| TABLE OF CONTENTS | |
| Page | |
| CORPORATE PROFILE | ||||||||
| NYSE-Amex: WSR | Whitestone REIT (NYSE-Amex: WSR) is a fully integrated real estate investment trust that owns, | |||||||
| Class B Common Shares | operates and re-develops Community Centered Properties TM, which are visibly located properties in | |||||||
| established or developing, culturally diverse neighborhoods. As of September 30, 2011, we owned | ||||||||
41 Community Centered Properties TM with approximately 3.4 million square feet of leasable space, | ||||||||
| 41 Community Centers | located in five of the top markets in the USA in terms of population growth: Houston, Dallas, San | |||||||
| 3.4 Million GLA | Antonio, Phoenix and Chicago. Headquartered in Houston, Texas, we were founded in 1998. | |||||||
| 850 Tenants | ||||||||
| We focus on value-creation in our properties, as we market, lease and manage our properties. We | ||||||||
| 5 Top Growth Markets | invest in properties that are or can become Community Centered Properties TM from which our | |||||||
| Houston | tenants deliver needed services to the surrounding community. We focus on niche properties with | |||||||
| Dallas | smaller rental spaces that present opportunities for attractive returns. | |||||||
| San Antonio | ||||||||
| Phoenix | Our strategic efforts target entrepreneurial tenants at each property who provide services to their | |||||||
| Chicago | respective surrounding community. Operations include an internal management structure, providing | |||||||
| cost-effective service to locally-oriented smaller space tenants. Multi-cultural community focus sets | ||||||||
| Fiscal Quarter End | us apart from traditional commercial real estate operators. We value diversity on our team and maintain | |||||||
| 09/30 | 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 | ||||||||
| Common Shares & | and neighborhoods. | |||||||
| Units Outstanding: | ||||||||
| Class B Common: 8.8 Million* | We have a diverse tenant base concentrated on service offerings such as medical, education and | |||||||
| Class A Common: 2.6 Million | casual dining. These tenants tend to occupy smaller spaces (less than 3,000 square feet) and, as of | |||||||
| Operating Partnership Units: | September 30, 2011, provided a 57% premium rental rate compared to our larger space tenants. The | |||||||
| 1.4 Million | largest of our 850 tenants comprises less than 2.0% of our revenues. | |||||||
| Dividend (per share / unit): | ||||||||
| Quarter $0.2850 | Investor Relations: | |||||||
| Annualized $1.14 | Whitestone REIT | |||||||
| Dividend Yield 9.8%** | Anne I. Gregory, Vice President, Investor Relations & Marketing | |||||||
| 2600 South Gessner Suite 500, Houston, Texas 77036 | ||||||||
| Board of Trusteees: | 713.435.2221 email: ir@whitestonereit.com | |||||||
| James C. Mastandrea | ||||||||
| Daryl J. Carter | ICR Inc. - Brad Cohen 203.682.8211 | |||||||
| Daniel G. DeVos | ||||||||
| Donald F. Keating | website: www.whitestonereit.com | |||||||
| Jack L. Mahaffey | ||||||||
| Analyst Coverage: | ||||||||
| * As of November 4, 2011 | BMO Capital Markets Corp. | J.J.B. Hilliard, W.L. Lyons, LLC | JMP Securities | Wunderlich Securities, Inc. | ||||
| Paul Adornato, CFA | Carol L. Kemple | Mitch Germain | Merril Ross | |||||
| 212.885.4170 | 502.588.1839 | 212.906.3546 | 703.669.9255 | |||||
| ** Based on share price of | Paul.Adornato@bmo.com | ckemple@hilliard.com | mgermain@jmpsecurities.com | mross@wundernet.com | ||||
| $11.67 as of November 4, 2011 | ||||||||
| Newest Acquisitions: | ||||||||
1
PRESS RELEASE
Contact Whitestone REIT:
Anne Gregory, Vice President Marketing & Investor Relations
(713) 435 2221 ir@whitestonereit.com
WHITESTONE REIT ANNOUNCES OPERATING RESULTS FOR THIRD QUARTER 2011
$25.4 Million in Acquisitions, Increased Occupancy, Solid Earnings Growth
Highlights
| • | Achieved record quarterly revenue of $8.8 million, in Q3 2011. |
| • | Physical occupancy of operating portfolio at 86%, a 3% increase, year over year; 2% increase quarter over quarter. |
| • | 15.0% year-over-year and quarter-over-quarter growth in Funds From Operations ("FFO")-Core to $2.3 million, or $0.18 per diluted common share and operating partnership unit. |
| • | 8% year-over-year increase in quarterly property net operating income to $5.2 million in Q3 2011. |
| • | Net income attributable to Whitestone REIT was $0.6 million, or $0.05 per diluted common share. |
| • | Purchased two Arizona Community Centered PropertiesTM below replacement cost for approximately $25.4 million. |
| • | Invested approximately $50 million, including the cost to stabilize, in new acquisitions, totaling approximately 427,000 square feet of leasable area, since our IPO in August 2010. |
| • | Under contract for an additional $28 million in acquisitions of Community Centered PropertiesTM. |
Houston, Texas, November 7, 2011 - Whitestone REIT (NYSE-Amex: WSR - "Whitestone" or the "Company"), 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 financial results for the quarter and nine months ended September 30, 2011. The supplemental operational and financial data package for the quarter ended September 30, 2011 can be found on the Company's website under the Investor Relations tab.
“We are pleased with our quarterly results reflecting growth in occupancy, revenues, NOI and FFO. Our business model, focused on Community Centered PropertiesTM with smaller, community service oriented tenants, continues to gain traction. We have acquired six value-add properties at below replacement costs totaling $50 million since completing our initial public and follow-on offerings in the past 14 months, adding 427,000 square feet of service retail space. While we are already benefiting from centers we acquired during the third quarter, income from these most recent acquisitions will be included for the entire quarter beginning in the fourth quarter. Additionally, several key leases that we recently executed will significantly contribute to income growth next year. Further, a number of redevelopment projects initiated in our Houston, San Antonio, and Phoenix markets are expected to start contributing to our earnings growth,” said James C. Mastandrea, Whitestone's Chairman and Chief Executive Officer.
He added, “As we deploy the remaining capital from our public offerings, we also expect to benefit from our strong balance sheet with cash and debt available from our unsecured revolving credit facility, and begin to apply conservative leverage to purchase additional Community Centered PropertiesTM. Our acquisition pipeline of off-market centers is currently in excess of $500 million in assets, sourced over several years, from financially distressed owners and/or regional bank foreclosures.”
“While there continues to be political and economic uncertainty in the country," Mastandrea concluded, “our focus remains on acquiring Community Centers that are 30,000 to 150,000 square feet in the largest markets and underserved communities within Houston, Dallas, and San Antonio, Texas; Chicago, Illinois; and greater Phoenix, Arizona. Our strategy of leasing to small-space service oriented tenants (occupying less than 3,000 square feet) is our mainstay, as it provides the Company a 57% rental premium per square foot as compared to our larger space tenants, and our downside risk is minimized, whereby no single tenant can impact our total revenues by more than 2%.”
A reconciliation of FFO, FFO-Core, NOI and EBITDA is included at the end of the financial tables accompanying this release.
The Company declared a quarterly cash dividend of $0.285 per common share and operating partnership ("OP") unit, payable in three equal installments of $0.095 in October, November and December 2011. The Company expects to declare its next quarterly dividend in December, payable in January, February, and March of 2012. Based on the closing price on November 4, 2011 of $11.67 per share, the dividend represents an annual yield of approximately 9.8%.
