Whitestone REIT Announces Operating Results For The First Quarter 2012

Whitestone REIT (NYSE Amex: WSR - “Whitestone” or the “Company”), a fully integrated real estate company that owns, operates and re-develops Community Centered Properties TM, which are visibly located in established or developing culturally diverse neighborhoods, announced its financial results for the first quarter of 2012.

“Whitestone continues to acquire off market value add Community Center Properties at a discount to replacement cost. During the past 18 months our new acquisitions have added to our core operating EBITDA, evidenced by the year-over-year 41% increase in the first quarter of 2012. A significant part of our growth is driven by our focus on our small space tenants that are entrepreneurial - community based service businesses that meet the needs of people living within a five mile radius of the properties we own," said James C. Mastandrea, Chairman and Chief Executive Officer. "During the quarter, we continued pre-acquisition due diligence activities on many properties that meet our acquisition criteria, drawing from our substantial pipeline of community centered properties. We expect that over the coming quarters we will meaningfully add select properties to our portfolio. We are well positioned, with a strong balance sheet and an unsecured line of credit, to utilize our financial flexibility and be nimble and quick when the right opportunity is uncovered. Our experienced team of Whitestone associates continues to work together integrating our acquisitions with our operations to create additional long-term value for our shareholders.”

Highlights: First Quarter 2012 Compared to First Quarter 2011
  • Net income attributable to Whitestone REIT was $793,000, or $0.07 per diluted common share for the first quarter 2012, compared to $185,000 or $0.03 per diluted common share for the same period in 2011.
  • Funds from Operations ("FFO") for the first quarter 2012 was $3.1 million, or $0.25 per diluted common share and operating partnership unit ("OP unit"), as compared to $2.1 million or $0.29 per diluted common share and OP unit for the first quarter 2011.
  • Earnings Before Interest, Tax, Depreciation and Amortization ("EBITDA") for the first quarter 2012 was $5.2 million as compared to $3.7 million for the first quarter 2011.
  • Property net operating income (“NOI”) increased 33% to $6.8 million for the first quarter 2012 as compared to $5.1 million for the same period in 2011. The increase of $1.7 million is primarily attributable to NOI of new acquisitions.
  • The Company declared a quarterly cash distribution of $0.285 per common share and OP unit, which was paid in three equal installments of $0.095 in January, February and March 2012. The distribution rate has remained the same since the distribution paid on July 8, 2010. In February 2012, the Company also declared its second quarter cash distribution of $0.285 per common share and OP unit, which has been paid or will be paid in three equal installments of $0.095 in April, May and June 2012.

First Quarter 2012 Leasing Highlights

The Company's Operating Portfolio Occupancy Rate increased to 87% as of March 31, 2012 from 84% as of March 31, 2011. The Company defines Operating Portfolio Occupancy Rate as physical occupancy in all properties, excluding (i) new acquisitions through the earlier of attainment of 90% occupancy or 18 months of ownership and (ii) properties that are undergoing significant redevelopment or re-tenanting. Total physical property occupancy, which includes properties under redevelopment, undergoing significant retenanting and recent acquisitions, was 85% as of March 31, 2012, an increase of 3% from 82% as of March 31, 2011.

The Company signed 90 new and renewal leases representing 159,000 square feet during the first quarter of 2012, primarily with tenants that required less than 3,000 square feet in multi-cultural neighborhoods, which drives premium rents. A summary of leasing activity is shown below:

  • Increase in total number of tenants by 3% from year end 2011 to 941 from 915;
  • An increase of 13% in total lease value of new and renewal leases signed: $6.8 million in the first quarter of 2012 versus $6.0 million in the same period of 2011;
  • An increase of 13% in the number of new and renewal leases signed: 90 in the first quarter of 2012 versus 80 in the same period of 2011; and
  • Total new and renewal leases signed of 159,000 square feet in the first quarter of 2012, with an average size of 1,769 square feet as compared to 218,000 square feet and average size of 2,721 in the same period of 2011.

Community Centered Properties TM Portfolio Statistics

As of March 31, 2012, Whitestone owned 45 Community Centered Properties TM with approximately 3.6 million square feet of gross leasable area, including two development land parcels, located in five of the top markets in the United States in terms of population growth: Houston, Dallas, San Antonio, Phoenix and Chicago.

The Company's strategic efforts target entrepreneurial tenants that provide services to the surrounding neighborhood at each Community Centered Property TM. These tenants tend to occupy smaller spaces (less than 3,000 square feet) and, as of March 31, 2012, provided a 68% premium rental rate compared to Whitestone's larger space tenants. The Company currently services 941 tenants throughout its portfolio. No single tenant accounted for more than 2.0% of the Company's annualized base rental revenues as of March 31, 2012.

