EXHIBIT 99.2
COVER
TABLE OF CONTENTS
CORPORATE PROFILE
NYSE-Amex: WSR Class B Common Shares Listed 8/25/2010 37 Community Centers 3.0 Million SF 770 Tenants 5 Top Growth Markets Houston Dallas San Antonio Phoenix Chicago Fiscal Year-End 12/31 Common Shares & Units Outstanding Class B Common 2.2 Million Class A Common 3.471 Million Operating Partnership Units 1.815 Million Dividend Quarter/Annualized $0.2850/$1.14 Dividend Yield 9.5%* Board of Directors James C. Mastandrea Daryl J. Carter Daniel G. DeVos Donald F. Keating Jack L. Mahaffey *Based on share price of $11.98 | Whitestone REIT (NYSE-Amex: WSR) is a fully integrated real estate investment trust that owns, operates and re-develops Community Centered Properties TM, which are visibly located properties in established or developing, culturally diverse neighbourhoods. As of September 30, 2010, the Company owns 37 Community Centered Properties TM with approximately 3.0 million square feet of leasable space, located in five of the top markets in the USA in terms of po pulation growth: Houston, Dallas, San Antonio, Phoenix and Chicago. With a corporate office in Houston, Texas, Whitestone was founded in 1998. Whitestone focuses on value-creation in its properties, as it markets, leases and manages its properties. We invest in properties that are or can become Community Centered Properties TM from which our tenants deliver needed services to the surrounding community. We focus on niche properties with smaller rental spaces that present opportunities for attractive returns. The Company’s strategic efforts target entrepreneurial tenants at each property providing services to their respective surrounding community. Operations include an internal management structure, providing cost-effective service to locally-oriented smaller space tenants. Multi-cultural community focus sets us apart from traditional commercial real estate operators. We value diversity in our team and maintain in-house leasing, property management, marketing, construction and maintenance departments with culturally diverse and multi-lingual associates who understand the particular needs of our tenants and neighborhoods. Whitestone has a diversified tenant base concentrated on service offerings such as medical, education, and casual dining. These tenants tend to occupy smaller spaces (less than 3,000 square feet) and, as of September 30, 2010, provide a 42% premium rental rate compared to Whitestone’s larger space tenants. The largest of its 770 tenants comprise less than 2.5% of its rental revenues. Investor Relations: Whitestone REIT Anne I. Gregory, Vice President, Investor Relations & Marketing 2600 South Gessner Houston, Texas 77036 713.435.2221 email: ir@whitestonereit.com website: www.whitestonereit.com ICR Inc. - Brad Cohen 203.682.8211 Analyst Coverage: J.J. B. Hilliard, W.LO. Lyons, LLC Wunderlich Securities, Inc. Carol L. Kemple Merril Ross 502.588.1839 703.669.9255 ckemple@hilliard.com mross@wundernet.com Newest Acquisitions:   The Citadel - Scottsdale Arizona Sunnyslope Village - Phoenix, Arizona October 5, 2010 November 1, 2010 |
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EARNINGS RELEASE
Anne Gregory, Vice President Marketing & Investor Relations
713.435.2213 agregory@whitestonereit.com
WHITESTONE REIT ANNOUNCES OPERATING RESULTS FOR THE THIRD QUARTER 2010
Raises $23 Million in IPO … Physical Occupancy of Portfolio Rises One Percent to 83%
Houston, Texas, November 1, 2010 –Whitestone REIT (NYSE-Amex: WSR – “Whitestone”), a fully integrated real estate company that owns, operates and re-develops Community Centered PropertiesTM, which are visibly located in established or developing culturally diverse neighborhoods, announced its financial results for the quarter and nine months ended September 30, 2010.
“We have successfully made progress in the execution of our community centered property strategy, which continues to produce solid operating and financial results. In August, we completed our initial public offering and listing of our Class B common shares on NYSE-Amex. We have now completed two off-market acquisitions in the Phoenix area, one of our target markets,” said James C. Mastandrea, Whitestone’s Chairman and Chief Executive Officer. “Our strategy to lease small spaces to service-oriented tenants creates a stable yet growing level of occupancy, even during the most challenged economic times. We receive a 42% rent premium on spaces that are less than 3,000 square feet, as compared to our larger spaces. Our focus on multi-cultural communities in some of the fastest growing cities in the country fu rther positions Whitestone for growth. As our tenants’ businesses become established within the local communities they serve, our business grows with them.”
Third Quarter 2010 Highlights compared to Third Quarter 2009*:
*2009 results, except Funds From Operations (“FFO”)-Core, include in income a portion of an insurance settlement for damages to the Company’s Houston communities from Hurricane Ike.
| · | FFO-Core increased 25.0%, or approximately $0.4 million, to $2.0 million, or $0.34 per diluted common share and operating partnership (“OP”) unit, as compared to $1.6 million, or $0.32 per diluted common share and OP unit, for the same period in 2009. FFO-Core excludes the insurance settlement referenced above which was $0.9 million, or $0.17 per diluted common share and OP unit, in 2009, as well as acquisition costs of $10,000 incurred in 2010. |
| · | FFO was $2.0 million, or $0.34 per diluted common share and OP unit, as compared to $2.5 million or $0.49 per diluted common share and OP unit for the same period in 2009. The income recognized from the insurance settlement referenced above was $0.9 million, or $0.17 per diluted common share and OP unit, in 2009. |
| · | Property net operating income (“NOI”) was $4.9 million versus $5.2 million for the same period in 2009. The income recognized from the insurance settlement referenced above was $0.4 million in 2009. |
| · | Net income attributable to Whitestone REIT was $0.2 million, or $0.04 per diluted common share, compared to $0.6 million or $0.18 per diluted common share for the same period in 2009. The income from the insurance settlement referenced above was $0.6 million in 2009. |
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| · | Acquired two value-add Community Centered Properties TM for $8.6 million since the Company’s Initial Public Offering (“IPO”): The Citadel and Sunnyslope Village, both located in the greater Phoenix market. |
| · | Declared quarterly cash dividend of $0.285 per common share and OP unit, paid in three equal installments of $0.095 in October, November and December 2010. |
Year to Date FFO
Excluding the insurance settlement referenced above, FFO-Core per share increased by 10% to $1.09 per diluted common share and OP unit in the first nine months of 2010. This compares to $0.99 per diluted common share and OP unit in the same period in 2009.
Whitestone’s FFO was $5.9 million, or $1.09 per diluted common share and OP unit, for the nine months ended September 30, 2010 as compared to $5.7 million or $1.11 per diluted common share and OP unit, for the same period in 2009. The income from the insurance settlement referenced above was $0.7 million, or $0.12 per diluted common share and OP unit, in 2009.