Acquisition Activity
In August, the Company announced the completed acquisitions of two “Class A” Community Centered PropertiesTM in the
2
Phoenix area, both at attractive cap rates and at prices below replacement cost:
| • | Ahwatukee Plaza Shopping Center in the Ahwatukee Foothills neighborhood, located in south Phoenix, Arizona. The Center, which contains 72,650 leasable square feet, is anchored by Gold's Gym along with other notable tenants including Ahwatukee Children's Theater, Millie's Hallmark, O'Reilly Auto Parts and a variety of other service providers. |
| • | Terravita Marketplace located in North Scottsdale, Arizona. The Center, which contains 102,733 leasable square feet, is anchored by Albertsons 47,000 square foot grocery store along with other well recognized tenants including Walgreens, The Good Egg Restaurant, Bedmart and Wells Fargo. Subsequent to the acquisition, Sherwin Williams signed a new 10 year lease for 3,818 square feet. |
Disposition Activity
During the quarter, the Company sold Greens Road Plaza, a non-core retail property in Houston, for $1.8 million in cash and net prorations, and plans to reinvest the proceeds in Community Centered PropertiesTM.
Redevelopment and Repositioning Activity
| • | Lion Square-Houston: Teletron, a Vietnamese electronics store based in Los Angeles, signed a new lease for 17,500 square feet, with plans to open in the fourth quarter 2011. Renovation of the entire Asian themed Center, located in Houston's International Management District, will be completed in 2012. Other new tenants include Yan Li, who signed a new 1,040 square foot lease, and Loc Cao, who signed a new 4,360 square foot lease. |
| • | Windsor Park Centre-San Antonio: Whitestone, in cooperation and partnership with the City of Windcrest, repositioned and re-tenanted the Center, which was initiated with the University of Phoenix. When former tenant Circuit City filed for bankruptcy, the physical occupancy at this Center declined to less than 60%. The first phase of renovation at this Center, replacing the entire façade, is underway, and the property is expected to be fully leased by the end of the first quarter 2012. During the third quarter, Ross Dress For Less signed a new 10 year lease for 25,000 square feet and Mattress Firm signed a new lease to develop a 4,000 square foot building on a pad site. Subsequent to the quarter, SKECHERS signed a new lease for 10,000 square feet. |
Leasing Highlights: Third Quarter 2011 Compared to Third Quarter 2010: The Company's physical occupancy of its Operating Portfolio was 86% as of September 30, 2011, up 2% from the end of the second quarter at June 30, 2011 and up 3% from 83% as of September 2010. The Company defines Operating Portfolio as all properties excluding (1) new acquisitions through the earlier of (i) attainment of 90% occupancy or (ii)18 months of ownership, and (2) properties which are undergoing significant redevelopment or re-tenanting. Total physical occupancy, including all properties, was 84% as of September 30, 2011.
The Company's strong leasing activity during the third quarter of 2011 was represented by:
| • | 152,000 square feet in new and renewal leases signed; |
| • | $5.3 million in new and renewal lease value signed; and |
| • | 67 new and renewal leases signed. |
Community Centered PropertiesTM Portfolio Statistics
Whitestone currently owns 41 Community Centered PropertiesTM with approximately 3.4 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.
The Company's strategic efforts target entrepreneurial tenants who provide services to their respective surrounding community. These tenants tend to occupy smaller spaces (less than 3,000 square feet), and as of September 30, 2011, provide a 57% premium rental rate compared to Whitestone's larger space tenants. The Company currently services 850 tenants. No single tenant accounted for more than 2% of the Company's annualized revenue as of September 30, 2011.
Balance Sheet
Whitestone maintains liquidity and financial flexibility through cash balances, unmortgaged properties, and availability under its credit facility. The Company has no amounts drawn under its $20 million unsecured credit facility and also has available 17 unencumbered properties as of September 30, 2011. The 17 unencumbered properties have an undepreciated cost basis of $96 million as of September 30, 2011. Whitestone's total undepreciated value of real estate assets and indebtedness were $241 million and $102 million, respectively, as of September 30, 2011.
The Company has no real estate debt maturing prior to October 2013, and as of September 30, 2011, 76% of the Company's total indebtedness was fixed-rate debt. The blended interest rate for the Company's debt was 5.6% as of September 30, 2011. For the third quarter of 2011, the Company's interest coverage ratio (EBITDA/Interest Expense) was 3.0:1.
3
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 7, 2011 at 5:00 p.m. (Eastern Time). The call will be hosted by James C. Mastandrea, Chairman and Chief Executive Officer, and David Holeman, Chief Financial Officer.
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-(888) 293-6979 for domestic participants or 1-(719) 325-2313 for international participants. 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 five to ten minutes prior to the start.
The conference call will be recorded and a telephone replay will be available through November 21, 2011, by dialing 1-(877) 870-5176 for domestic participants or 1-(858) 384-5517 for international participants and entering the passcode 4554536. Additionally, a replay of the call will be available on the Company's website until its next earnings release.
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 third quarter 2011 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 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 Community 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 diverse tenant base concentrated on service offerings including medical, education and casual dining. The largest of its 850 tenants comprises 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"), including earnings guidance for the third fiscal quarter. 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, and 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 reports on Form 10-Q and other documents we file with the Securities and Exchange Commission.
4
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 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. 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 we define to exclude such items. The Company 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 most 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
