 )   (6 )   (10 )
FFO excluding amounts attributable to unvested
restricted common shares   2,730     1,585     5,847     3,693  
FFO-Core excluding amounts attributable to unvested
restricted common shares $ 2,860   $ 2,019     5,910     4,191  
 
Denominator:
Weighted average number of total common shares -
basic 11,746 8,520 11,685 7,008
Weighted average number of total noncontrolling OP
units - basic   882     1,815     937     1,815  
Weighted average number of total commons shares
and noncontrolling OP units - basic 12,628 10,335 12,622 8,823
 
Effect of dilutive securities:
Unvested restricted shares   8     -     11     -  
Weighted average number of total common shares
and noncontrolling OP units - dilutive   12,636     10,335     12,633     8,823  
 
FFO per share and unit - basic $ 0.22 $ 0.15 $ 0.46 $ 0.42
FFO per share and unit - diluted $ 0.22 $ 0.15 $ 0.46 $ 0.42
 
FFO-Core per share and unit - basic $ 0.23 $ 0.20 $ 0.47 $ 0.48
FFO-Core per share and unit - diluted $ 0.23 $ 0.20 $ 0.47 $ 0.48
 
 
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share and per unit data)
 
        Three Months Ended June 30,         Six Months Ended June 30,
2012         2011 2012         2011
 
PROPERTY NET OPERATING INCOME ("NOI")
 
Net income (loss) attributable to Whitestone REIT $ 431 $ (196 ) $ 1,224 $ 7
General and administrative expenses 1,863 1,778 3,504 3,242
Depreciation and amortization 2,663 1,976 5,207 3,965
Interest expense 1,734 1,445 3,446 2,847
Interest, dividend and other investment income (83 ) (55 ) (153 ) (115 )
Provision for income taxes 70 58 135 111
Loss on disposal of assets 16 - 28 18
Net income (loss) attributable to noncontrolling
interests   31     (42 )   98     1  
NOI $ 6,725   $ 4,964   $ 13,489   $ 10,076  
 
EARNINGS BEFORE INTEREST, TAX,
DEPRECIATION
AND AMORTIZATION ("EBITDA")
 
Net income (loss) attributable to Whitestone REIT $ 431 $ (196 ) $ 1,224 $ 7
Depreciation and amortization 2,663 1,976 5,207 3,965
Interest expense 1,734 1,445 3,446 2,847
Provision for income taxes 70 58 135 111
Loss on disposal of assets 16 - 28 18
Net income (loss) attributable to noncontrolling
interests   31     (42 )   98     1  
EBITDA $ 4,945   $ 3,241   $ 10,138   $ 6,949  
 
                               
Three Months Ended
June 30, March 31, December 31, September 30,
2012 2012 2011 2011
Net income attributable to Whitestone REIT $ 431 $ 793 $ 556 $ 578
Depreciation and amortization 2,663 2,544 2,239 2,161
Interest expense 1,734 1,712 1,451 1,430
Provision for income taxes 70 65 60 54
Loss (gain) on disposal of assets 16 12 129 (1 )
 
Net income attributable to noncontrolling interests   31   67   94   97  
EBITDA $ 4,945 $ 5,193 $ 4,529 $ 4,319  




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