Capital Markets and Acquisition Activity
The Company completed its IPO on August 25, 2010 in which it sold 2.2 million Class B common shares for $12 per share. Net proceeds from the offering were approximately $23.0 million, which the Company intends to use primarily to acquire value-add Community Centered PropertiesTM in its target markets.
Since the IPO, the Company has invested $8.6 million of the proceeds to acquire two value-add Community Centers in Scottsdale and Phoenix through two separate off-market transactions. The first property, The Citadel, Class A Community Center in Scottsdale, was acquired in September 2010. Sunnyslope Village, Class B Community Center in Central Phoenix, was acquired on November 1, 2010.
Leasing Highlights Third Quarter and Year to Date 2010
Physical occupancy in the Company’s operating portfolio increased one percent to 83% as of September 30, 2010. Total physical property occupancy, which includes properties under re-development, undergoing significant re-tenanting and recent acquisitions, was 82% as of September 30, 2010.
The Company experienced increased leasing activity from the prior year as represented by:
| · | An increase of 14% in total lease value of new and renewal leases signed: $20.9 million in the first nine months of 2010 versus $18.3 million in the same period 2009; |
| · | An increase of 20% in the number of new and renewal leases signed: 235 in the first nine months 2010 versus 196 in 2009; and |
| · | An increase of 5% in the square footage of new and renewal leases signed: 535,000 for the first nine months 2010 versus 511,000 in 2009. |
The Company has signed leases for approximately 60,000 square feet of space and is completing tenant improvements for tenants who are expected to move into their leased spaces by year end.
Community Centered PropertiesTM Portfolio Statistics
Whitestone currently owns 38 Community Centered PropertiesTM with approximately 3.2 million square feet of leasable space, located in five of the top markets in the USA in terms of population growth: Houston, Dallas, San Antonio, Phoenix and Chicago.
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The Company’s strategic efforts target entrepreneurial tenants at each property providing services to their respective surrounding community. These tenants tend to occupy smaller spaces (less than 3,000 square feet) and, as of September 30, 2010, provide a 42% premium rental rate compared to Whitestone’s larger space tenants.
The Company currently services 770 tenants. No single tenant accounts for more than 2.5% of the Company’s annualized revenue, and only one tenant represented more than 2.0%, as of September 30, 2010.
Balance Sheet
Whitestone had $27 million in cash and 15 unencumbered properties at September 30, 2010, with an undepreciated cost basis of $58 million, giving the Company meaningful financial flexibility to meet its capital needs. Whitestone’s total book assets and indebtedness were $198.4 million and $101.7 million, respectively, at September 30, 2010. The Company has no debt maturing prior to 2013. Of this debt,
75% was fixed-rate debt and 25% was floating debt with a blended interest rate of 5.6% and a weighted average maturity of 3.3 years. For the quarter the Company’s interest coverage ratio (EBITDA/Interest Expense) was 2.6.
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 webcast and conference call for investors and other interested parties on Monday, November 1, 2010 at 5:00 p.m. (Eastern Standard Time). The call will be hosted by James Mastandrea, President and Chief Executive Officer, and David Holeman, Chief Financial Officer.
Listen via Webcast: 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, or by dialing 1-(877) 407-9039 and entering the passcode 359324. Listeners should go to the website at least 15 minutes prior to the call to download and install any necessary audio software. Those using the 1-(877) number should dial in to the call at least 5 to 10 minutes prior to the start of the call.
The conference call will be recorded and a telephone replay will be available through November 15, 2010, by dialing 1-(877) 870-5176 and entering the passcode 359324. Additionally, a replay of the call will be available on the Company’s website until its next earning release.
The complete earnings release and supplemental data package will be located in the Investor Relations section of the website on the Press Releases page. For those without internet access, the third quarter 2010 earnings release and supplemental data package will be available by mail upon request. To receive a copy, please call the Investor Relations Message Center at (713) 435-2221.
About Whitestone REIT
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Whitestone REIT (NYSE-Amex: WSR) is a fully integrated real estate company that owns, operates and re-develops Community Centered PropertiesTM, which are visibly located properties in established or developing culturally diverse neighborhoods. Whitestone focuses on value-creation in its properties, as it markets, leases and manages its properties to match tenants with the shared needs of surrounding neighborhoods. Operations are structured for providing cost-effective service to locally-oriented smaller space tenants (<3,000 sq. ft.). Whitestone has a diversified tenant base concentrated on service offerings such as medical, education, and casual dining. The largest of its 770 tenants comprise less than 2.5% 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 Section of the Company's website has links to SEC filings, news releases, financial reports and investor newsletters.
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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 ca n 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 Company’s anticipated net income, depreciation and amortization and FFO-Core.
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 report 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 and NOI. 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 FFO should represent net income (loss) before noncontrolling interest (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 on the sale of property. 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 Operating Partnership 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, we believe that FFO provides a more meaningful and accurate indication of our performance. In addition, management believes that FFO provides useful information to the investment community about the Company's financial performance when compared 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, gains and losses on insurance claim settlements and acquisition costs.
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 real estate investment trust ("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 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, depreci ation and amortization, involuntary conversion, interest expense, interest income, provision for
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income taxes and loss on sale or disposition of assets, the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties.