Balance Sheet

Whitestone had 19 properties, unencumbered by debt as of March 31, 2012, with an undepreciated cost basis of $115 million. The total undepreciated values of the Company's real estate assets and real estate indebtedness were $295 million and $134 million, respectively, as of March 31, 2012. As of March 31, 2012, 69% of the Company's debt was fixed-rate and the Company's weighted average interest rate for the quarter was 5.2%.

On February 27, 2012, Whitestone closed on a new three-year $125 million unsecured revolving credit facility. The new facility replaces the existing $20 million facility with Bank of Montreal. The Company plans to use the new facility for general corporate purposes, primarily for acquisitions and redevelopment of existing properties in its portfolio. BMO Capital Markets served as the Sole Lead Arranger and Sole Book Runner. Bank of Montreal also serves as the Administrative Agent. U. S. Bank National Association served as Syndication Agent, while Capital One, National Association, and Wells Fargo Bank, National Association served as Co-Documentation Agents. Also included in the lender group is MidFirst Bank. As of March 31, 2012, $107 million was available under the credit facility.

Supplemental Financial Information

Further details regarding Whitestone REIT's results of operations, communities and tenants can be accessed at the Company's website at www.whitestonereit.com.

Webcast and Conference Call

The Company will host a conference call for investors and other interested parties on Wednesday, May 9, 2012 at 5:00 p.m. (Eastern Time). Interested parties can listen to the call live on the internet through the Investor Relations section of the Company's website, www.whitestonereit.com, using the News/Events - Press Releases tab. The call is also accessible via telephone by dialing 1-(800) 575-5790 for domestic participants or 1-(719) 325-2122 for international participants and entering the passcode 4632897. Listeners should go to the website at least 15 minutes prior to the call to download and install any necessary audio software. Those dialing in should call in at least 10 minutes prior to the start.

The conference call will be recorded and a telephone replay will be available through May 23, 2012, by dialing 1-(877) 870-5176 for domestic participants or 1-(858) 384-5517 for international participants and entering the passcode 4632897. The replay of the call will also be available on the Company's website.

The earnings release and supplemental data package will be located in the Investor Relations section of the website on the News/Events Press Releases tab. For those without internet access, the first quarter 2012 earnings release and supplemental data package will be available by mail upon request. To receive a copy, please call the Company's Investor Relations line at (713) 435-2221.

About Whitestone REIT

Whitestone REIT (NYSE Amex: WSR) is a fully integrated real estate investment trust that owns, operates and redevelops Community Centered Properties TM, which are visibly located properties in established or developing culturally diverse neighborhoods. Whitestone focuses on value-creation in its Centers, as it markets, leases and manages its Centers to match tenants with the shared needs of surrounding neighborhoods. Operations are structured for providing cost-effective service to local service-oriented smaller space tenants (less than 3,000 square feet). Whitestone has a diversified tenant base concentrated on service offerings including medical, education, and casual dining. The largest of its 941 tenants comprise less than 2% of its rental revenues. Headquartered in Houston, Texas and founded in 1998, the Company is internally managed with a portfolio of commercial properties in Texas, Arizona, and Illinois. For additional information about the Company, please visit www.whitestonereit.com. The Investor Relations section of the Company's website has links to SEC filings, news releases, financial reports and investor newsletters.

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We intend for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such information is subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology, such as "may," "will," "expect," "intend," "anticipate," "believe," "continue" or similar words or phrases that are predictions of future events or trends and which do not relate solely to historical matters. Examples of such statements in this press release include, but are not limited to, the strength of the Company's leasing portfolio and lease renewal activities.

The following are some of the factors that could cause the Company's actual results and its expectations to differ materially from those described in the Company's forward-looking statements: the Company's ability to successfully identify and consummate suitable acquisitions; current adverse market and economic conditions; lease terminations or lease defaults; the impact of competition on the Company's efforts to renew existing leases; changes in the economies and other conditions of the specific markets in which the Company operates; economic and regulatory changes; the success of the Company's real estate strategies and investment objectives; the Company's ability to continue to qualify as a REIT under the Internal Revenue Code; and other factors detailed in our most recent Annual Report on Form 10-K, quarterly reports on Form 10-Q and other documents we file with the Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. We cannot guarantee the accuracy of any such forward-looking statements contained in this press release, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measures

This release contains the supplemental non-GAAP financial measures of FFO, FFO-Core, NOI and EBITDA. Following are definitions and reconciliations of these metrics to their most comparable GAAP metric.