5
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.
6
Whitestone REIT and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Real estate assets, at cost: | ||||||||
| Property | $ | 241,488 | $ | 203,223 | ||||
| Accumulated depreciation | (43,761 | ) | (38,989 | ) | ||||
| Net operating real estate assets | 197,727 | 164,234 | ||||||
| Real estate assets held-for-sale, net | — | 1,164 | ||||||
| Total real estate assets | 197,727 | 165,398 | ||||||
| Cash and cash equivalents | 32,660 | 17,591 | ||||||
| Marketable securities | 4,579 | — | ||||||
| Escrows and acquisition deposits | 4,092 | 4,385 | ||||||
| Accrued rents and accounts receivable, net of allowance for doubtful accounts | 5,309 | 4,691 | ||||||
| Unamortized lease commissions and loan costs | 3,618 | 3,574 | ||||||
| Prepaid expenses and other assets | 705 | 746 | ||||||
| Other assets - discontinued operations | — | 60 | ||||||
| Total assets | $ | 248,690 | $ | 196,445 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Liabilities: | ||||||||
| Notes payable | $ | 102,234 | $ | 100,941 | ||||
| Accounts payable and accrued expenses | 7,800 | 7,208 | ||||||
| Tenants' security deposits | 1,956 | 1,768 | ||||||
| Dividends and distributions payable | 3,647 | 2,133 | ||||||
| Other liabilities - discontinued operations | — | 112 | ||||||
| Total liabilities | 115,637 | 112,162 | ||||||
| Commitments and contingencies: | ||||||||
| Equity: | ||||||||
| Preferred shares, $0.001 par value per share; 50,000,000 shares authorized; none issued | ||||||||
| and outstanding at September 30, 2011 and December 31, 2010 | — | — | ||||||
| Class A common shares, $0.001 par value per share; 50,000,000 shares authorized; | ||||||||
| 3,471,090 and 3,471,187 issued and outstanding as of September 30, 2011 and | ||||||||
| December 31, 2010, respectively | 3 | 3 | ||||||
| Class B common shares, $0.001 par value per share; 350,000,000 shares authorized; | ||||||||
| 7,511,269 and 2,200,000 issued and outstanding as of September 30, 2011 and | ||||||||
| December 31, 2010, respectively | 7 | 2 | ||||||
| Additional paid-in capital | 153,105 | 93,357 | ||||||
| Accumulated other comprehensive loss | (1,545 | ) | — | |||||
| Accumulated deficit | (38,413 | ) | (30,654 | ) | ||||
| Total Whitestone REIT shareholders' equity | 113,157 | 62,708 | ||||||
| Noncontrolling interests in subsidiary | 19,896 | 21,575 | ||||||
| Total equity | 133,053 | 84,283 | ||||||
| Total liabilities and equity | $ | 248,690 | $ | 196,445 | ||||
7
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Property revenues | ||||||||||||||||
| Rental revenues | $ | 7,075 | $ | 6,446 | $ | 20,354 | $ | 19,167 | ||||||||
| Other revenues | 1,704 | 1,410 | 4,415 | 4,069 | ||||||||||||
| Total property revenues | 8,779 | 7,856 | 24,769 | 23,236 | ||||||||||||
| Property expenses | ||||||||||||||||
| Property operation and maintenance | 2,355 | 2,090 | 6,238 | 5,952 | ||||||||||||
| Real estate taxes | 1,259 | 948 | 3,367 | 2,978 | ||||||||||||
| Total property expenses | 3,614 | 3,038 | 9,605 | 8,930 | ||||||||||||
| Other expenses (income) | ||||||||||||||||
| General and administrative | 1,495 | 1,263 | 4,737 | 3,735 | ||||||||||||
| Depreciation and amortization | 2,162 | 1,816 | 6,098 | 5,281 | ||||||||||||
| Interest expense | 1,430 | 1,401 | 4,277 | 4,210 | ||||||||||||
| Interest, dividend and other investment income | (264 | ) | (7 | ) | (379 | ) | (19 | ) | ||||||||
| Total other expense | 4,823 | 4,473 | 14,733 | 13,207 | ||||||||||||
| Income from continuing operations before gain (loss) on disposal of | ||||||||||||||||
| assets and income taxes | 342 | 345 | 431 | 1,099 | ||||||||||||
| Provision for income taxes | (54 | ) | (56 | ) | (164 | ) | (211 | ) | ||||||||
| Gain (loss) on sale or disposal of assets | 1 | (72 | ) | (17 | ) | (113 | ) | |||||||||
| Income from continuing operations | 289 | 217 | 250 | 775 | ||||||||||||
| Income (loss) from discontinued operations | (11 | ) | 17 | 36 | 49 | |||||||||||
| Gain on sale of property from discontinued operations | 397 | — | 397 | — | ||||||||||||
| Net income | 675 | 234 | 683 | 824 | ||||||||||||
| Less: Net income attributable to noncontrolling interests | 97 | 57 | 122 | 264 | ||||||||||||
| Net income attributable to Whitestone REIT | $ | 578 | $ | 177 | $ | 561 | $ | 560 | ||||||||
8
Whitestone REIT and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Earnings per share - basic | ||||||||||||||||
| Income from continuing operations attributable to Whitestone | ||||||||||||||||
| REIT excluding amount attributable to unvested restricted shares | $ | 0.02 | $ | 0.04 | $ | 0.02 | $ | 0.14 | ||||||||
| Income from discontinued operations attributable to Whitestone REIT | 0.03 | — | 0.05 | 0.01 | ||||||||||||
| Net income attributable to common shareholders excluding | ||||||||||||||||
| amounts attributable to unvested restricted shares | $ | 0.05 | $ | 0.04 | $ | 0.07 | $ | 0.15 | ||||||||
| Earnings per share - diluted | ||||||||||||||||
| Income from continuing operations attributable to Whitestone | ||||||||||||||||
| REIT excluding amount attributable to unvested restricted shares | $ | 0.02 | $ | 0.04 | $ | 0.02 | $ | 0.14 | ||||||||
| Income from discontinued operations attributable to Whitestone REIT | 0.03 | — | 0.05 | 0.01 | ||||||||||||
| Net income attributable to common shareholders excluding | ||||||||||||||||
| amounts attributable to unvested restricted shares | $ | 0.05 | $ | 0.04 | $ | 0.07 | $ | 0.15 | ||||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 10,797 | 4,020 | 8,285 | 3,517 | ||||||||||||
| Diluted | 10,809 | 4,040 | 8,300 | 3,548 | ||||||||||||
| Dividends declared per Class A common share | $ | 0.2850 | $ | 0.2850 | $ | 0.8550 | $ | 0.9075 | ||||||||
Dividends declared per Class B common share (1) | 0.2850 | 0.2850 | 0.8550 | 0.3810 | ||||||||||||
| Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||
| Net income | $ | 675 | $ | 234 | $ | 683 | $ | 824 | ||||||||
| Other comprehensive loss: | ||||||||||||||||
| Unrealized loss on available-for-sale marketable securities | (1,672 | ) | — | (1,881 | ) | — | ||||||||||
| Comprehensive income (loss) | (997 | ) | 234 | (1,198 | ) | 824 | ||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling | ||||||||||||||||
| interests | (143 | ) | 57 | (214 | ) | 264 | ||||||||||
| Comprehensive income (loss) attributable to Whitestone REIT | $ | (854 | ) | $ | 177 | $ | (984 | ) | $ | 560 | ||||||