Reconciliation of Non-GAAP Measures
(in thousands, except share, unit and per share and per unit data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| FUNDS FROM OPERATIONS ("FFO") | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| Net income (loss) attributable to Whitestone REIT | $ | 177 | $ | 601 | $ | 560 | $ | 627 | ||||||||
| Depreciation and amortization of real estate assets | 1,701 | 1,592 | 4,930 | 4,688 | ||||||||||||
| Loss (gain) on sale or disposal of assets | 72 | 5 | 113 | 58 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 57 | 329 | 264 | 343 | ||||||||||||
| FFO | $ | 2,007 | $ | 2,527 | $ | 5,867 | $ | 5,716 | ||||||||
| Acquisition Costs | 10 | - | 11 | 60 | ||||||||||||
(Gain) loss on insurance claim settlement (1) | - | (892 | ) | - | (692 | ) | ||||||||||
| Core FFO | $ | 2,017 | $ | 1,635 | $ | 5,878 | $ | 5,084 | ||||||||
| FFO PER SHARE AND OP UNITS CALCULATION: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| FFO | $ | 2,007 | $ | 2,527 | $ | 5,867 | $ | 5,716 | ||||||||
| Dividends paid on unvested restricted Class A common shares | (6 | ) | (7 | ) | (21 | ) | (20 | ) | ||||||||
| FFO excluding amounts attributable to unvested restricted Class A common shares | 2,001 | 2,520 | 5,846 | 5,696 | ||||||||||||
| Core FFO exluding amounts attributable to unvested restricted Class A common shares | 2,011 | 1,628 | 5,857 | 5,064 | ||||||||||||
| Denominator | ||||||||||||||||
| Weighted average number of total common shares - basic | 4,020 | 3,236 | 3,517 | 3,236 | ||||||||||||
| Weighted average number of total noncontrolling OP units - basic | 1,814 | 1,814 | 1,814 | 1,814 | ||||||||||||
| Weighted average number of total common shares and noncontrolling OP units - basic | 5,834 | 5,050 | 5,331 | 5,050 | ||||||||||||
| \ | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Unvested restricted shares | 20 | 65 | 31 | 67 | ||||||||||||
| Weighted average number of total common shares and noncontrolling OP units - dilutive | 5,854 | 5,115 | 5,362 | 5,117 | ||||||||||||
| FFO per share and unit - basic | $ | 0.34 | $ | 0.50 | $ | 1.10 | $ | 1.13 | ||||||||
| FFO per share and unit - diluted | $ | 0.34 | $ | 0.49 | $ | 1.09 | $ | 1.11 | ||||||||
| Core FFO per share and unit - basic | $ | 0.34 | $ | 0.32 | $ | 1.10 | $ | 1.00 | ||||||||
| Core FFO per share and unit - diluted | $ | 0.34 | $ | 0.32 | $ | 1.09 | $ | 0.99 | ||||||||
(1) $402 and $392 included in rental revenues for the three and nine months ended September 30, 2010, respectively. | ||||||||||||||||
| PROPERTY NET OPERATING INCOME ("NOI") | ||||||||||||||||
| Net income (loss) attributable to Whitestone REIT | $ | 177 | $ | 601 | $ | 560 | $ | 627 | ||||||||
| General and administrative expense | 1,263 | 1,549 | 3,735 | 4,603 | ||||||||||||
| Depreciation and amortization | 1,830 | 1,741 | 5,323 | 5,159 | ||||||||||||
| Involuntary conversion | - | (489 | ) | - | (299 | ) | ||||||||||
| Interest expense | 1,401 | 1,437 | 4,210 | 4,335 | ||||||||||||
| Interest income | (7 | ) | (8 | ) | (19 | ) | (30 | ) | ||||||||
| Provision for income taxes | 57 | 55 | 213 | 166 | ||||||||||||
| Loss on disposal of assets | 72 | 5 | 113 | 58 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 57 | 329 | 264 | 343 | ||||||||||||
| NOI | $ | 4,850 | $ | 5,220 | $ | 14,399 | $ | 14,962 | ||||||||
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| September 30, 2010 | December 31, 2009 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Real estate assets, at cost: | ||||||||
| Property | $ | 196,877 | $ | 192,832 | ||||
| Accumulated depreciation | (38,218 | ) | (34,434 | ) | ||||
| Total real estate assets | 158,659 | 158,398 | ||||||
| Cash and cash equivalents | 26,617 | 6,275 | ||||||
| Escrows and acquisition deposits | 4,332 | 8,155 | ||||||
| Accrued rent and accounts receivable, net of allowance for doubtful accounts | 4,393 | 4,514 | ||||||
| Unamortized lease commissions and loan costs | 3,659 | 3,973 | ||||||
| Prepaid expenses and other assets | 705 | 685 | ||||||
| Total assets | $ | 198,365 | $ | 182,000 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities: | ||||||||
| Notes payable | $ | 101,667 | $ | 101,782 | ||||
| Accounts payable and accrued expenses | 7,224 | 9,954 | ||||||
| Tenants' security deposits | 1,704 | 1,630 | ||||||
| Dividends and distributions payable | 2,133 | 1,775 | ||||||
| Total liabilities | 112,728 | 115,141 | ||||||
| Commitments and Contingencies: | ||||||||
| Equity: | ||||||||
| Preferred shares, $0.001 par value per share; 50,000,000 | ||||||||
| shares authorized; none issued and outstanding at September 30, 2010 and December 31, 2009 | - | - | ||||||
| Class A common shares, $0.001 par value per share; 50,000,000 shares authorized; | ||||||||
| 3,471,201 and 3,445,769 issued and outstanding at September 30, 2010 and December 31, 2009, respectively | 3 | 10 | ||||||
| Class B common shares, $0.001 par value per share; 350,000,000 shares authorized; | ||||||||
| 2,200,000 and 0 issued and outstanding at September 30, 2010 and December 31, 2009, respectively | 2 | - | ||||||
| Additional paid-in capital | 93,378 | 69,952 | ||||||
| Accumulated deficit | (29,632 | ) | (26,372 | ) | ||||
| Total Whitestone REIT shareholders' equity | 63,751 | 43,590 | ||||||
| Noncontrolling interest in subsidiary | 21,886 | 23,269 | ||||||
| Total equity | 85,637 | 66,859 | ||||||
| Total liabilities and equity | $ | 198,365 | $ | 182,000 | ||||
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Condensed Consolidated Statements of Operations – Three and Nine Months (Unaudited)