FFO: Management believes that FFO is a useful measure of the Company's operating performance. The Company computes FFO as defined by the National Association of Real Estate Investment Trusts, or NAREIT, which states that FFO should represent net income (loss) available to common shareholders (computed in accordance with GAAP) plus real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures and excluding gains or losses on the sale of operating real estate assets and extraordinary items. In October 2011, NAREIT communicated to its members that the exclusion of impairment writedowns of depreciable real estate is consistent with the definition of FFO, and prior periods should be restated to be consistent with this guidance. As the Company has not had any impairments in the past five years, the Company was not required to restate our FFO for prior periods. FFO does not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an alternative to net income as an indication of the Company's performance or to cash flow from operations as a measure of liquidity or ability to make distributions.

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 share data)
 
March 31, 2012   December 31, 2011
(unaudited)
ASSETS
Real estate assets, at cost
Property $ 295,184 $ 292,360
Accumulated depreciation (47,481 ) (45,472 )
Total real estate assets 247,703 246,888
Cash and cash equivalents 8,288 5,695
Marketable securities 4,034 5,131
Escrows and acquisition deposits 2,618 4,996
Accrued rents and accounts receivable, net of allowance for doubtful accounts 6,472 6,053
Unamortized lease commissions and loan costs 4,752 3,755
Prepaid expenses and other assets 875   975  
Total assets $ 274,742   $ 273,493  
LIABILITIES AND EQUITY
Liabilities:
Notes payable $ 134,208 $ 127,890
Accounts payable and accrued expenses 6,049 9,017
Tenants' security deposits 2,277 2,232
Dividends and distributions payable 3,649   3,647  
Total liabilities 146,183   142,786  
Commitments and contingencies:
Equity:
Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued and outstanding at March 31, 2012 and December 31, 2011, respectively
Class A common shares, $0.001 par value per share; 50,000,000 shares authorized; 1,737,438 and 2,603,292 issued and outstanding as of March 31, 2012 and December 31, 2011, respectively 1 2
Class B common shares, $0.001 par value per share; 350,000,000 shares authorized; 10,157,693 and 8,834,563 issued and outstanding as of March 31, 2012 and December 31, 2011, respectively 9 8
Additional paid-in capital 162,870 158,127
Accumulated other comprehensive loss (413 ) (1,119 )
Accumulated deficit (43,692 ) (41,060 )
Total Whitestone REIT shareholders' equity 118,775 115,958
Noncontrolling interest in subsidiary 9,784   14,749  
Total equity 128,559   130,707  
Total liabilities and equity $ 274,742   $ 273,493  
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
 
  Three Months Ended March 31,
2012   2011
Property revenues
Rental revenues $ 8,128 $ 6,671
Other revenues 2,298   1,415  
Total property revenues 10,426   8,086  
 
Property expenses
Property operation and maintenance 2,352 1,954
Real estate taxes 1,310   1,020  
Total property expenses 3,662   2,974  
 
Other expenses (income)
General and administrative 1,641 1,464
Depreciation and amortization 2,544 1,989
Interest expense 1,712 1,402
Interest, dividend and other investment income (70 ) (60 )
Total other expense 5,827   4,795  
 
Income before loss on disposal of assets and income taxes 937 317
 
Provision for income taxes (65 ) (53 )
Loss on sale or disposal of assets (12 ) (18 )
 
Net income 860 246
 
Less: Net income attributable to noncontrolling interests 67   61  
 
Net income attributable to Whitestone REIT $ 793   $ 185  
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except per share data)
 
  Three Months Ended March 31,
2012   2011
Basic and Diluted Earnings Per Share:
Net income attributable to common shareholders excluding amounts attributable to unvested restricted shares $ 0.07   $ 0.03
 
Weighted average number of common shares outstanding:
Basic 11,624 5,479
Diluted 11,638 5,499
 
Distributions declared per common share / OP unit $ 0.2850 $ 0.2850
 
Consolidated Statements of Comprehensive Income
 
Net income $ 860 $ 246
 
Other comprehensive gain
 
Unrealized gain on available-for-sale marketable securities 766  
 
Comprehensive income 1,626 246
 
Less: Comprehensive income attributable to noncontrolling interests 127   61
 
Comprehensive income attributable to Whitestone REIT $ 1,499   $ 185
 
 
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 
  Three Months Ended March 31,
2012   2011
 
Cash flows from operating activities:
Net income $ 860 $ 246
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,283 1,879
Amortization of deferred loan costs 261 110
Gain on sale of marketable securities (1 ) (38 )
Loss on sale or disposal of assets 12 18
Bad debt expense 132 69
Share-based compensation 78 78
Changes in operating assets and liabilities:
Escrows and acquisition deposits 2,378 3,021
Accrued rent and accounts receivable (551 ) (535 )
Unamortized lease commissions and loan costs (280 ) (133 )
Prepaid expenses and other assets 177 266
Accounts payable and accrued expenses (2,980 ) (2,220 )
Tenants' security deposits 45   19  
Net cash provided by operating activities 2,414   2,780  
 