(1) | Class B common shares were issued on August 25, 2010 in connection with our initial public offering and listing on the NYSE-Amex. Class B shares received a pro-rated dividend in September 2010. From October 2010 forward, Class A and Class B shares received the same dividend. |
9
Whitestone REIT and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Nine Months Ended September 30, | ||||||||
| 2011 | 2010 | |||||||
| Cash flows from operating activities: | ||||||||
| Income from continuing operations | $ | 250 | $ | 775 | ||||
| Income from discontinued operations | 433 | 49 | ||||||
| Net income | 683 | 824 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 6,098 | 5,281 | ||||||
| Gain on sale of marketable securities | (192 | ) | — | |||||
| Loss on sale or disposal of assets | 17 | 113 | ||||||
| Bad debt expense | 379 | 339 | ||||||
| Share-based compensation | 233 | 219 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Escrows and acquisition deposits | 385 | 3,893 | ||||||
| Accrued rent and accounts receivable | (994 | ) | (213 | ) | ||||
| Unamortized lease commissions and loan costs | (728 | ) | (514 | ) | ||||
| Prepaid expenses and other assets | 599 | 515 | ||||||
| Accounts payable and accrued expenses | 97 | (2,141 | ) | |||||
| Tenants' security deposits | 188 | 74 | ||||||
| Net cash provided by operating activities | 6,332 | 8,341 | ||||||
| Net cash provided by (used in) operating activities of discontinued operations | (8 | ) | 69 | |||||
| Cash flows from investing activities: | ||||||||
| Additions to real estate | (3,966 | ) | (2,439 | ) | ||||
| Real estate acquisitions | (34,020 | ) | (2,225 | ) | ||||
| Investments in marketable securities | (13,520 | ) | — | |||||
| Proceeds from sales of marketable securities | 7,252 | — | ||||||
| Net cash used in investing activities | (44,254 | ) | (4,664 | ) | ||||
| Net cash provided by investing activities of discontinued operations | 1,553 | — | ||||||
| Cash flows from financing activities: | ||||||||
| Dividends paid | (6,852 | ) | (3,534 | ) | ||||
| Distributions paid to OP unit holders | (1,544 | ) | (1,742 | ) | ||||
| Proceeds from issuance of common shares | 59,667 | 23,020 | ||||||
| Proceeds from notes payable | 2,905 | 1,430 | ||||||
| Repayments of notes payable | (2,356 | ) | (2,231 | ) | ||||
| Payments of loan origination costs | (374 | ) | (98 | ) | ||||
| Repurchase of common shares | — | (249 | ) | |||||
| Net cash provided by financing activities | 51,446 | 16,596 | ||||||
| Net increase in cash and cash equivalents | 15,069 | 20,342 | ||||||
| Cash and cash equivalents at beginning of period | 17,591 | 6,275 | ||||||
| Cash and cash equivalents at end of period | $ | 32,660 | $ | 26,617 | ||||
Whitestone REIT and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Nine Months Ended September 30, | ||||||||
| 2011 | 2010 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | 4,271 | $ | 4,217 | ||||
| Cash paid for taxes | 215 | 262 | ||||||
| Non cash investing and financing activities: | ||||||||
| Disposal of fully depreciated real estate | $ | 162 | $ | 468 | ||||
| Financed insurance premiums | 649 | 616 | ||||||
| Change in fair value of available-for-sale securities | (1,881 | ) | — | |||||
| Change in par value of Class A common shares | — | 7 | ||||||
10
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share and per unit data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| FFO AND FFO-CORE | ||||||||||||||||
| Net income attributable to Whitestone REIT | $ | 578 | $ | 177 | $ | 561 | $ | 560 | ||||||||
Depreciation and amortization of real estate assets (1) | 1,933 | 1,701 | 5,610 | 4,930 | ||||||||||||
Loss (gain) on disposal of assets (1) | (398 | ) | 72 | (380 | ) | 113 | ||||||||||
Net income attributable to noncontrolling interests (1) | 97 | 57 | 122 | 264 | ||||||||||||
| FFO | $ | 2,210 | $ | 2,007 | $ | 5,913 | $ | 5,867 | ||||||||
| Acquisition costs | $ | 185 | $ | 10 | $ | 327 | $ | 11 | ||||||||
| Legal and professional costs (recoveries), net | (103 | ) | — | 254 | — | |||||||||||
| FFO-Core | $ | 2,292 | $ | 2,017 | $ | 6,494 | $ | 5,878 | ||||||||
| FFO PER SHARE AND OP UNIT CALCULATION | ||||||||||||||||
| Numerator: | ||||||||||||||||
| FFO | $ | 2,210 | $ | 2,007 | $ | 5,913 | $ | 5,867 | ||||||||
| Dividends paid on unvested restricted Class A common shares | (4 | ) | (6 | ) | (13 | ) | (21 | ) | ||||||||
| FFO excluding amounts attributable to unvested restricted | ||||||||||||||||
| Class A common shares | $ | 2,206 | $ | 2,001 | $ | 5,900 | $ | 5,846 | ||||||||
| FFO-Core excluding amounts attributable to unvested restricted | ||||||||||||||||
| Class A common shares | $ | 2,288 | $ | 2,011 | $ | 6,481 | $ | 5,857 | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average number of total common shares - basic | 10,797 | 4,020 | 8,285 | 3,517 | ||||||||||||
| Weighted average number of total noncontrolling | ||||||||||||||||
| OP units - basic | 1,815 | 1,815 | 1,815 | 1,815 | ||||||||||||
| Weighted average number of total commons shares and | ||||||||||||||||
| noncontrolling OP units - basic | 12,612 | 5,835 | 10,100 | 5,332 | ||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Unvested restricted shares | 12 | 20 | 15 | 31 | ||||||||||||
| Weighted average number of total common shares and | ||||||||||||||||
| noncontrolling OP units - dilutive | 12,624 | 5,855 | 10,115 | 5,363 | ||||||||||||
| FFO per share and unit - basic | $ | 0.17 | $ | 0.34 | $ | 0.58 | $ | 1.10 | ||||||||
| FFO per share and unit - diluted | $ | 0.17 | $ | 0.34 | $ | 0.58 | $ | 1.09 | ||||||||
| FFO-Core per share and unit - basic | $ | 0.18 | $ | 0.34 | $ | 0.64 | $ | 1.10 | ||||||||
| FFO-Core per share and unit - diluted | $ | 0.18 | $ | 0.34 | $ | 0.64 | $ | 1.09 | ||||||||
(1) | Including amounts for discontinued operations. |
11
Whitestone REIT and Subsidiaries
RECONCILIATION OF NON-GAAP MEASURES
(in thousands, except per share and per unit data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| PROPERTY NET OPERATING INCOME ("NOI") | ||||||||||||||||
| Net income attributable to Whitestone REIT | $ | 578 | $ | 177 | $ | 561 | $ | 560 | ||||||||
| General and administrative expenses | 1,495 | 1,263 | 4,737 | 3,735 | ||||||||||||
| Depreciation and amortization | 2,162 | 1,816 | 6,098 | 5,281 | ||||||||||||
| Interest expense | 1,430 | 1,401 | 4,277 | 4,210 | ||||||||||||
| Interest, dividend and other investment income | (264 | ) | (7 | ) | (379 | ) | (19 | ) | ||||||||
| Provision for income taxes | 54 | 56 | 164 | 211 | ||||||||||||
| Loss on disposal of assets | (1 | ) | 72 | 17 | 113 | |||||||||||
| Gain on sale of property from discontinued operations | (397 | ) | — | (397 | ) | — | ||||||||||
| Net income (loss) attributable to noncontrolling interests | 97 | 57 | 122 | 264 | ||||||||||||
| NOI | $ | 5,154 | $ | 4,835 | $ | 15,200 | $ | 14,355 | ||||||||
| EARNINGS BEFORE INTEREST, TAX, DEPRECIATION | ||||||||||||||||
| AND AMORTIZATION ("EBITDA") | ||||||||||||||||
| Net income attributable to Whitestone REIT | $ | 578 | $ | 177 | $ | 561 | $ | 560 | ||||||||
Depreciation and amortization (1) | 2,161 | 1,858 | 6,126 | 5,323 | ||||||||||||
| Interest expense | 1,430 | 1,401 | 4,277 | 4,210 | ||||||||||||
Provision for income taxes (1) | 54 | 56 | 112 | 211 | ||||||||||||
| Loss (gain) on disposal of assets | (1 | ) | 72 | 17 | 113 | |||||||||||
| Net income attributable to noncontrolling interests | 97 | 57 | 122 | 264 | ||||||||||||
| EBITDA | $ | 4,319 | $ | 3,621 | $ | 11,215 | $ | 10,681 | ||||||||
| Three Months Ended | ||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | |||||||||||||
| 2011 | 2011 | 2011 | 2010 | |||||||||||||
| Net income (loss) attributable to Whitestone REIT | $ | 578 | $ | (196 | ) | $ | 185 | $ | 545 | |||||||
Depreciation and amortization (1) | 2,161 | 1,976 | 1,989 | 1,902 | ||||||||||||
Involuntary conversion (1) | — | — | — | (558 | ) | |||||||||||
| Interest expense | 1,430 | 1,445 | 1,402 | 1,410 | ||||||||||||
Provision for income taxes (1) | 54 | 59 | 53 | 51 | ||||||||||||
| Loss on disposal of assets | (1 | ) | — | 18 | 47 | |||||||||||
| Net income (loss) attributable to noncontrolling | ||||||||||||||||
| interests | 97 | (42 | ) | 61 | 206 | |||||||||||
| EBITDA | $ | 4,319 | $ | 3,242 | $ | 3,708 | $ | 3,603 | ||||||||
(1) | Including amounts for discontinued operations. |
12
Whitestone REIT and Subsidiaries OTHER FINANCIAL INFORMATION (in thousands, except number of properties and employees) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Other Financial Information: | ||||||||||||||||
Tenant improvements (1) | $ | 588 | $ | 514 | $ | 1,634 | $ | 1,170 | ||||||||
Leasing commissions (1) | $ | 135 | $ | 140 | $ | 518 | $ | 407 | ||||||||
| Scheduled debt principal payments | $ | 630 | $ | 563 | $ | 1,852 | $ | 1,708 | ||||||||
| Straight line rent income | $ | 154 | $ | 35 | $ | 520 | $ | 52 | ||||||||
| Market rent amortization income from acquired leases | $ | 13 | $ | 2 | $ | 36 | $ | 13 | ||||||||
| Non-cash share-based compensation expense | $ | 78 | $ | 76 | $ | 233 | $ | 219 | ||||||||
| Non-real estate depreciation and amortization | $ | 32 | $ | 23 | $ | 91 | $ | 82 | ||||||||
| Amortization of loan fees | $ | 196 | $ | 106 | $ | 425 | $ | 311 | ||||||||
| Acquisition costs | $ | 185 | $ | 10 | $ | 327 | $ | 11 | ||||||||
| Undepreciated value of unencumbered properties | $ | 95,733 | $ | 58,058 | $ | 95,733 | $ | 58,058 | ||||||||
| Number of unencumbered properties | 17 | 14 | 17 | 14 | ||||||||||||
| Full time employees | 61 | 50 | 61 | 50 | ||||||||||||
(1) | Does not include first generation costs for tenant improvements and leasing commission costs needed for new acquisitions or redevelopment of a property to bring the property to operating standards for its intended use. |
13
Whitestone REIT and Subsidiaries
MARKET CAPITALIZATION AND SELECTED RATIOS
(in thousands)
| As of September 30, 2011 | ||||||||||||
| MARKET CAPITALIZATION: | Percent of Total Equity | Total Market Capitalization | Percent of Total Market Capitalization | |||||||||
| Equity Capitalization: | ||||||||||||
| Class A common shares outstanding | 27.1 | % | 3,471 | |||||||||
| Class B common shares outstanding | 58.7 | % | 7,511 | |||||||||
| Operating partnership units outstanding | 14.2 | % | 1,815 | |||||||||
| Total | 100.0 | % | 12,797 | |||||||||
| Market price of Class B common shares as of | ||||||||||||
| September 30, 2011 | $ | 11.14 | ||||||||||
| Total equity capitalization | $ | 142,559 | 67 | % | ||||||||
| Debt Capitalization: | ||||||||||||
| Outstanding debt | $ | 102,234 | ||||||||||
| Less: Cash and cash equivalents | (32,660 | ) | ||||||||||
| 69,574 | 33 | % | ||||||||||
| Total Market Capitalization as of | ||||||||||||
| September 30, 2011 | $ | 212,133 | 100 | % | ||||||||
| SELECTED RATIOS: | ||||||||||||||||
| Three Months Ended | ||||||||||||||||
| September 30, | June 30, | March 31, | December 31, | |||||||||||||
| 2011 | 2011 | 2011 | 2010 | |||||||||||||
| INTEREST COVERAGE RATIO | ||||||||||||||||
| EBITDA/Interest Expense | ||||||||||||||||
| EBITDA | $ | 4,319 | $ | 3,242 | $ | 3,708 | $ | 3,603 | ||||||||
| Interest expense | 1,430 | 1,445 | 1,402 | 1,410 | ||||||||||||
| 3.0 | 2.2 | 2.6 | 2.6 | |||||||||||||
| LEVERAGE RATIO | ||||||||||||||||
| Debt/Undepreciated Book Value | ||||||||||||||||
| Undepreciated real estate assets | $ | 241,488 | $ | 215,651 | $ | 205,966 | $ | 204,954 | ||||||||
| Outstanding debt | $ | 102,234 | $ | 103,050 | $ | 103,760 | $ | 100,941 | ||||||||
| Less: Cash | (32,660 | ) | (57,776 | ) | (18,334 | ) | (17,591 | ) | ||||||||
| $ | 69,574 | $ | 45,274 | $ | 85,426 | $ | 83,350 | |||||||||
| 29 | % | 21 | % | 41 | % | 41 | % | |||||||||
14
Whitestone REIT and Subsidiaries
SUMMARY OF OUTSTANDING DEBT AND DEBT MATURITIES
As of September 30, 2011
(in thousands)
TOTAL OUTSTANDING DEBT
| Description | Oustanding Amount | Percentage of Total Debt | |||||
| Fixed rate notes | |||||||
$3.0 million 6.00% Note, due 2021 (1) | $ | 2,986 | 3 | % | |||
| $10.0 million 6.04% Note, due 2014 | 9,370 | 9 | % | ||||
| $1.5 million 6.50% Note, due 2014 | 1,477 | 1 | % | ||||
| $11.2 million 6.52% Note, due 2015 | 10,800 | 11 | % | ||||
| $21.4 million 6.53% Notes, due 2013 | 19,683 | 19 | % | ||||
| $24.5 million 6.56% Note, due 2013 | 23,708 | 23 | % | ||||
| $9.9 million 6.63% Notes, due 2014 | 9,292 | 9 | % | ||||
| $0.5 million 5.05% Notes, due 2011 | 158 | 1 | % | ||||
| Floating rate note | |||||||
| $26.9 million LIBOR + 2.86% Note, due 2013 | 24,760 | 24 | % | ||||
| $ | 102,234 | 100 | % | ||||
(1) | The 6.00% interest rate is fixed through March 30, 2016. On March 31, 2016, the interest rate will be reset to the rate of interest for a five year balloon note with a thirty year amortization as published by the Federal Home Loan Bank. |
SCHEDULE OF DEBT MATURITIES
| Year | Scheduled Amortization Payments | Scheduled Maturities | Total Scheduled Maturities | Percentage of Debt Maturing | |||||||||||
| 2011 | $ | 795 | $ | — | $ | 795 | 1 | % | |||||||
| 2012 | 2,636 | — | 2,636 | 3 | % | ||||||||||
| 2013 | 2,336 | 64,152 | 66,488 | 65 | % | ||||||||||
| 2014 | 242 | 18,949 | 19,191 | 19 | % | ||||||||||
| 2015 | 169 | 10,146 | 10,315 | 10 | % | ||||||||||
| 2016 and thereafter | 288 | 2,521 | 2,809 | 2 | % | ||||||||||
| Total | $ | 6,466 | $ | 95,768 | $ | 102,234 | 100 | % | |||||||
15
Whitestone REIT and Subsidiaries SUMMARY OF OCCUPANCY AND TOP TENANTS | |||||||||||||||
| Leasable Square Feet as of | Occupancy as of | ||||||||||||||
| Community Center Properties | September 30, 2011 | September 30, 2011 | June 30, 2011 | March 31, 2011 | December 31, 2010 | ||||||||||
| Retail | 1,343,706 | 90 | % | 84 | % | 83 | % | 88 | % | ||||||
| Office/Flex | 1,201,672 | 86 | % | 85 | % | 86 | % | 88 | % | ||||||
| Office | 631,841 | 80 | % | 79 | % | 80 | % | 79 | % | ||||||
| Total - Operating Portfolio | 3,177,219 | 86 | % | 84 | % | 84 | % | 86 | % | ||||||
Redevelopment, New Acquisitions (1) | 251,625 | 47 | % | 48 | % | 42 | % | 40 | % | ||||||
| Total | 3,428,844 | 84 | % | 81 | % | 82 | % | 84 | % | ||||||
(1) | Includes new acquisitions through the earlier of attainment of 90% occupancy or 18 months of ownership, and properties which are undergoing significant redevelopment or re-tenanting. |
| Tenant Name | Location | Annualized Rental Revenue (in thousands) | Percentage of Total Annualized Base Rental Revenues (2) | Initial Lease Date | Year Expiring | ||||||||
| Sports Authority | San Antonio | $ | 495 | 1.7 | % | 1/1/2004 | 2015 | ||||||
| University of Phoenix | San Antonio | 407 | 1.4 | % | 10/18/2010 | 2018 | |||||||
| Air Liquide America, L.P. | Dallas | 375 | 1.3 | % | 8/1/2001 | 2013 | |||||||
| Walgreens #3766 | Phoenix | 279 | 0.9 | % | 8/9/2011 | 2049 | |||||||
| X-Ray X-Press Corporation | Houston | 272 | 0.9 | % | 7/1/1998 | 2019 | |||||||
| Marshalls | Houston | 248 | 0.8 | % | 5/12/1983 | 2013 | |||||||
| Rock Solid Images | Houston | 243 | 0.8 | % | 4/1/2004 | 2012 | |||||||
| Eligibility Services | Dallas | 236 | 0.8 | % | 6/6/2000 | 2012 | |||||||
| Albertson's #979 | Phoenix | 235 | 0.8 | % | 8/9/2011 | 2022 | |||||||
| Merrill Corporation | Dallas | 234 | 0.8 | % | 12/10/2001 | 2014 | |||||||
| Fitness Alliance, LLC | Phoenix | 216 | 0.7 | % | 8/17/2011 | 2021 | |||||||
| Compass Insurance | Dallas | 213 | 0.7 | % | 9/1/2005 | 2013 | |||||||
| River Oaks L-M, Inc. | Houston | 212 | 0.7 | % | 10/15/1993 | 2014 | |||||||
| Petsmart, Inc | San Antonio | 199 | 0.7 | % | 1/1/2004 | 2018 | |||||||
| New Lifestyles, Inc. | Dallas | 196 | 0.7 | % | 5/5/1998 | 2013 | |||||||
| $ | 4,060 | 13.7 | % | ||||||||||
(2) | Annualized Base Rental Revenues represents the monthly base rent as of September 30, 2011 for each applicable tenant multiplied by 12. |
16
Whitestone REIT and Subsidiaries SUMMARY OF LEASING ACTIVITY | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| RENEWALS | ||||||||||||||||
| Number of Leases | 28 | 50 | 118 | 128 | ||||||||||||
Total SF (1) | 55,456 | 114,718 | 353,092 | 243,068 | ||||||||||||
| Average SF | 1,981 | 2,294 | 2,992 | 1,899 | ||||||||||||
| Total Lease Value | $ | 1,581,708 | $ | 2,999,000 | $ | 11,450,245 | $ | 8,941,000 | ||||||||
| NEW LEASES | ||||||||||||||||
| Number of Leases | 39 | 48 | 106 | 107 | ||||||||||||
Total SF (1) | 96,804 | 94,403 | 283,101 | 292,053 | ||||||||||||
| Average SF | 2,482 | 1,967 | 2,671 | 2,729 | ||||||||||||
| Total Lease Value | $ | 3,682,570 | $ | 3,336,000 | $ | 13,616,814 | $ | 11,994,000 | ||||||||
| TOTAL LEASES | ||||||||||||||||
| Number of Leases | 67 | 98 | 224 | 235 | ||||||||||||
Total SF (1) | 152,260 | 209,121 | 636,193 | 535,121 | ||||||||||||
| Average SF | 2,273 | 2,134 | 2,840 | 2,277 | ||||||||||||
| Total Lease Value | $ | 5,264,278 | $ | 6,335,000 | $ | 25,067,059 | $ | 20,935,000 | ||||||||
(1) | Represents the square footage as the result of new, renewal, expansion and contraction leases. |
17
Whitestone REIT and Subsidiaries SUMMARY OF LEASING ACTIVITY | |||||||||||||||||||||||||||||||||||||||||||
| Type | Number of Leases Signed | Lease Value Signed | GLA Signed | Weighted Average Lease Term (2) | TI and Incentives (3) | TI and Incentives per SF | Contractual Rent Per Sq. Ft. (4) | Prior Contractual Rent Per Sq. Ft. (5) | Annual Increase (Decrease) in Contractual Rent | Cash Basis Increase (Decrease) Over Prior Rent | Annual Increase (Decrease) in Straight-lined Rent | Straight-lined Basis Increase (Decrease) Over Prior Rent | |||||||||||||||||||||||||||||||
Comparable: (1) | |||||||||||||||||||||||||||||||||||||||||||
| Comparable Total Leases: | |||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 42 | $ | 1,794,549 | 72,165 | 2.6 | $ | 95,407 | $ | 1.32 | $ | 9.64 | $ | 10.78 | $ | (91,856 | ) | (11 | )% | $ | (61,707 | ) | (5 | )% | ||||||||||||||||||||
| 2nd Quarter 2011 | 50 | 9,057,363 | 254,912 | 4.9 | 1,710,550 | 6.71 | 8.07 | 8.69 | (156,257 | ) | (7 | )% | (19,542 | ) | (1 | )% | |||||||||||||||||||||||||||
| 1st Quarter 2011 | 56 | 3,432,033 | 196,598 | 2.5 | 125,259 | 0.64 | 7.36 | 8.32 | (190,592 | ) | (12 | )% | (12,000 | ) | (1 | )% | |||||||||||||||||||||||||||
| Year-to-Date 2011 | 148 | $ | 14,283,945 | 523,675 | 3.9 | $ | 1,931,216 | $ | 3.69 | $ | 8.02 | $ | 8.86 | $ | (438,705 | ) | (9 | )% | $ | (93,249 | ) | (2 | )% | ||||||||||||||||||||
| Comparable New Leases: | |||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 19 | $ | 1,192,312 | 39,147 | 3.0 | $ | 77,725 | $ | 1.99 | $ | 8.53 | $ | 9.59 | $ | (44,416 | ) | (11 | )% | $ | (24,749 | ) | (6 | )% | ||||||||||||||||||||
| 2nd Quarter 2011 | 9 | 3,395,023 | 54,519 | 8.8 | 1,271,790 | 23.33 | 8.75 | 7.95 | 43,210 | 10 | % | 13,053 | 3 | % | |||||||||||||||||||||||||||||
| 1st Quarter 2011 | 16 | 794,204 | 36,212 | 3.0 | 54,296 | 1.50 | 7.93 | 9.96 | (73,510 | ) | (20 | )% | (26,435 | ) | (8 | )% | |||||||||||||||||||||||||||
| Year-to-Date 2011 | 44 | $ | 5,381,539 | 129,878 | 5.4 | $ | 1,403,811 | $ | 10.81 | $ | 8.46 | $ | 9.03 | $ | (74,716 | ) | (6 | )% | $ | (38,131 | ) | (3 | )% | ||||||||||||||||||||
| Comparable Renewal Leases: | |||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 23 | $ | 602,237 | 33,018 | 2.1 | $ | 17,682 | $ | 0.54 | $ | 10.95 | $ | 12.34 | $ | (47,440 | ) | (11 | )% | $ | (36,958 | ) | (5 | )% | ||||||||||||||||||||
| 2nd Quarter 2011 | 41 | 5,662,340 | 200,393 | 3.8 | 438,760 | 2.19 | 7.89 | 8.89 | (199,467 | ) | (11 | )% | (32,595 | ) | (2 | )% | |||||||||||||||||||||||||||
| 1st Quarter 2011 | 40 | 2,637,829 | 160,386 | 2.4 | 70,963 | 0.44 | 7.23 | 7.96 | (117,082 | ) | (9 | )% | 14,435 | 1 | % | ||||||||||||||||||||||||||||
| Year-to-Date 2011 | 104 | $ | 8,902,406 | 393,797 | 3.5 | $ | 527,405 | $ | 1.34 | $ | 7.87 | $ | 8.80 | $ | (363,989 | ) | (11 | )% | $ | (55,118 | ) | (2 | )% | ||||||||||||||||||||
18
Whitestone REIT and Subsidiaries SUMMARY OF LEASING ACTIVITY (continued) | |||||||||||||||||||||||||||||||||||||||||||
| Type | Number of Leases Signed | Lease Value Signed | GLA Signed | Weighted Average Lease Term (2) | TI and Incentives (3) | TI and Incentives per SF | Contractual Rent Per Sq. Ft. (4) | Prior Contractual Rent Per Sq. Ft. (5) | Annual Increase (Decrease) in Contractual Rent | Cash Basis Increase (Decrease) Over Prior Rent | Annual Increase (Decrease) in Straight-lined Rent | Straight-lined Basis Increase (Decrease) Over Prior Rent | |||||||||||||||||||||||||||||||
| Non-comparable | |||||||||||||||||||||||||||||||||||||||||||
| Non-Comparable Total Leases: | |||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 25 | $ | 3,469,728 | 144,081 | 7.2 | $ | 1,989,773 | $ | 13.81 | $ | 8.04 | ||||||||||||||||||||||||||||||||
| 2nd Quarter 2011 | 27 | 4,748,641 | 92,815 | 4.9 | 545,959 | 5.88 | 11.80 | ||||||||||||||||||||||||||||||||||||
| 1st Quarter 2011 | 24 | 2,564,745 | 77,904 | 8.3 | 455,794 | 5.85 | 9.52 | ||||||||||||||||||||||||||||||||||||
| Year-to-Date 2011 | 76 | $ | 10,783,114 | 314,800 | 5.8 | $ | 2,991,526 | $ | 9.50 | $ | 9.54 | ||||||||||||||||||||||||||||||||
| Non-Comparable New Leases: | �� | ||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 20 | $ | 2,490,258 | 116,625 | 8.0 | $ | 1,973,200 | $ | 16.92 | $ | 7.77 | ||||||||||||||||||||||||||||||||
| 2nd Quarter 2011 | 21 | 3,266,160 | 56,571 | 4.9 | 429,472 | 7.59 | 11.83 | ||||||||||||||||||||||||||||||||||||
| 1st Quarter 2011 | 21 | 2,478,857 | 66,958 | 4.5 | 439,575 | 6.56 | 8.60 | ||||||||||||||||||||||||||||||||||||
| Year-to-Date 2011 | 62 | $ | 8,235,275 | 240,154 | 6.3 | $ | 2,842,247 | $ | 11.84 | $ | 8.99 | ||||||||||||||||||||||||||||||||
| Non-Comparable Renewal Leases: | |||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 5 | $ | 979,470 | 27,456 | 3.9 | $ | 16,573 | $ | 0.60 | $ | 9.19 | ||||||||||||||||||||||||||||||||
| 2nd Quarter 2011 | 6 | 1,482,481 | 36,244 | 4.9 | 116,487 | 3.21 | 11.76 | ||||||||||||||||||||||||||||||||||||
| 1st Quarter 2011 | 3 | 85,888 | 10,946 | 8.3 | 16,219 | 1.48 | 15.11 | ||||||||||||||||||||||||||||||||||||
| Year-to-Date 2011 | 14 | $ | 2,547,839 | 74,646 | 4.1 | $ | 149,279 | $ | 2.00 | $ | 11.31 | ||||||||||||||||||||||||||||||||
19
Whitestone REIT and Subsidiaries SUMMARY OF LEASING ACTIVITY (continued) | |||||||||||||||||||||||||||||||||||||||||||
| Type | Number of Leases Signed | Lease Value Signed | GLA Signed | Weighted Average Lease Term (2) | TI and Incentives (3) | TI and Incentives per SF | Contractual Rent Per Sq. Ft. (4) | Prior Contractual Rent Per Sq. Ft. (5) | Annual Increase (Decrease) in Contractual Rent | Cash Basis Increase (Decrease) Over Prior Rent | Annual Increase (Decrease) in Straight-lined Rent | Straight-lined Basis Increase (Decrease) Over Prior Rent | |||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||||||||||
| New & Renewal | |||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 67 | $ | 5,264,277 | 216,246 | 5.6 | $ | 2,085,180 | $ | 9.64 | $ | 8.57 | ||||||||||||||||||||||||||||||||
| 2nd Quarter 2011 | 77 | 13,806,004 | 347,727 | 4.9 | 2,256,509 | 6.49 | 9.09 | ||||||||||||||||||||||||||||||||||||
| 1st Quarter 2011 | 80 | 5,996,778 | 274,502 | 3.1 | 581,053 | 2.12 | 7.73 | ||||||||||||||||||||||||||||||||||||
| Year-to-Date 2011 | 224 | $ | 25,067,059 | 838,475 | 4.6 | $ | 4,922,742 | $ | 5.87 | $ | 8.86 | ||||||||||||||||||||||||||||||||
| New | |||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 39 | $ | 3,682,570 | 155,772 | 6.7 | $ | 2,050,925 | $ | 13.17 | $ | 7.96 | ||||||||||||||||||||||||||||||||
| 2nd Quarter 2011 | 30 | 6,661,183 | 111,090 | 6.7 | 1,701,262 | 15.31 | 10.36 | ||||||||||||||||||||||||||||||||||||
| 1st Quarter 2011 | 37 | 3,273,061 | 103,170 | 3.9 | 493,871 | 4.79 | 8.37 | ||||||||||||||||||||||||||||||||||||
| Year-to-Date 2011 | 106 | $ | 13,616,814 | 370,032 | 6.0 | $ | 4,246,058 | $ | 11.47 | $ | 8.81 | ||||||||||||||||||||||||||||||||
| Renewal | |||||||||||||||||||||||||||||||||||||||||||
| 3rd Quarter 2011 | 28 | $ | 1,581,707 | 60,474 | 2.9 | $ | 34,255 | $ | 0.57 | $ | 10.15 | ||||||||||||||||||||||||||||||||
| 2nd Quarter 2011 | 47 | 7,144,821 | 236,637 | 4.0 | 555,247 | 2.35 | 8.48 | ||||||||||||||||||||||||||||||||||||
| 1st Quarter 2011 | 43 | 2,723,717 | 171,332 | 2.4 | 87,182 | 0.51 | 7.73 | ||||||||||||||||||||||||||||||||||||
| Year-to-Date 2011 | 118 | $ | 11,450,245 | 468,443 | 3.5 | $ | 676,684 | $ | 1.44 | $ | 8.42 | ||||||||||||||||||||||||||||||||
(1) | Comparable leases represent leases signed on spaces for which there was a former tenant within the last twelve months and the new or renewal square footage was within 25% of the expired square footage. |
(2) | Weighted average is determined on the basis of square footage. |
(3) | Estimated amount per signed lease. Actual cost of construction may vary. Does not include first generation costs for tenant improvements and leasing commission costs needed for new acquisitions or redevelopment of a property to bring the property to operating standards for its intended use. |
(4) | Contractual rent represents contractual minimum rent under the new lease for the first month, excluding concessions. |
(5) | Prior contractual rent represents contractual minimum rent under the prior lease for the final month. |
20
Whitestone REIT and Subsidiaries LEASE EXPIRATIONS | ||||||||||||||||||||
| Annualized Base Rent | ||||||||||||||||||||
| Gross Leasable Area | as of September 30, 2011 | |||||||||||||||||||
| Year | Number of Leases (1) | Approximate Square Feet | Percent of Total | Amount (in thousands)(2) | Percent of Total | Per Square Foot | ||||||||||||||
| 2011 | 115 | 194,337 | 5.7 | % | $ | 2,081 | 7.1 | % | $ | 10.71 | ||||||||||
| 2012 | 212 | 505,481 | 14.7 | % | 5,940 | 20.2 | % | 11.75 | ||||||||||||
| 2013 | 169 | 562,503 | 16.4 | % | 6,015 | 20.5 | % | 10.69 | ||||||||||||
| 2014 | 140 | 498,978 | 14.6 | % | 4,704 | 16.0 | % | 9.43 | ||||||||||||
| 2015 | 79 | 334,512 | 9.8 | % | 3,413 | 11.6 | % | 10.20 | ||||||||||||
| 2016 | 77 | 276,500 | 8.1 | % | 2,738 | 9.3 | % | 9.90 | ||||||||||||
| 2017 | 14 | 62,540 | 1.8 | % | 695 | 2.4 | % | 11.11 | ||||||||||||
| 2018 | 11 | 88,015 | 2.6 | % | 1,037 | 3.5 | % | 11.78 | ||||||||||||
| 2019 | 7 | 58,783 | 1.7 | % | 681 | 2.3 | % | 11.58 | ||||||||||||
| 2020 and thereafter | 26 | 282,393 | 8.1 | % | 2,043 | 7.1 | % | 7.23 | ||||||||||||
| Total | 850 | 2,864,042 | 83.5 | % | $ | 29,347 | 100.0 | % | $ | 10.25 | ||||||||||
(1) | Lease expirations table reflects rents in place as of September 30, 2011, and does not include option periods. |
(2) | Annualized Base Rent represents the monthly base rent as of September 30, 2011 for each tenant multiplied by 12. |
21
Whitestone REIT and Subsidiaries COMMUNITY CENTERED PROPERTY DETAILS As of September 30, 2011 | ||||||||||||||||||||||
Community Name | Location | Year Built/ Renovated | Leasable Square Feet | Percent Occupied at 9/30/11 | Annualized Base Rental Revenue (in thousands) (1) | Average Base Rental Revenue Per Sq. Ft. (2) | Average Net Effective Annual Base Rent Per Leased Sq. Ft.(3) | |||||||||||||||
| Retail Communities: | ||||||||||||||||||||||
| Ahwatukee Plaza | Phoenix | 1979 | 72,650 | 98 | % | $ | 868 | $ | 12.19 | $ | 12.64 | |||||||||||
| Bellnott Square | Houston | 1982 | 73,930 | 41 | % | $ | 301 | 9.93 | 9.63 | |||||||||||||
| Bissonnet/Beltway | Houston | 1978 | 29,205 | 100 | % | 305 | 10.44 | 10.85 | ||||||||||||||
| Centre South | Houston | 1974 | 39,134 | 86 | % | 220 | 6.54 | 8.29 | ||||||||||||||
| Holly Knight | Houston | 1984 | 20,015 | 100 | % | 344 | 17.19 | 17.44 | ||||||||||||||
| Kempwood Plaza | Houston | 1974 | 101,008 | 96 | % | 842 | 8.68 | 8.63 | ||||||||||||||
| Lion Square | Houston | 1980 | 119,621 | 94 | % | 1,040 | 9.25 | 9.45 | ||||||||||||||
| Providence | Houston | 1980 | 90,327 | 99 | % | 724 | 8.10 | 7.98 | ||||||||||||||
| Shaver | Houston | 1978 | 21,926 | 98 | % | 236 | 10.98 | 11.40 | ||||||||||||||
| South Richey | Houston | 1980 | 69,928 | 94 | % | 291 | 4.43 | 9.26 | ||||||||||||||
| Spoerlein Commons | Chicago | 1987 | 41,455 | 91 | % | 766 | 20.31 | 20.62 | ||||||||||||||
| SugarPark Plaza | Houston | 1974 | 95,032 | 93 | % | 813 | 9.20 | 9.69 | ||||||||||||||
| Sunridge | Houston | 1979 | 49,359 | 99 | % | 445 | 9.11 | 9.21 | ||||||||||||||
| Terravita Marketplace | Phoenix | 1997 | 102,733 | 100 | % | 1,448 | 14.09 | 14.60 | ||||||||||||||
| Torrey Square | Houston | 1983 | 105,766 | 98 | % | 735 | 7.09 | 7.25 | ||||||||||||||
| Town Park | Houston | 1978 | 43,526 | 100 | % | 782 | 17.97 | 17.71 | ||||||||||||||
| Webster Point | Houston | 1984 | 26,060 | 100 | % | 274 | 10.51 | 10.78 | ||||||||||||||
| Westchase | Houston | 1978 | 49,573 | 84 | % | 496 | 11.91 | 11.36 | ||||||||||||||
| Windsor Park | San Antonio | 1992 | 192,458 | 76 | % | 1,426 | 9.75 | 9.39 | ||||||||||||||
| 1,343,706 | 90 | % | $ | 12,356 | $ | 10.22 | $ | 10.62 | ||||||||||||||
| Office/Flex Communities: | ||||||||||||||||||||||
| Brookhill | Houston | 1979 | 74,757 | 95 | % | $ | 260 | $ | 3.66 | $ | 3.62 | |||||||||||
| Corporate Park Northwest | Houston | 1981 | 185,627 | 66 | % | 1,293 | 10.55 | 10.53 | ||||||||||||||
| Corporate Park West | Houston | 1999 | 175,665 | 84 | % | 1,347 | 9.13 | 8.76 | ||||||||||||||
| Corporate Park Woodland | Houston | 2000 | 99,937 | 92 | % | 756 | 8.22 | 8.16 | ||||||||||||||
| Dairy Ashford | Houston | 1981 | 42,902 | 92 | % | 219 | 5.55 | 5.57 | ||||||||||||||
| Holly Hall | Houston | 1980 | 90,000 | 100 | % | 713 | 7.92 | 8.09 | ||||||||||||||
| Interstate 10 | Houston | 1980 | 151,000 | 81 | % | 630 | 5.15 | 5.26 | ||||||||||||||
| Main Park | Houston | 1982 | 113,410 | 96 | % | 698 | 6.41 | 6.48 | ||||||||||||||
| Plaza Park | Houston | 1982 | 105,530 | 83 | % | 731 | 8.35 | 8.00 | ||||||||||||||
| Westbelt Plaza | Houston | 1978 | 65,619 | 73 | % | 369 | 7.70 | 7.77 | ||||||||||||||
| Westgate | Houston | 1984 | 97,225 | 100 | % | 556 | 5.72 | 5.69 | ||||||||||||||
| 1,201,672 | 86 | % | $ | 7,572 | $ | 7.33 | $ | 7.27 | ||||||||||||||
22
Whitestone REIT and Subsidiaries COMMUNITY CENTERED PROPERTY DETAILS As of September 30, 2011 (continued) | ||||||||||||||||||||||
Community Name | Location | Year Built/ Renovated | Leasable Square Feet | Percent Occupied at 9/30/11 | Annualized Base Rental Revenue (in thousands) (1) | Average Base Rental Revenue Per Sq. Ft. (2) | Average Net Effective Annual Base Rent Per Leased Sq. Ft.(3) | |||||||||||||||
| Office Communities: | ||||||||||||||||||||||
| 9101 LBJ Freeway | Dallas | 1985 | 125,874 | 76 | % | $ | 1,385 | $ | 14.48 | $ | 14.66 | |||||||||||
| Featherwood | Houston | 1983 | 49,760 | 84 | % | 770 | 18.42 | 18.06 | ||||||||||||||
| Pima Norte | Phoenix | 2007 | 33,417 | 15 | % | 97 | 19.35 | 18.75 | ||||||||||||||
| Royal Crest | Houston | 1984 | 24,900 | 80 | % | 267 | 13.40 | 13.25 | ||||||||||||||
| Uptown Tower | Dallas | 1982 | 253,981 | 84 | % | 3,746 | 17.56 | 17.95 | ||||||||||||||
| Woodlake Plaza | Houston | 1974 | 106,169 | 90 | % | 1,332 | 13.94 | 14.27 | ||||||||||||||
| Zeta Building | Houston | 1982 | 37,740 | 89 | % | 530 | 15.78 | 15.36 | ||||||||||||||
| 631,841 | 80 | % | $ | 8,127 | $ | 16.08 | $ | 16.27 | ||||||||||||||
| Total - Operating Portfolio | 3,177,219 | 86 | % | $ | 28,055 | $ | 10.27 | $ | 10.46 | |||||||||||||
| Non-Operating Portfolio Communities: | ||||||||||||||||||||||
| The Citadel | Phoenix | 1985 | 28,547 | 56 | % | $ | 102 | $ | 6.38 | $ | 16.51 | |||||||||||
| Desert Canyon | Phoenix | 2000 | 62,533 | 70 | % | 505 | 11.54 | 11.65 | ||||||||||||||
| Gilbert Tuscany Village | Phoenix | 2009 | 49,415 | 16 | % | 202 | 25.55 | 30.36 | ||||||||||||||
| The MarketPlace at Central | Phoenix | 2000 | 111,130 | 47 | % | 480 | 9.19 | 10.24 | ||||||||||||||
| 251,625 | 48 | % | $ | 1,289 | $ | 10.67 | $ | 12.82 | ||||||||||||||
| Grand Totals | 3,428,844 | 84 | % | $ | 29,344 | $ | 10.19 | $ | 10.46 | |||||||||||||
(1) | Calculated as the tenant's actual September 30, 2011 base rent (defined as cash base rents including abatements) multiplied by 12. Excludes vacant space as of September 30, 2011. 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. Total abatements for leases in effect as of September 30, 2011 equaled approximately $74,000 for the month ended September 30, 2011. |
(2) | Calculated as annualized base rent divided by net rentable square feet leased as of September 30, 2011. Excludes vacant space as of September 30, 2011. |
(3) | Represents (i) the contractual base rent for leases in place as of September 30, 2011, calculated on a straight-line basis to reflect changes in rental rates throughout the lease term and amortize free rent periods and abatements, but without regard to tenant improvement allowances and leasing commissions, divided by (ii) square footage under commenced leases as of September 30, 2011. |
23