(in thousands, except share and per share amounts)
| Three Months Ended September 30, | Nine Months Ended, September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (revised) | (revised) | |||||||||||||||
| Property revenues | ||||||||||||||||
| Rental revenues | $ | 6,489 | $ | 6,950 | $ | 19,300 | $ | 20,027 | ||||||||
| Other revenues | 1,444 | 1,534 | 4,174 | 4,704 | ||||||||||||
| Total property revenues | 7,933 | 8,484 | 23,474 | 24,731 | ||||||||||||
| Property expenses | ||||||||||||||||
| Property operation and maintenance | 2,127 | 2,149 | 6,073 | 6,542 | ||||||||||||
| Real estate taxes | 956 | 1,115 | 3,002 | 3,227 | ||||||||||||
| Total property expenses | 3,083 | 3,264 | 9,075 | 9,769 | ||||||||||||
| Other expenses (income) | ||||||||||||||||
| General and administrative | 1,263 | 1,549 | 3,735 | 4,603 | ||||||||||||
| Depreciation & amortization | 1,830 | 1,741 | 5,323 | 5,159 | ||||||||||||
| Involuntary conversion | - | (489 | ) | - | (299 | ) | ||||||||||
| Interest expense | 1,401 | 1,437 | 4,210 | 4,335 | ||||||||||||
| Interest income | (7 | ) | (8 | ) | (19 | ) | (30 | ) | ||||||||
| Total other expense | 4,487 | 4,230 | 13,249 | 13,768 | ||||||||||||
| Income (loss) from continuing operations before loss | ||||||||||||||||
| on disposal of assets and income taxes | 363 | 990 | 1,150 | 1,194 | ||||||||||||
| Provision for income taxes | (57 | ) | (55 | ) | (213 | ) | (166 | ) | ||||||||
| Loss on sale or disposal of assets | (72 | ) | (5 | ) | (113 | ) | (58 | ) | ||||||||
| Net income | 234 | 930 | 824 | 970 | ||||||||||||
| Less: Net income attributable to noncontrolling interests | 57 | 329 | 264 | 343 | ||||||||||||
| Net income attributable to Whitestone REIT | $ | 177 | $ | 601 | $ | 560 | $ | 627 | ||||||||
| Earnings per share - basic | ||||||||||||||||
| Net income attributable to common shareholders | ||||||||||||||||
| excluding amounts attributable to unvested restricted shares | $ | 0.04 | $ | 0.18 | $ | 0.15 | $ | 0.19 | ||||||||
| Earnings per share - diluted | ||||||||||||||||
| Net income attributable to common shareholders | ||||||||||||||||
| excluding amounts attributable to unvested restricted shares | $ | 0.04 | $ | 0.18 | $ | 0.15 | $ | 0.18 | ||||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 4,020 | 3,236 | 3,517 | 3,236 | ||||||||||||
| Diluted | 4,040 | 3,301 | 3,548 | 3,303 | ||||||||||||
| Dividends declared per common share | ||||||||||||||||
| Class A | $ | 0.2850 | $ | 0.3375 | $ | 0.9075 | $ | 1.0125 | ||||||||
| Class B | $ | 0.2850 | $ | - | $ | 0.3810 | $ | - | ||||||||
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| Nine Months Ended September 30, | ||||||||
| 2010 | 2009 | |||||||
| (revised) | ||||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 824 | $ | 970 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) | ||||||||
| operating activities: | ||||||||
| Depreciation and amortization | 5,323 | 5,159 | ||||||
| Loss on disposal of assets | 113 | 58 | ||||||
| Bad debt expense | 357 | 803 | ||||||
| Share-based compensation | 219 | 745 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Escrows and acquisition deposits | 3,893 | (533 | ) | |||||
| Accrued rent and accounts receivable | (236 | ) | (5,401 | ) | ||||
| Unamortized lease commissions and loan costs | (514 | ) | (517 | ) | ||||
| Prepaid expenses and other assets | 514 | 421 | ||||||
| Accounts payable and accrued expenses | (2,157 | ) | 3,915 | |||||
| Tenants' security deposits | 74 | 17 | ||||||
| Net cash provided by operating activities | 8,410 | 5,637 | ||||||
| Cash flows from investing activities: | ||||||||
| Acquisitions of real estate | (2,225 | ) | (5,619 | ) | ||||
| Additions to real estate | (2,439 | ) | (2,590 | ) | ||||
| Net cash used in investing activities | (4,664 | ) | (8,209 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Dividends paid on common shares and common share equivalents | (3,534 | ) | (3,482 | ) | ||||
| Distributions paid to OP unit holders | (1,742 | ) | (1,671 | ) | ||||
| Proceeds from issuance of common shares | 23,020 | - | ||||||
| Proceeds from notes payable | 1,430 | 9,791 | ||||||
| Repayments of notes payable | (2,231 | ) | (8,046 | ) | ||||
| Payments of loan origination costs | (98 | ) | (288 | ) | ||||
| Repurchase of common shares | (249 | ) | - | |||||
| Net cash used in financing activities | 16,596 | (3,696 | ) | |||||
| Net decrease in cash and cash equivalents | 20,342 | (6,268 | ) | |||||
| Cash and cash equivalents at beginning of period | 6,275 | 12,989 | ||||||
| Cash and cash equivalents at end of period | $ | 26,617 | $ | 6,721 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 4,217 | $ | 4,116 | ||||
| Cash paid for taxes | $ | 262 | $ | 223 | ||||
| Non cash investing and financing activities: | ||||||||
| Disposal of fully depreciated real estate | $ | 468 | $ | 531 | ||||
| Financed insurance premiums | $ | 616 | $ | 478 | ||||
| Acquisition of real estate asset in exchange for OP Units | $ | - | $ | 3,625 | ||||
| Change in par value of Class A common shares | $ | 7 | $ | - | ||||
10
Non-GAAP Financial Measures (Unaudited)
(in thousands)
| Three Months | Nine Months | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (unaudited) | (revised) | (unaudited) | (revised) | |||||||||||||
| PROPERTY NET OPERATING INCOME ("NOI") | ||||||||||||||||
| Net income (loss) attributable to Whitestone REIT | $ | 177 | $ | 601 | $ | 560 | $ | 627 | ||||||||
| General and administrative expense | 1,263 | 1,549 | 3,735 | 4,603 | ||||||||||||
| Depreciation and amortization | 1,830 | 1,741 | 5,323 | 5,159 | ||||||||||||
| Involuntary conversion | - | (489 | ) | - | (299 | ) | ||||||||||
| Interest expense | 1,401 | 1,437 | 4,210 | 4,335 | ||||||||||||
| Interest income | (7 | ) | (8 | ) | (19 | ) | (30 | ) | ||||||||
| Provision for income taxes | 57 | 55 | 213 | 166 | ||||||||||||
| Loss on disposal of assets | 72 | 5 | 113 | 58 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 57 | 329 | 264 | 343 | ||||||||||||
| NOI | $ | 4,850 | $ | 5,220 | $ | 14,399 | $ | 14,962 | ||||||||
| EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION ("EBITDA") | ||||||||||||||||
| Net income (loss) attributable to Whitestone REIT | $ | 177 | $ | 601 | $ | 560 | $ | 627 | ||||||||
| Net income (loss) attributable to noncontrolling interests | 57 | 329 | 264 | 343 | ||||||||||||
| Depreciation and amortization | 1,830 | 1,741 | 5,323 | 5,159 | ||||||||||||
| Interest expense | 1,401 | 1,437 | 4,210 | 4,335 | ||||||||||||
| Interest income | (7 | ) | (8 | ) | (19 | ) | (30 | ) | ||||||||
| Loss on disposal of assets | 72 | 5 | 113 | 58 | ||||||||||||
| Involuntary conversion | - | (489 | ) | - | (299 | ) | ||||||||||
| Provision for income taxes | 57 | 55 | 213 | 166 | ||||||||||||
| EBITDA | $ | 3,587 | $ | 3,671 | $ | 10,664 | $ | 10,359 | ||||||||
| Three Months Ended | ||||||||||||||||
| SEP-2010 | JUN-2010 | MAR-2010 | DEC-2009 | |||||||||||||
| (unaudited) | ||||||||||||||||
| PROPERTY NET OPERATING INCOME ("NOI") | ||||||||||||||||
| Net income (loss) attributable to Whitestone REIT | $ | 177 | $ | 166 | $ | 217 | $ | 715 | ||||||||
| General and administrative expense | 1,263 | 1,272 | 1,200 | 1,469 | ||||||||||||
| Depreciation and amortization | 1,830 | 1,759 | 1,734 | 1,799 | ||||||||||||
| Involuntary conversion | - | - | - | (1,243 | ) | |||||||||||
| Interest expense | 1,401 | 1,402 | 1,407 | 1,414 | ||||||||||||
| Interest income | (7 | ) | (5 | ) | (7 | ) | (6 | ) | ||||||||
| Provision for income taxes | 57 | 102 | 54 | 56 | ||||||||||||
| Loss on disposal of assets | 72 | 8 | 33 | 138 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 57 | 89 | 118 | 390 | ||||||||||||
| NOI | $ | 4,850 | $ | 4,793 | $ | 4,756 | $ | 4,732 | ||||||||
| EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION ("EBITDA") | ||||||||||||||||
| Net income (loss) attributable to Whitestone REIT | $ | 177 | $ | 166 | $ | 217 | $ | 715 | ||||||||
| Net income (loss) attributable to noncontrolling interests | 57 | 89 | 118 | 390 | ||||||||||||
| Depreciation and amortization | 1,830 | 1,759 | 1,734 | 1,799 | ||||||||||||
| Interest expense | 1,401 | 1,402 | 1,407 | 1,414 | ||||||||||||
| Interest income | (7 | ) | (5 | ) | (7 | ) | (6 | ) | ||||||||
| Loss on disposal of assets | 72 | 8 | 33 | 138 | ||||||||||||
| Involuntary conversion | - | - | - | (1,243 | ) | |||||||||||
| Provision for income taxes | 57 | 102 | 54 | 56 | ||||||||||||
| EBITDA | $ | 3,587 | $ | 3,521 | $ | 3,556 | $ | 3,263 | ||||||||
11
Funds From Operations and Other Financial Information – Three and Nine Months (Unaudited)
(in thousands, except share, unit and per share and unit amounts; # of unencumbered properties and employees)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| FUNDS FROM OPERATIONS ("FFO") | 2010 | 2009 | 2010 | 2009 | ||||||||||||
| (unaudited) | (revised) | (unaudited) | (revised) | |||||||||||||
| Net income (loss) attributable to Whitestone REIT | $ | 177 | $ | 601 | $ | 560 | $ | 627 | ||||||||
| Depreciation and amortization of real estate assets | 1,701 | 1,592 | 4,930 | 4,688 | ||||||||||||
| Loss (gain) on sale or disposal of assets | 72 | 5 | 113 | 58 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 57 | 329 | 264 | 343 | ||||||||||||
| FFO | $ | 2,007 | $ | 2,527 | $ | 5,867 | $ | 5,716 | ||||||||
| Acquisition Costs | 10 | - | 11 | 60 | ||||||||||||
(Gain) loss on insurance claim settlement (1) | - | (892 | ) | - | (692 | ) | ||||||||||
| FFO-Core | $ | 2,017 | $ | 1,635 | $ | 5,878 | $ | 5,084 | ||||||||
| FFO PER SHARE AND OP UNITS CALCULATION: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| FFO | $ | 2,007 | $ | 2,527 | $ | 5,867 | $ | 5,716 | ||||||||
| Dividends paid on unvested restricted Class A common shares | (6 | ) | (7 | ) | (21 | ) | (20 | ) | ||||||||
| FFO excluding amounts attributable to unvested restricted Class A common shares | 2,001 | 2,520 | 5,846 | 5,696 | ||||||||||||
| FFO-Core exluding amounts attributable to unvested restricted Class A common shares | 2,011 | 1,628 | 5,857 | 5,064 | ||||||||||||
| Denominator | ||||||||||||||||
| Weighted average number of total common shares - basic | 4,020 | 3,236 | 3,517 | 3,236 | ||||||||||||
| Weighted average number of total noncontrolling OP units - basic | 1,814 | 1,814 | 1,814 | 1,814 | ||||||||||||
| Weighted average number of total common shares and noncontrolling OP units - basic | 5,834 | 5,050 | 5,331 | 5,050 | ||||||||||||
| \ | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Unvested restricted shares | 20 | 65 | 31 | 67 | ||||||||||||
| Weighted average number of total common shares and noncontrolling OP units - dilutive | 5,854 | 5,115 | 5,362 | 5,117 | ||||||||||||
| FFO per share and unit - basic | $ | 0.34 | $ | 0.50 | $ | 1.10 | $ | 1.13 | ||||||||
| FFO per share and unit - diluted | $ | 0.34 | $ | 0.49 | $ | 1.09 | $ | 1.11 | ||||||||
| FFO-Core per share and unit - basic | $ | 0.34 | $ | 0.32 | $ | 1.10 | $ | 1.00 | ||||||||
| FFO-Core per share and unit - diluted | $ | 0.34 | $ | 0.32 | $ | 1.09 | $ | 0.99 | ||||||||
| Other Financial Information: | ||||||||||||||||
Tenant improvements (2) | $ | 515 | $ | 621 | $ | 1,170 | $ | 1,308 | ||||||||
Leasing commissions (2) | $ | 185 | $ | 202 | $ | 407 | $ | 484 | ||||||||
| Scheduled debt principal payments | $ | 564 | $ | 638 | $ | 1,708 | $ | 1,646 | ||||||||
| Straight line rent | $ | 35 | $ | (18 | ) | $ | 52 | $ | 93 | |||||||
| Market rent amortization income (loss) from acquired leases | $ | 2 | $ | (3 | ) | $ | 13 | $ | (17 | ) | ||||||
| Non-cash share-based compensation expense | $ | 76 | $ | 247 | $ | 219 | $ | 745 | ||||||||
| Non-real estate depreciation and amortization | $ | 24 | $ | 41 | $ | 82 | $ | 134 | ||||||||
| Amortization of loan fees | $ | 106 | $ | 108 | $ | 311 | $ | 337 | ||||||||
| Acquisition costs | $ | 10 | $ | - | $ | 11 | $ | 60 | ||||||||
| Undepreciated value of unencumbered properties | $ | 58,058 | $ | 58,814 | $ | 58,058 | $ | 58,814 | ||||||||
| Number of Unencumbered properties | 14 | 15 | 14 | 15 | ||||||||||||
| Total full time employees | 50 | 55 | 50 | 55 | ||||||||||||
(1) $402 and $392 included in rental revenues for the three and nine months ended September 30, 2010, respectively. | ||||||||||||||||
(2) Does not include first generation costs for tenant improvements and leasing commission costs needed for new acquisitions, revelopment of a property to bring the property to operating standards for its intended use. | ||||||||||||||||
12
| As of September 30, 2010 | ||||||||||||||||
Percent of Total Equity | Total Market Capitalization | Percent of Total Market Capitalization | ||||||||||||||
| Equity Capitalization: | ||||||||||||||||
| Total Class A Common Shares Outstanding | 46.4 | % | 3,471 | |||||||||||||
| Total Class B Common Shares Outstanding | 29.4 | % | 2,200 | |||||||||||||
| Operating Partnership Units Outstanding | 24.2 | % | 1,815 | |||||||||||||
| Total | 100.0 | % | 7,486 | |||||||||||||
| Market Price of Class B Common Shares at September 30, 2010 | $ | 11.98 | ||||||||||||||
| Total Equity Capitalization | $ | 89,682 | 54 | % | ||||||||||||
| Debt Capitalization: | ||||||||||||||||
| Company Outstanding Debt | $ | 101,667 | ||||||||||||||
| Less: Cash and Cash Equivalents | $ | (26,617 | ) | |||||||||||||
| $ | 75,050 | 46 | % | |||||||||||||
| Total Market Capitalization as of September 30, 2010 | $ | 164,732 | 100 | % | ||||||||||||
| SELECTED RATIOS: | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| SEP-2010 | JUN-2010 | MAR-2010 | DEC-2010 | |||||||||||||
| COVERAGE RATIO | ||||||||||||||||
| Interest Coverage Ratio | ||||||||||||||||
| EBITDA | $ | 3,587 | $ | 3,521 | $ | 3,556 | $ | 3,263 | ||||||||
| Interest Expense | 1,401 | 1,402 | 1,407 | 1,414 | ||||||||||||
| 2.6 | 2.5 | 2.5 | 2.3 | |||||||||||||
| LEVERAGE RATIO | ||||||||||||||||
| Debt/Undepreciated Book Value | ||||||||||||||||
| Undepreciated Real Estate Assets | $ | 196,877 | $ | 193,283 | $ | 193,268 | $ | 192,832 | ||||||||
| Outstanding Debt | $ | 101,667 | $ | 100,837 | $ | 101,569 | $ | 101,782 | ||||||||
| Less: Cash | (26,617 | ) | (3,910 | ) | (4,762 | ) | (6,275 | ) | ||||||||
| $ | 75,050 | $ | 96,927 | $ | 96,807 | $ | 95,507 | |||||||||
| 38 | % | 50 | % | 50 | % | 50 | % | |||||||||
13
Summary of Outstanding Debt as of September 30, 2010
(in thousands)
| TOTAL OUTSTANDING DEBT | ||||||||||||||||
| Description | Outstanding Amount | Percentage of Total Debt | ||||||||||||||
| Fixed rate notes | ||||||||||||||||
| $10.0 million 6.04% Note, due 2014 | $ | 9,539 | 9 | % | ||||||||||||
| $ 1.5 million 6.50% Note, due 2014 | 1,500 | 1 | % | |||||||||||||
| $11.2 million 6.52% Note, due 2015 | 10,942 | 11 | % | |||||||||||||
| $21.4 million 6.53% Note, due 2013 | 20,290 | 20 | % | |||||||||||||
| $24.5 million 6.56% Note, due 2013 | 24,134 | 24 | % | |||||||||||||
| $ 9.9 million 6.63% Note, due 2014 | 9,565 | 9 | % | |||||||||||||
| $ 0.5 million 3.25% Note, due 2011 | 145 | 0 | % | |||||||||||||
| 76,115 | 75 | % | ||||||||||||||
| Floating rate note | ||||||||||||||||
$26.9 million LIBOR + 2.60% Note, due 2013 1 | 25,552 | 25 | % | |||||||||||||
| $ | 101,667 | 100 | % | |||||||||||||
SCHEDULE OF DEBT MATURITIES | ||||||||||||||||
| Year | Scheduled Amortization Payments | Scheduled Maturities | Total Scheduled Maturities | Percentage of Debt Maturing | ||||||||||||
| 2010 | $ | 735 | $ | - | $ | 735 | 0.7 | % | ||||||||
| 2011 | 2,444 | - | 2,444 | 2.4 | % | |||||||||||
| 2012 | 2,578 | - | 2,578 | 2.5 | % | |||||||||||
| 2013 | 2,272 | 64,154 | 66,426 | 65.3 | % | |||||||||||
| 2014 | 266 | 18,949 | 19,215 | 18.9 | % | |||||||||||
| 2015 + | 123 | 10,146 | 10,269 | 10.1 | % | |||||||||||
| Totals | $ | 8,418 | $ | 93,249 | $ | 101,667 | 100.0 | % | ||||||||
_______________________________________________
1 As of September 30, 2010, one-month LIBOR interest rate was 0.26%
14
Occupancy Summary
| Occupancy as of | ||||||||||||||||
| 9/30/2010 | 6/30/2010 | 3/31/2010 | 12/31/2009 | |||||||||||||
| Community Center Properties | ||||||||||||||||
| Operating Portfolio: | ||||||||||||||||
| Retail | 80 | % | 82 | % | 81 | % | 80 | % | ||||||||
| Office/Flex | 87 | % | 85 | % | 84 | % | 85 | % | ||||||||
| Office | 78 | % | 76 | % | 78 | % | 80 | % | ||||||||
| Operating Portfolio Total | 83 | % | 82 | % | 82 | % | 82 | % | ||||||||
Redevelopment, New Acquisitions 1 | 16 | % | N/A | N/A | N/A | |||||||||||
| All Properties | 82 | % | 82 | % | 82 | % | 82 | % | ||||||||
1 Includes new acquisitions, through the earlier of (1) attainment of 90% occupancy or 18 months of ownership, and (2) properties which are undergoing significant redevelopment or re-tenanting.
15
Top Tenants as of September 30, 2010
| Tenant Name | Location | Annualized Rental Revenue (in thousands) | Percentage of Total Annualized Base Rental Revenues 1 | Initial Lease Date | Year Expiring | |||||||||||
| US Census | Houston | $ | 708 | 2.7 | % | 10/21/2008 | 2010 | |||||||||
| Sports Authority | San Antonio | 495 | 1.9 | % | 1/1/2004 | 2015 | ||||||||||
| Brockett Davis Drake Inc. | Dallas | 365 | 1.4 | % | 3/14/1994 | 2011 | ||||||||||
| Compass Insurance | Dallas | 367 | 1.4 | % | 9/1/2005 | 2011 | ||||||||||
| Air Liquide America, L.P. | Dallas | 363 | 1.3 | % | 8/1/2001 | 2013 | ||||||||||
| Kroger | Houston | 265 | 1.0 | % | 9/1/1999 | 2011 | ||||||||||
| Petsmart, Inc | San Antonio | 255 | 1.0 | % | 1/1/2004 | 2013 | ||||||||||
| X-Ray X-Press Corporation | Houston | 252 | 1.0 | % | 7/1/1998 | 2019 | ||||||||||
| Marshall's | Houston | 248 | 0.9 | % | 5/12/1983 | 2013 | ||||||||||
| Rock Solid Images | Houston | 236 | 0.9 | % | 4/1/2004 | 2012 | ||||||||||
| Merrill Corporation | Dallas | 234 | 0.9 | % | 12/10/2001 | 2014 | ||||||||||
| Eligibility Services | Dallas | 224 | 0.9 | % | 6/6/2000 | 2012 | ||||||||||
| River Oaks L-M, Inc. | Houston | 199 | 0.8 | % | 10/15/1993 | 2011 | ||||||||||
| New Lifestyles, Inc. | Dallas | 192 | 0.7 | % | 5/5/1998 | 2013 | ||||||||||
| Landworks, Inc. | Houston | 178 | 0.7 | % | 6/1/2004 | 2013 | ||||||||||
| $ | 4,581 | 17.5 | % | |||||||||||||
1 Annualized Base Rental Revenues represents the monthly base rent as of September 30, 2010 for each applicable tenant multiplied by 12.
16
Lease Activity
| Nine Months Ended September 30, | ||||||||
| 2010 | 2009 | |||||||
| RENEWALS | ||||||||
| Number of Leases | 128 | 120 | ||||||
| Total SF | 243,068 | 328,326 | ||||||
| Average SF | 1,899 | 2,736 | ||||||
| Total Lease Value | $ | 8,941,000 | $ | 9,988,000 | ||||
| NEW LEASES | ||||||||
| Number of Leases | 107 | 76 | ||||||
| Total SF | 292,053 | 182,307 | ||||||
| Average SF | 2,729 | 2,399 | ||||||
| Total Lease Value | $ | 11,994,000 | $ | 8,335,000 | ||||
| TOTAL LEASES | ||||||||
| Number of Leases | 235 | 196 | ||||||
| Total SF | 535,121 | 510,633 | ||||||
| Average SF | 2,277 | 2,605 | ||||||
| Total Lease Value | $ | 20,935,000 | $ | 18,323,000 | ||||
| ROLL-FORWARD OF OCCUPIED SQUARE FEET | ||||||||
| December 31, 2009 | 2,484,414 | |||||||
| New leases | 252,113 | |||||||
| Property acquisitions | 4,646 | |||||||
| Expiring leases | (230,448 | ) | ||||||
| Lease renewals | 162,645 | |||||||
| Early terminations | (181,804 | ) | ||||||
| September 30, 2010 | 2,491,566 | |||||||
___________________________
Table reflects physical occupancy, and therefore does not include signed leases which have not yet taken occupancy.
17
Lease Expirations as of September 30, 2010
| Year | Number of Expiring Leases 1 | Expiring GLA | % of GLA expiring | Expiring Annualized Base Rent 2 | % of Total Annualized Base Rent | Expiring Annualized Base Rent per Sq. Ft. | ||||||||||||||||||
| 2010 | 83 | 145,780 | 5 | % | $ | 1,980,386 | 8 | % | $ | 13.58 | ||||||||||||||
| 2011 | 179 | 546,639 | 18 | % | 5,333,308 | 21 | % | 9.76 | ||||||||||||||||
| 2012 | 156 | 453,538 | 15 | % | 4,830,203 | 18 | % | 10.65 | ||||||||||||||||
| 2013 | 143 | 503,566 | 17 | % | 5,278,297 | 20 | % | 10.48 | ||||||||||||||||
| 2014 | 87 | 330,315 | 11 | % | 3,425,462 | 13 | % | 10.37 | ||||||||||||||||
| 2015 | 67 | 274,162 | 9 | % | 2,728,593 | 10 | % | 9.95 | ||||||||||||||||
| 2016 | 26 | 87,902 | 3 | % | 944,526 | 4 | % | 10.75 | ||||||||||||||||
| 2017 | 8 | 43,725 | 1 | % | 394,702 | 2 | % | 9.03 | ||||||||||||||||
| 2018 | 8 | 35,581 | 1 | % | 364,500 | 1 | % | 10.24 | ||||||||||||||||
| 2019 | 6 | 50,333 | 2 | % | 558,457 | 2 | % | 11.10 | ||||||||||||||||
| Beyond | 7 | 20,025 | 1 | % | 275,029 | 1 | % | 13.73 | ||||||||||||||||
| 770 | 2,491,566 | 83 | % | $ | 26,113,463 | 100 | % | $ | 10.48 | |||||||||||||||
___________________________
1 Lease expirations table reflects rents in place as of September 30, 2010, and does not include option periods.
2 Annualized base rent represents the monthly base rent as of September 30, 2010 for each tenant multiplied by 12.
18
Property Detail as of September 30, 2010
| Community Center Name | Location | Year Built/ Renovated | Leasable Square Feet | Percent Occupied at 9/30/2010 | Annualized Base Rental Revenue (1) (in.thousands) | Average Base Rental Revenue Per Sq. Ft. (2) | ||||||||||||||
| Community Centers - Retail: | ||||||||||||||||||||
| Bellnott Square | Houston | 1982 | 73,930 | 35 | % | $ | 283 | $ | 10.94 | |||||||||||
| Bissonnet/Beltway | Houston | 1978 | 29,205 | 89 | % | 299 | 11.50 | |||||||||||||
| Centre South | Houston | 1974 | 39,134 | 82 | % | 285 | 8.88 | |||||||||||||
| Greens Road | Houston | 1979 | 20,507 | 79 | % | 173 | 10.68 | |||||||||||||
| Holly Knight | Houston | 1984 | 20,015 | 100 | % | 335 | 16.74 | |||||||||||||
| Kempwood Plaza | Houston | 1974 | 92,929 | 98 | % | 862 | 9.47 | |||||||||||||
| Lion Square | Houston | 1980 | 119,621 | 64 | % | 800 | 10.45 | |||||||||||||
| Providence | Houston | 1980 | 90,327 | 94 | % | 785 | 9.25 | |||||||||||||
| Shaver | Houston | 1978 | 21,926 | 93 | % | 236 | 11.57 | |||||||||||||
| South Richey | Houston | 1980 | 69,928 | 94 | % | 514 | 7.82 | |||||||||||||
| Spoerlein Commons | Chicago | 1987 | 41,455 | 90 | % | 740 | 19.83 | |||||||||||||
| SugarPark Plaza | Houston | 1974 | 95,032 | 99 | % | 932 | 9.91 | |||||||||||||
| Sunridge | Houston | 1979 | 49,359 | 89 | % | 421 | 9.58 | |||||||||||||
| Torrey Square | Houston | 1983 | 105,766 | 82 | % | 785 | 9.05 | |||||||||||||
| Town Park | Houston | 1978 | 43,526 | 100 | % | 724 | 16.63 | |||||||||||||
| Webster Point | Houston | 1984 | 26,060 | 100 | % | 287 | 11.01 | |||||||||||||
| Westchase | Houston | 1978 | 49,573 | 63 | % | 351 | 11.24 | |||||||||||||
| Windsor Park | San Antonio | 1992 | 192,458 | 66 | % | 1,072 | 8.44 | |||||||||||||
| 1,180,751 | 80 | % | $ | 9,884 | $ | 10.52 | ||||||||||||||
| Community Centers - Office/Flex: | ||||||||||||||||||||
| Brookhill | Houston | 1979 | 74,757 | 89 | % | $ | 279 | $ | 4.19 | |||||||||||
| Corporate Park Northwest | Houston | 1981 | 185,627 | 68 | % | 1,292 | 10.24 | |||||||||||||
| Corporate Park West | Houston | 1999 | 175,665 | 93 | % | 1,397 | 8.55 | |||||||||||||
| Corporate Park Woodland | Houston | 2000 | 99,937 | 89 | % | 776 | 8.72 | |||||||||||||
| Dairy Ashford | Houston | 1981 | 42,902 | 95 | % | 178 | 4.37 | |||||||||||||
| Holly Hall | Houston | 1980 | 90,000 | 100 | % | 748 | 8.31 | |||||||||||||
| Interstate 10 | Houston | 1980 | 151,000 | 93 | % | 698 | 4.97 | |||||||||||||
| Main Park | Houston | 1982 | 113,410 | 93 | % | 581 | 5.51 | |||||||||||||
| Plaza Park | Houston | 1982 | 105,530 | 79 | % | 967 | 11.60 | |||||||||||||
| Westbelt Plaza | Houston | 1978 | 65,619 | 73 | % | 734 | 15.32 | |||||||||||||
| Westgate | Houston | 1984 | 97,225 | 100 | % | 479 | 4.93 | |||||||||||||
| 1,201,672 | 87 | % | $ | 8,129 | $ | 7.78 | ||||||||||||||
| Community Centers - Office | ||||||||||||||||||||
| 9101 LBJ Freeway | Dallas | 1985 | 125,874 | 71 | % | $ | 1,467 | $ | 16.41 | |||||||||||
| Featherwood | Houston | 1983 | 49,760 | 87 | % | 761 | 17.58 | |||||||||||||
| Pima Norte | Phoenix | 2007 | 33,417 | 11 | % | 74 | 20.13 | |||||||||||||
| Royal Crest | Houston | 1984 | 24,900 | 75 | % | 238 | 12.74 | |||||||||||||
| Uptown Tower | Dallas | 1982 | 253,981 | 86 | % | 3,808 | 17.43 | |||||||||||||
| Woodlake Plaza | Houston | 1974 | 106,169 | 83 | % | 1,179 | 13.38 | |||||||||||||
| Zeta Building | Houston | 1982 | 37,740 | 77 | % | 488 | 16.79 | |||||||||||||
| 631,841 | 78 | % | $ | 8,015 | $ | 16.26 | ||||||||||||||
| Total Operating Portfolio | 3,014,264 | 83 | % | $ | 26,028 | $ | 10.40 | |||||||||||||
Redevelopment, New Acquisitions (3) | ||||||||||||||||||||
| The Citadel | Phoenix | 1985 | 28,547 | 16 | % | 85 | 18.61 | |||||||||||||
| Total All Properties | 3,042,811 | 82 | % | $ | 26,113 | $ | 10.48 | |||||||||||||
(1) Calculated as the tenant's actual September 30, 2010 base rent multiplied by 12. Excludes vacant space as of September 30, 2010. Because annualized base rental revenue is not derived from historical results that were accounted for in accordance with generally accepted accounting principles, historical results differ from the annualized amounts.
(2) Calculated as annualized base rent divided by net rentable square feet leased at September 30, 2010. Excludes vacant space at September 30, 2010.
(3) Includes new acquisitions, through the earlier of (1) attainment of 90% occupancy or (2) 18 months of ownership, and properties which are undergoing significant redevelopment or re-tenanting
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Management Statement on Non-GAAP Supplemental Measures
Investors and analysts following the real estate industry use funds from operations ("FFO"), net operating income ("NOI"), and earnings before interest, taxes, depreciation and amortization ("EBITDA"), variously defined, as supplemental performance measures. The Company believes FFO, NOI, and EBITDA are appropriate measures given their wide use by and relevance to investors and analysts. FFO, reflecting the assumption that real estate asset values rise or fall with market conditions, principally adjusts for the effects of GAAP depreciation/amortization of real estate assets. NOI provides a measure of rental operations and does not factor in depreciation/amortization and non-property specific expenses such as general and administrative expenses. EBITDA provides a further tool to evaluate the ability to incur and servi ce debt and to fund dividends and other cash needs. In addition, FFO, NOI, and EBITDA are commonly used in various ratios, pricing multiples/yields and returns and valuation calculations used to measure financial position, performance and value.
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 real estate investment trust ("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 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 types 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 and loss on sale or disposition of asse ts, 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 a useful measure of the Company's operating performance. EBITDA is defined as earnings before interest, taxes, depreciation, and amortization. Management considers EBITDA to be an appropriate supplemental performance measure since it represents earnings prior to the impact of depreciation, amortization, gain (loss) from property dispositions, and gain (loss) from insurance settlements. This calculation facilitates the review of income from operations without considering the effect of non-cash depreciation and amortization or the cost of debt.
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 FFO should represent net income (loss) before noncontrolling interest (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 on the sale of property. 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 p lus the outstanding Operating Partnership 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, we believe that FFO provides a more meaningful and accurate indication of our performance. In addition, management believes that FFO provides useful information to the investment community about the Company's financial performance when compared 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, gains and losses on insurance claim settlements and acquisition costs.
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