Cash flows from investing activities:
Additions to real estate (2,893 ) (1,042 )
Investments in marketable securities (750 ) (1,865 )
Proceeds from sales of marketable securities 2,614   908  
Net cash used in investing activities (1,029 ) (1,999 )
 
Cash flows from financing activities:
Distributions paid to common shareholders (3,322 ) (1,616 )
Distributions paid to OP unit holders (301 ) (515 )
Payments of exchange offer costs (225 )
Proceeds from notes payable 6,956 2,905
Repayments of notes payable (713 ) (731 )
Payments of loan origination costs (1,187 ) (81 )
Net cash provided by (used in) financing activities 1,208   (38 )
 
Net increase in cash and cash equivalents 2,593 743
Cash and cash equivalents at beginning of period 5,695   17,591  
Cash and cash equivalents at end of period $ 8,288   $ 18,334  
 
 
 
  Three Months Ended March 31,
2012   2011
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,671 $ 1,404
Non cash investing and financing activities:
Disposal of fully depreciated real estate $ 11 $ 1
Financed insurance premiums 31 550
Value of shares issued under dividend reinvestment plan 22
Accrued offering costs 54 138
Value of Class B shares exchanged for OP units 4,917
Change in fair value of available-for-sale securities 766
 
 
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share and per unit data)
 
  Three Months Ended March 31,
2012   2011

FFO AND FFO-CORE
Net income attributable to Whitestone REIT $ 793 $ 185
Depreciation and amortization of real estate assets 2,249 1,850
Loss on disposal of assets 12 18
Net income attributable to noncontrolling interests 67   61  
FFO 3,121 2,114
 
Acquisition costs 64 1
Legal settlement (131 )  
FFO-Core $ 3,054   $ 2,115  
 

FFO PER SHARE AND OP UNIT CALCULATION:
Numerator:
FFO $ 3,121 $ 2,114
Distributions paid on unvested restricted Class A common shares (4 ) (6 )
FFO excluding amounts attributable to unvested restricted Class A common shares 3,117   2,108  
FFO-Core excluding amounts attributable to unvested restricted Class A common shares 3,050   2,109  
 
Denominator:
Weighted average number of total common shares - basic 11,624 5,479
Weighted average number of total noncontrolling OP units - basic 992   1,815  
Weighted average number of total commons shares and noncontrolling OP units - basic 12,616 7,294
 
Effect of dilutive securities:
Unvested restricted shares 14   20  
Weighted average number of total common shares and noncontrolling OP units - dilutive 12,630   7,314  
 
FFO per share and unit - basic $ 0.25 $ 0.29
FFO per share and unit - diluted $ 0.25 $ 0.29
 
FFO-Core per share and unit - basic $ 0.24 $ 0.29
FFO-Core per share and unit - diluted $ 0.24 $ 0.29
 
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share and per unit data)
 
  Three Months Ended March 31,
2012   2011
 
PROPERTY NET OPERATING INCOME ("NOI")
 
Net income attributable to Whitestone REIT $ 793 $ 185
General and administrative expenses 1,641 1,464
Depreciation and amortization 2,544 1,989
Interest expense 1,712 1,402
Interest, dividend and other investment income (70 ) (60 )
Provision for income taxes 65 53
Loss on disposal of assets 12 18
Net income attributable to noncontrolling interests 67   61  
NOI $ 6,764   $ 5,112  
 
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION
AND AMORTIZATION ("EBITDA")
 
Net income attributable to Whitestone REIT $ 793 $ 185
Depreciation and amortization 2,544 1,989
Interest expense 1,712 1,402
Provision for income taxes 65 53
Loss on disposal of assets 12 18
Net income attributable to noncontrolling interests 67   61  
EBITDA $ 5,193   $ 3,708  
 
  Three Months Ended
March 31,     December 31,     September 30,     June 30,
2012 2011 2011 2011
Net income (loss) attributable to Whitestone REIT $ 793 $ 556 $ 578 $ (196 )
Depreciation and amortization 2,544 2,239 2,161 1,976
Interest expense 1,712 1,451 1,430 1,445
Provision for income taxes 65 60 54 58
Loss (gain) on disposal of assets 12 129 (1 )
Net income attributable to noncontrolling interests 67   94   97   (42 )
EBITDA $ 5,193   $ 4,529   $ 4,319   $ 3,241  

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX