Whitestone REIT (NYSE: WSR) (“Whitestone” or the “Company”) a
pure-play community-centered retail REIT that acquires, owns,
manages, develops and redevelops high quality “E-Commerce
Resistant” neighborhood, community and lifestyle retail centers
principally located in the largest, fastest-growing and most
affluent markets in the Sunbelt, today announced operating and
financial results for the third quarter ended September 30, 2019.
Highlights*
*All per share amounts presented in this news
release are on a diluted per common share and operating partnership
(“OP”) unit basis unless stated otherwise.Third Quarter
2019 Compared to Third Quarter 2018:
- Net Income attributable to Whitestone REIT was $1.8 million, or
$0.04 per share, compared to $7.8 million, or $0.19 per
share. Third quarter 2018 included a gain on sale of
properties of $4.4 million, representing $0.11 per share.
- Grew rental rates 6.6% and 7.6% (GAAP basis) on new and renewal
leases signed last twelve months, respectively.
- Occupancy improved 100 basis points from the second quarter to
90.4%.
- Average Annual Base Rent per Square Foot (Straight Line Basis)
increased 4% to $19.64 from $18.97 in third quarter of 2018.
- Funds from Operations (“FFO”) of $9.2 million, or $0.22 per
share, compared to $10.8 million, or $0.26 per share
- FFO Core of $11.0 million, or $0.26 per share, compared to
$12.3 million, or $0.29 per share
Jim Mastandrea, Chairman and Chief Executive
Officer of Whitestone REIT, stated, “We are pleased to have driven
a sequential increase of 100 basis points in occupancy from the
second quarter, while effectively managing operating costs in the
third quarter. We continue to extract value from our portfolio of
well-positioned Community Centered Properties® in high growth
markets to create incremental cashflow. By making timely
investments in our existing assets, we can ultimately improve
occupancy and create meaningful long-term value for our
shareholders.”
Financial
ResultsReconciliations of Net Income to FFO and FFO Core
are included herein.Net Income attributable to Whitestone REIT was
$1.8 million, or $0.04 per share, for the third quarter of 2019,
compared to $7.8 million, or $0.19 per share, for the same period
in 2018. Included in third quarter 2018 net income was a $4.4
million gain from sale of properties, representing $0.11 per share.
FFO was $9.2 million, or $0.22 per share, for the third
quarter of 2019, compared to $10.8 million, or $0.26 per share, for
the same period in 2018. FFO Core was $11.0 million, or $0.26 per
share, in the third quarter of 2019, compared to $12.3 million, or
$0.29 per share, in the same period of 2018.
Operating ResultsFor the period ending
September 30, 2019, the Company’s operating highlights were as
follows:
|
3Q-2019 |
|
YTD 2019 |
|
|
|
|
Ending Occupancy - Wholly Owned Properties |
|
90.4 |
% |
|
|
90.4 |
% |
Same Store Property NOI Growth
from 2018 Period |
|
(1.2 |
)% |
|
|
0.34 |
% |
Rental Rate Growth (1): |
|
|
|
Total Leases |
|
14.4 |
% |
|
|
8.4 |
% |
New Leases |
|
6.6 |
% |
|
|
6.5 |
% |
Renewal Leases |
|
16.4 |
% |
|
|
8.7 |
% |
|
|
|
|
Leasing
Transactions: |
|
|
|
Number of New Leases |
|
26 |
|
|
|
88 |
|
New Leases - Lease Term
Revenue (millions) |
$ |
9.3 |
|
|
$ |
23.5 |
|
Number of Renewal Leases |
|
42 |
|
|
|
153 |
|
Renewal Leases - Lease Term
Revenue (millions) |
$ |
9.4 |
|
|
$ |
37.1 |
|
|
|
|
|
|
|
|
|
(1) Rental rate growth represents the
percentage increase on rental rates per square foot, on comparable
leases signed during the period, compared to rental rates per
square foot on the previous leases. Growth rates are
calculated on a GAAP basis.
Real Estate Portfolio
Update
Community Centered
Properties™ Portfolio Statistics:Whitestone’s optimal
mix of national, regional and local tenants provide daily
necessities, needed services and entertainment to the communities
in which they are located. As of September 30, 2019, Whitestone
wholly owned 57 Community Centered Properties® with 4.8 million
square feet of gross leasable area ("GLA"). Whitestone’s
Retail Community Centered Properties® are located in Austin (4),
San Antonio (3), Chicago (1), Dallas-Fort Worth (7), Houston (15)
and the greater Phoenix metropolitan area (27).
In addition to being business friendly, these
are five of the top markets in the country in terms of size,
economic strength and population growth. 2017 estimates show the
projected 5-year population growth rates for both Austin and
Dallas-Fort Worth to be 9.7%, San Antonio to be 8.6%, Houston to be
8.0%, and Phoenix to be 6.6% (1). The Company’s retail properties
in these markets are located on the best retail corners embedded in
affluent communities. The Company also owns an equity interest in
and manages 11 properties containing 1.3 million square feet of GLA
through its investment in Pillarstone OP.
At the end of the third quarter, the Company's
diversified tenant base was comprised of approximately 1,364
tenants, with the largest tenant accounting for only 2.9% of
annualized base rental revenues. Lease terms range from less than
one year for smaller tenants to over 15 years for larger tenants.
The Company’s leases generally include minimum monthly lease
payments and tenant reimbursements for payment of taxes, insurance
and maintenance, and typically exclude restrictive lease
clauses.
Leasing Activity:During the
third quarter of 2019, the leasing team signed 68 leases totaling
175,714 square feet in new, expansion and renewal leases, compared
to 75 leases totaling 170,944 square feet in the third quarter of
2018. The total lease value was $18.7 million compared to $23.8
million during the same period last year.
The Company's total portfolio occupancy stood at
90.4% at quarter end compared to 89.4% at June 30, 2019 and 91.9%
at the end the third quarter 2018.
Development:The Company
completed construction at its Fulton Towne Ranch pad on a
development pad site. The 7,209 square foot Community Centered
Property® is 100% leased and is located in Chandler, Arizona,
Balance Sheet and Liquidity
Balance Sheet:
Reflecting the Company’s acquisition and
disposition activity during the year and selective development and
redevelopment, undepreciated real estate assets were $1.06 billion
and $1.05 billion at September 30, 2019 and September 30, 2018,
respectively.
Liquidity, Debt and Credit
Facility:
At September 30, 2019, 49 of the Company’s
wholly-owned 57 properties were unencumbered by mortgage debt, with
an undepreciated cost basis of $765.4 million. At September 30,
2019, the Company had total real estate debt of $622.7 million, of
which approximately 87% was subject to fixed interest rates. The
Company’s weighted average interest rate on all fixed rate debt as
of the end of the third quarter was 4.08% and the weighted average
remaining term was 5.5 years.
At quarter end, Whitestone had $5.5
million of cash available on its balance sheet and $164.0 million
of available capacity under its credit facility.
Dividend
On September 23, 2019, the Company declared a
quarterly cash distribution of $0.285 per common share and OP unit
for the fourth quarter of 2019, to be paid in three equal
installments of $0.095 in October, November, and December of
2019.
(1) Source: Claritas, April 2017.
2019 Guidance
The Company updates its 2019 full year guidance
for Net Income attributable to Whitestone REIT per share to be in
the range of $0.55 to $0.59 and affirms its 2019 full year guidance
for FFO, as defined by NAREIT, per share to be in the range of
$0.90 to $0.94 and FFO Core per share (as defined by the Company)
to be in the range of $1.06 to $1.10.
Whitestone REIT and Subsidiaries2019
FINANCIAL GUIDANCE |
|
|
Projected Range |
|
|
Full Year 2019 |
|
|
Prior Guidance |
|
Updated Guidance |
|
|
Low |
|
High |
|
Low |
|
High |
Net income attributable to Whitestone REIT |
|
$ |
0.21 |
|
|
$ |
0.25 |
|
|
$ |
0.55 |
|
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net income to FFO(1): |
|
|
|
|
|
|
|
|
Depreciation expense,
amortization, gain on disposal of assets |
|
0.69 |
|
|
0.69 |
|
|
0.68 |
|
|
0.68 |
|
(Gain) loss on sale or
disposal of assets or properties |
|
— |
|
|
— |
|
|
(0.34 |
) |
|
(0.34 |
) |
Net income attributable to
redeemable operating partnership |
|
— |
|
|
— |
|
|
0.01 |
|
|
0.01 |
|
FFO |
|
$ |
0.90 |
|
|
$ |
0.94 |
|
|
$ |
0.90 |
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile FFO to FFO Core: |
|
|
|
|
|
|
|
|
Share based compensation
expense |
|
0.16 |
|
|
0.16 |
|
|
0.15 |
|
|
0.15 |
|
Early debt extinguishment
costs of real estate partnership |
|
— |
|
|
— |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
FFO Core |
|
$ |
1.06 |
|
|
$ |
1.10 |
|
|
$ |
1.06 |
|
|
$ |
1.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes pro-rata share attributable to real estate in
unconsolidated partnership.
Note: Guidance reflects management’s view of current and future
market conditions, as well as the earnings impact of events
referenced in our earnings release and supplemental data
package. This guidance does not include the operational or
capital impact of any future unannounced acquisition or disposition
activity. Estimates involve numerous assumptions such as rental
income, interest rates, tenant default, occupancy rates, expenses,
the consolidation of the Company’s non-wholly owned portfolio of
non-retail assets and numerous other factors, and excludes
potential future acquisitions and dispositions, acquisition and
disposition transaction income and expenses and professional
service fees. Not all of the factors are determinable at this
time and actual results may vary from the projected results, and
may be above or below the range indicated.
Subsequent Event - Post Quarter Asset
Sales
On October 14, 2019, the Company announced the
sale of three Houston non-core properties owned through an equity
investment in a real estate partnership for a total sale price of
$39.7 million. The sale represented a capitalization rate of 6.8%
on trailing twelve month net operating income. The Company
expects to record a gain on sale of approximately $14 million in
the fourth quarter, representing its ownership percentage of the
real estate partnership. Net proceeds received by the real
estate partnership were $12.3 million, after closing costs and
repayment of mortgage debt. Whitestone received $11 million in cash
as a result of the sale, and expects to recycle the capital into
development and redevelopment of existing assets, acquisitions and
general corporate purposes.
Webcast and Conference Call
Information
To listen to a live webcast of the conference
call, click on the Investor Relations tab of the Company’s website,
www.whitestonereit.com, and then click on the webcast link. A
replay of the call will be available on Whitestone’s website via
the webcast link until the Company’s next earnings release.
Additional information about Whitestone can be found on the
Company’s website.
The third quarter earnings release and
supplemental data package will be located in the Investor Relations
section of the Company’s website. For those without internet
access, the 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) 435-2219.
In conjunction with the issuance of its
financial results, you are invited to listen to the Company’s
earnings release conference call to be broadcast live on Thursday,
October 31, 2019 at 10:00 A.M. Central Time. Conference call
access information is as follows:
Dial-in number for domestic participants:Dial-in number for
international participants: |
|
(800) 289-0438(323) 794-2423 |
|
|
|
The conference call will be recorded and a telephone replay will
be available through Thursday, November 14, 2019. Replay
access information is as follows:
Replay number for domestic participants:Replay number for
international participants:Passcode (for all participants): |
|
(844) 512-2921(412) 317-66715958525 |
|
|
|
Supplemental Financial Information
Supplemental materials and details regarding
Whitestone's results of operations, communities and tenants are
available on the Company's website at www.whitestonereit.com.
About Whitestone REITWhitestone
is a community-centered retail REIT that acquires, owns, manages,
develops and redevelops high quality "e-commerce resistant"
neighborhood, community and lifestyle retail centers principally
located in the largest, fastest-growing and most affluent markets
in the Sunbelt. Whitestone’s optimal mix of national, regional and
local tenants provides daily necessities, needed services and
entertainment to the communities in which they are located.
Whitestone's properties are primarily located in business-friendly
Phoenix, Austin, Dallas-Fort Worth, Houston and San Antonio, which
are among the fastest growing U.S. population centers with highly
educated workforces, high household incomes and strong job growth.
For additional information, visit www.whitestonereit.com.
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”). The Company intends 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 the
Company's use of forward-looking terminology, such as “may,”
“will,” “plan,” “expect,” “intend,” “anticipate,” “believe,”
“continue,” “goals” or similar words or phrases that are
predictions of future events or trends and which do not relate
solely to historical matters.
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 meet its long-term goals, its
assumptions regarding its earnings guidance, including its ability
to execute effectively its acquisition and disposition strategy, to
continue to execute its development pipeline on schedule and at the
expected costs, and its ability to grow its NOI as expected, which
could be impacted by a number of factors, including, among other
things, its ability to continue to renew leases or re-let space on
attractive terms and to otherwise address its leasing rollover; its
ability to successfully identify, finance and consummate suitable
acquisitions, and the impact of such acquisitions, including
financing developments, capitalization rates and internal rates of
return; the Company’s ability to reduce or otherwise effectively
manage its general and administrative expenses; the Company’s
ability to fund from cash flows or otherwise distributions to its
shareholders at current rates or at all; 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,
legislative and regulatory changes, the success of the Company's
real estate strategies and investment objectives; litigation risks;
the Company's ability to continue to qualify as a REIT under the
Internal Revenue Code of 1986, as amended; and other factors
detailed in the Company's most recent Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and other documents the Company
files with the Securities and Exchange Commission from time to
time.
Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this press release. The Company cannot guarantee the
accuracy of any such forward-looking statements contained in this
press release, and the Company does 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 supplemental financial
measures that are not calculated pursuant to U.S. generally
accepted accounting principles (“GAAP”) including FFO, FFO Core,
and NOI. Following are explanations 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 NAREIT, which states that FFO should
represent net income available to common shareholders (computed in
accordance with GAAP) excluding depreciation and amortization
related to real estate, gains or losses from the sale of certain
real estate assets, gains and losses from change in control, and
impairment write-downs of certain real estate assets and
investments in entities when the impairment is directly
attributable to decreases in the value of depreciable real estate
held by the entity. 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 and service
debt.
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.
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.
FFO Core: Management believes that the
computation of FFO in accordance with NAREIT's definition includes
certain non-cash and non-comparable items that affect the Company's
period-over-period performance. These items include, but are not
limited to, legal settlements, non-cash share-based compensation
expense, rent support agreement payments received from sellers on
acquired assets and acquisition costs. In addition, the Company
believes that FFO Core is a useful supplemental measure for the
investing community to use in comparing the Company to other REITs
as many REITs provide some form of adjusted or modified FFO.
However, other REITs may use different adjustments, and the
Company's FFO Core may not be comparable to the adjusted or
modified FFO of other REITs.
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). Because NOI excludes
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 capital expenditures and leasing costs, 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 of
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. Other REITs may use different
methodologies for calculating NOI, and accordingly, the Company's
NOI may not be comparable to that of other REITs.
Whitestone REIT
Contacts:Investors Contact:Kevin Reed,
Director of Investor RelationsWhitestone REIT(713)
435-2219ir@whitestonereit.com
Whitestone
REIT and Subsidiaries |
CONSOLIDATED
BALANCE SHEETS |
(in
thousands, except share and per share data) |
|
|
|
|
|
|
|
September 30, 2019 |
|
December 31, 2018 |
|
|
(unaudited) |
|
|
|
|
|
|
|
ASSETS |
Real estate
assets, at cost |
|
|
|
|
Property |
|
$ |
1,062,283 |
|
|
$ |
1,052,238 |
|
Accumulated depreciation |
|
|
(131,508 |
) |
|
|
(113,300 |
) |
Total real estate assets |
|
|
930,775 |
|
|
|
938,938 |
|
Investment
in real estate partnership |
|
|
26,423 |
|
|
|
26,236 |
|
Cash and
cash equivalents |
|
|
5,539 |
|
|
|
13,658 |
|
Restricted
cash |
|
|
106 |
|
|
|
128 |
|
Escrows and
acquisition deposits |
|
|
8,163 |
|
|
|
8,211 |
|
Accrued
rents and accounts receivable, net of allowance for doubtful
accounts |
|
|
22,232 |
|
|
|
21,642 |
|
Receivable
due from related party |
|
|
379 |
|
|
|
394 |
|
Financed
receivable due from related party |
|
|
5,661 |
|
|
|
5,661 |
|
Unamortized
lease commissions, legal fees and loan costs |
|
|
9,011 |
|
|
|
6,698 |
|
Prepaid
expenses and other assets(1) |
|
|
3,471 |
|
|
|
7,306 |
|
Total assets |
|
$ |
1,011,760 |
|
|
$ |
1,028,872 |
|
|
|
|
|
|
LIABILITIES
AND EQUITY |
Liabilities: |
|
|
|
|
Notes payable |
|
$ |
621,737 |
|
|
$ |
618,205 |
|
Accounts payable and accrued expenses(2) |
|
|
38,933 |
|
|
|
33,729 |
|
Payable due to related party |
|
|
73 |
|
|
|
58 |
|
Tenants' security deposits |
|
|
6,440 |
|
|
|
6,130 |
|
Dividends and distributions payable |
|
|
11,820 |
|
|
|
11,600 |
|
Total liabilities |
|
|
679,003 |
|
|
|
669,722 |
|
Commitments
and contingencies: |
|
|
— |
|
|
|
— |
|
Equity: |
|
|
|
|
Preferred shares, $0.001 par value per share; 50,000,000 shares
authorized; none issued and outstanding as of September 30, 2019
and December 31, 2018 |
|
|
— |
|
|
|
— |
|
Common shares, $0.001 par value per share; 400,000,000 shares
authorized; 40,517,569 and 39,778,029 issued and outstanding as of
September 30, 2019 and December 31, 2018, respectively |
|
|
40 |
|
|
|
39 |
|
Additional paid-in capital |
|
|
540,116 |
|
|
|
527,662 |
|
Accumulated deficit |
|
|
(207,824 |
) |
|
|
(181,361 |
) |
Accumulated other comprehensive gain (loss) |
|
|
(7,356 |
) |
|
|
4,116 |
|
Total Whitestone REIT shareholders' equity |
|
|
324,976 |
|
|
|
350,456 |
|
Noncontrolling interest in subsidiary |
|
|
7,781 |
|
|
|
8,694 |
|
Total equity |
|
|
332,757 |
|
|
|
359,150 |
|
Total liabilities and equity |
|
$ |
1,011,760 |
|
|
$ |
1,028,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019 |
|
December 31, 2018 |
|
|
(unaudited) |
|
|
|
|
|
|
|
(1)
Operating lease right of use assets (net) (related to adoption of
Topic 842) |
|
$ |
697 |
|
|
N/A |
|
|
|
|
|
(2)
Operating lease liabilities (related to adoption of Topic 842) |
|
$ |
701 |
|
|
N/A |
|
|
|
|
|
Whitestone
REIT and Subsidiaries CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited) (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Revenues |
|
|
|
|
|
|
|
|
Rental(1) |
|
$ |
29,368 |
|
|
$ |
30,085 |
|
|
$ |
87,527 |
|
|
$ |
88,211 |
|
Management, transaction, and other fees |
|
|
511 |
|
|
|
619 |
|
|
|
1,624 |
|
|
|
1,751 |
|
Total revenues |
|
|
29,879 |
|
|
|
30,704 |
|
|
|
89,151 |
|
|
|
89,962 |
|
|
|
|
|
|
|
|
|
|
Property expenses |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
6,789 |
|
|
|
6,477 |
|
|
|
19,865 |
|
|
|
19,044 |
|
Operating and maintenance |
|
|
5,118 |
|
|
|
5,452 |
|
|
|
14,760 |
|
|
|
15,325 |
|
Real estate taxes |
|
|
4,410 |
|
|
|
4,379 |
|
|
|
12,474 |
|
|
|
12,260 |
|
General and administrative(2) |
|
|
5,597 |
|
|
|
4,982 |
|
|
|
16,514 |
|
|
|
17,987 |
|
Total operating expenses |
|
|
21,914 |
|
|
|
21,290 |
|
|
|
63,613 |
|
|
|
64,616 |
|
|
|
|
|
|
|
|
|
|
Other expenses (income) |
|
|
|
|
|
|
|
|
Interest expense |
|
|
6,679 |
|
|
|
6,419 |
|
|
|
19,738 |
|
|
|
18,705 |
|
Gain on sale of properties |
|
|
(37 |
) |
|
|
(4,380 |
) |
|
|
(37 |
) |
|
|
(4,629 |
) |
Loss on sale or disposal of assets |
|
|
37 |
|
|
|
3 |
|
|
|
152 |
|
|
|
256 |
|
Interest, dividend and other investment income |
|
|
(141 |
) |
|
|
(251 |
) |
|
|
(550 |
) |
|
|
(792 |
) |
Total other expense |
|
|
6,538 |
|
|
|
1,791 |
|
|
|
19,303 |
|
|
|
13,540 |
|
|
|
|
|
|
|
|
|
|
Income before equity investments in real estate
partnerships and income tax |
|
|
1,427 |
|
|
|
7,623 |
|
|
|
6,235 |
|
|
|
11,806 |
|
|
|
|
|
|
|
|
|
|
Equity in earnings of real estate partnership |
|
|
524 |
|
|
|
502 |
|
|
|
1,480 |
|
|
|
1,762 |
|
Provision for income tax |
|
|
(102 |
) |
|
|
(92 |
) |
|
|
(324 |
) |
|
|
(261 |
) |
Income from continuing operations |
|
|
1,849 |
|
|
|
8,033 |
|
|
|
7,391 |
|
|
|
13,307 |
|
|
|
|
|
|
|
|
|
|
Gain on sale of property from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
701 |
|
|
|
— |
|
Income from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
701 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net
income |
|
|
1,849 |
|
|
|
8,033 |
|
|
|
8,092 |
|
|
|
13,307 |
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interests |
|
|
42 |
|
|
|
198 |
|
|
|
184 |
|
|
|
342 |
|
|
|
|
|
|
|
|
|
|
Net
income attributable to Whitestone REIT |
|
$ |
1,807 |
|
|
$ |
7,835 |
|
|
$ |
7,908 |
|
|
$ |
12,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations attributable to Whitestone REIT
excluding amounts attributable to unvested restricted shares |
|
$ |
0.04 |
|
|
$ |
0.20 |
|
|
$ |
0.18 |
|
|
$ |
0.33 |
|
Income from
discontinued operations attributable to Whitestone REIT |
|
|
— |
|
|
|
— |
|
|
|
0.02 |
|
|
|
— |
|
Net income
attributable to common shareholders, excluding amounts attributable
to unvested restricted shares |
|
$ |
0.04 |
|
|
$ |
0.20 |
|
|
$ |
0.20 |
|
|
$ |
0.33 |
|
Diluted Earnings Per Share: |
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations attributable to Whitestone REIT
excluding amounts attributable to unvested restricted shares |
|
$ |
0.04 |
|
|
$ |
0.19 |
|
|
$ |
0.17 |
|
|
$ |
0.31 |
|
Income from
discontinued operations attributable to Whitestone REIT |
|
|
— |
|
|
|
— |
|
|
|
0.02 |
|
|
|
— |
|
Net income
attributable to common shareholders, excluding amounts attributable
to unvested restricted shares |
|
$ |
0.04 |
|
|
$ |
0.19 |
|
|
$ |
0.19 |
|
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
40,187 |
|
|
|
39,327 |
|
|
|
39,942 |
|
|
|
39,200 |
|
Diluted |
|
|
41,446 |
|
|
|
40,635 |
|
|
|
41,084 |
|
|
|
40,541 |
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Comprehensive
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
1,849 |
|
|
$ |
8,033 |
|
|
$ |
8,092 |
|
|
$ |
13,307 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive gain (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on cash flow hedging activities |
|
|
(2,235 |
) |
|
|
605 |
|
|
|
(11,740 |
) |
|
|
4,163 |
|
Unrealized gain on available-for-sale marketable securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
(386 |
) |
|
|
8,638 |
|
|
|
(3,648 |
) |
|
|
17,488 |
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interests |
|
|
42 |
|
|
|
198 |
|
|
|
184 |
|
|
|
342 |
|
Less: Comprehensive gain (loss) attributable to noncontrolling
interests |
|
|
(51 |
) |
|
|
15 |
|
|
|
(266 |
) |
|
|
107 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to Whitestone
REIT |
|
$ |
(377 |
) |
|
$ |
8,425 |
|
|
$ |
(3,566 |
) |
|
$ |
17,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
(1)
Rental |
|
|
|
|
|
|
|
|
Rental revenues |
|
$ |
21,623 |
|
|
$ |
21,964 |
|
|
$ |
64,752 |
|
|
$ |
65,018 |
|
Recoveries |
|
|
8,240 |
|
|
|
8,121 |
|
|
|
23,701 |
|
|
|
23,193 |
|
Bad debt |
|
|
(495 |
) |
|
N/A |
|
|
|
(926 |
) |
|
N/A |
|
Total rental |
|
$ |
29,368 |
|
|
$ |
30,085 |
|
|
$ |
87,527 |
|
|
$ |
88,211 |
|
|
|
|
|
|
|
|
|
|
(2) Bad debt included in general and administrative expenses prior
to adoption of Topic 842 |
|
N/A |
|
|
$ |
308 |
|
|
N/A |
|
|
$ |
970 |
|
|
|
|
|
|
|
|
|
|
Whitestone REIT and
SubsidiariesCONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(in
thousands) |
|
|
|
|
|
|
|
Nine Months
Ended |
|
|
September 30, |
|
|
|
2019 |
|
|
|
2018 |
|
Cash
flows from operating activities: |
|
|
|
|
Net income from continuing operations |
|
$ |
7,391 |
|
|
$ |
13,307 |
|
Net income from discontinued operations |
|
|
701 |
|
|
|
— |
|
Net income |
|
|
8,092 |
|
|
|
13,307 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
19,865 |
|
|
|
19,044 |
|
Amortization of deferred loan costs |
|
|
814 |
|
|
|
902 |
|
Loss on sale of marketable securities |
|
|
— |
|
|
|
20 |
|
Loss (gain) on sale or disposal of assets and properties |
|
|
115 |
|
|
|
(4,373 |
) |
Bad debt |
|
|
926 |
|
|
|
970 |
|
Share-based compensation |
|
|
4,548 |
|
|
|
4,894 |
|
Equity in earnings of real estate partnership |
|
|
(1,480 |
) |
|
|
(1,762 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
Escrows and acquisition deposits |
|
|
48 |
|
|
|
214 |
|
Accrued rents and accounts receivable |
|
|
(1,762 |
) |
|
|
(1,724 |
) |
Receivable due from related party |
|
|
15 |
|
|
|
696 |
|
Distributions from real estate partnership |
|
|
1,005 |
|
|
|
505 |
|
Unamortized lease commissions, legal fees and loan costs |
|
|
(202 |
) |
|
|
(1,396 |
) |
Prepaid expenses and other assets |
|
|
(6,838 |
) |
|
|
619 |
|
Accounts payable and accrued expenses |
|
|
5,206 |
|
|
|
(2,979 |
) |
Payable due to related party |
|
|
15 |
|
|
|
(403 |
) |
Tenants' security deposits |
|
|
310 |
|
|
|
226 |
|
Net cash provided by operating activities |
|
|
29,976 |
|
|
|
28,760 |
|
Cash
flows from investing activities: |
|
|
|
|
Additions to real estate |
|
|
(9,953 |
) |
|
|
(8,733 |
) |
Proceeds from sales of properties |
|
|
— |
|
|
|
12,574 |
|
Proceeds from financed receivable due from related party |
|
|
— |
|
|
|
1,000 |
|
Proceeds from sales of marketable securities |
|
|
— |
|
|
|
30 |
|
Net cash provided by (used in) investing activities |
|
|
(9,953 |
) |
|
|
4,871 |
|
Net cash provided by investing activities of discontinued
operations |
|
|
701 |
|
|
|
— |
|
Cash
flows from financing activities: |
|
|
|
|
Distributions paid to common shareholders |
|
|
(34,047 |
) |
|
|
(33,642 |
) |
Distributions paid to OP unit holders |
|
|
(793 |
) |
|
|
(890 |
) |
Proceeds from issuance of common shares, net of offering costs |
|
|
8,546 |
|
|
|
— |
|
Payments of exchange offer costs |
|
|
(5 |
) |
|
|
(128 |
) |
Proceeds from bonds payable |
|
|
100,000 |
|
|
|
— |
|
Net proceeds from (payments to) credit facility |
|
|
(90,200 |
) |
|
|
9,000 |
|
Repayments of notes payable |
|
|
(7,502 |
) |
|
|
(1,972 |
) |
Payments of loan origination costs |
|
|
(4,088 |
) |
|
|
(30 |
) |
Repurchase of common shares |
|
|
(776 |
) |
|
|
(1,699 |
) |
Net cash used in financing activities |
|
|
(28,865 |
) |
|
|
(29,361 |
) |
Net increase
(decrease) in cash, cash equivalents and restricted cash |
|
|
(8,141 |
) |
|
|
4,270 |
|
Cash, cash
equivalents and restricted cash at beginning of period |
|
|
13,786 |
|
|
|
5,210 |
|
Cash, cash
equivalents and restricted cash at end of period |
|
$ |
5,645 |
|
|
$ |
9,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended |
|
|
September 30, |
|
|
|
2019 |
|
|
|
2018 |
|
Supplemental disclosure of cash flow
information: |
|
|
|
|
Cash paid for interest |
|
$ |
19,176 |
|
|
$ |
18,181 |
|
Cash paid for taxes |
|
$ |
396 |
|
|
$ |
304 |
|
Non
cash investing and financing activities: |
|
|
|
|
Disposal of fully depreciated real estate |
|
$ |
203 |
|
|
$ |
904 |
|
Financed insurance premiums |
|
$ |
1,238 |
|
|
$ |
1,273 |
|
Value of shares issued under dividend reinvestment plan |
|
$ |
104 |
|
|
$ |
101 |
|
Value of common shares exchanged for OP units |
|
$ |
37 |
|
|
$ |
1,545 |
|
Change in fair value of available-for-sale securities |
|
$ |
— |
|
|
$ |
18 |
|
Change in fair value of cash flow hedge |
|
$ |
(11,740 |
) |
|
|
$ |
4,163 |
|
Reallocation of ownership percentage between parent and
subsidiary |
|
$ |
— |
|
|
$ |
24 |
|
|
|
|
|
|
Whitestone
REIT and Subsidiaries RECONCILIATION OF NON-GAAP MEASURES (in
thousands, except per share and per unit data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
FFO (NAREIT) AND FFO CORE |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Net income attributable to Whitestone REIT |
|
$ |
1,807 |
|
|
$ |
7,835 |
|
|
$ |
7,908 |
|
|
$ |
12,965 |
|
Adjustments
to reconcile to FFO: |
|
|
|
|
|
|
|
|
Depreciation and amortization of real estate |
|
|
6,718 |
|
|
|
6,405 |
|
|
|
19,657 |
|
|
|
18,836 |
|
Depreciation and amortization of real estate assets of real estate
partnership (pro rata) |
|
|
651 |
|
|
|
702 |
|
|
|
1,921 |
|
|
|
2,127 |
|
(Gain) loss on disposal of assets and properties of continuing
operations, net |
|
|
— |
|
|
|
(4,377 |
) |
|
|
115 |
|
|
|
(4,373 |
) |
Gain on sale of assets and properties of discontinued operations,
net |
|
|
— |
|
|
|
— |
|
|
|
(701 |
) |
|
|
— |
|
Loss on sale or disposal of properties or assets of real estate
partnership (pro rata) |
|
|
13 |
|
|
|
10 |
|
|
|
20 |
|
|
|
10 |
|
Net income attributable to noncontrolling interests |
|
|
42 |
|
|
|
198 |
|
|
|
184 |
|
|
|
342 |
|
FFO
(NAREIT) |
|
|
9,231 |
|
|
|
10,773 |
|
|
|
29,104 |
|
|
|
29,907 |
|
Adjustments
to reconcile to FFO Core: |
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
1,719 |
|
|
|
1,497 |
|
|
|
4,770 |
|
|
|
4,894 |
|
Proxy contest professional fees |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,534 |
|
FFO
Core |
|
$ |
10,950 |
|
|
$ |
12,270 |
|
|
$ |
33,874 |
|
|
$ |
37,335 |
|
|
|
|
|
|
|
|
|
|
FFO PER SHARE AND OP UNIT CALCULATION |
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
FFO |
|
$ |
9,231 |
|
|
$ |
10,773 |
|
|
$ |
29,104 |
|
|
$ |
29,907 |
|
Distributions paid on unvested restricted common shares |
|
|
— |
|
|
|
(117 |
) |
|
|
(41 |
) |
|
|
(225 |
) |
FFO excluding amounts attributable to unvested restricted common
shares |
|
$ |
9,231 |
|
|
$ |
10,656 |
|
|
$ |
29,063 |
|
|
$ |
29,682 |
|
FFO Core excluding amounts attributable to unvested restricted
common shares |
|
$ |
10,950 |
|
|
$ |
12,153 |
|
|
$ |
33,833 |
|
|
$ |
37,110 |
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average number of total common shares - basic |
|
|
40,187 |
|
|
|
39,327 |
|
|
|
39,942 |
|
|
|
39,200 |
|
Weighted average number of total noncontrolling OP units -
basic |
|
|
927 |
|
|
|
1,002 |
|
|
|
927 |
|
|
|
1,039 |
|
Weighted average number of total common shares and noncontrolling
OP units - basic |
|
|
41,114 |
|
|
|
40,329 |
|
|
|
40,869 |
|
|
|
40,239 |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Unvested restricted shares |
|
|
1,259 |
|
|
|
1,308 |
|
|
|
1,142 |
|
|
|
1,341 |
|
Weighted average number of total common shares and noncontrolling
OP units - diluted |
|
|
42,373 |
|
|
|
41,637 |
|
|
|
42,011 |
|
|
|
41,580 |
|
|
|
|
|
|
|
|
|
|
FFO per
common share and OP unit - basic |
|
$ |
0.22 |
|
|
$ |
0.26 |
|
|
$ |
0.71 |
|
|
$ |
0.74 |
|
FFO per
common share and OP unit - diluted |
|
$ |
0.22 |
|
|
$ |
0.26 |
|
|
$ |
0.69 |
|
|
$ |
0.71 |
|
|
|
|
|
|
|
|
|
|
FFO Core per
common share and OP unit - basic |
|
$ |
0.27 |
|
|
$ |
0.30 |
|
|
$ |
0.83 |
|
|
$ |
0.92 |
|
FFO Core per
common share and OP unit - diluted |
|
$ |
0.26 |
|
|
$ |
0.29 |
|
|
$ |
0.81 |
|
|
$ |
0.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
PROPERTY NET OPERATING INCOME |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Net income attributable to Whitestone REIT |
|
$ |
1,807 |
|
|
$ |
7,835 |
|
|
$ |
7,908 |
|
|
$ |
12,965 |
|
General and administrative expenses |
|
|
5,597 |
|
|
|
4,982 |
|
|
|
16,514 |
|
|
|
17,987 |
|
Depreciation and amortization |
|
|
6,789 |
|
|
|
6,477 |
|
|
|
19,865 |
|
|
|
19,044 |
|
Equity in earnings of real estate partnership |
|
|
(524 |
) |
|
|
(502 |
) |
|
|
(1,480 |
) |
|
|
(1,762 |
) |
Interest expense |
|
|
6,679 |
|
|
|
6,419 |
|
|
|
19,738 |
|
|
|
18,705 |
|
Interest, dividend and other investment income |
|
|
(141 |
) |
|
|
(251 |
) |
|
|
(550 |
) |
|
|
(792 |
) |
Provision for income taxes |
|
|
102 |
|
|
|
92 |
|
|
|
324 |
|
|
|
261 |
|
Gain on sale of assets and properties of continuing operations,
net |
|
|
(37 |
) |
|
|
(4,380 |
) |
|
|
(37 |
) |
|
|
(4,629 |
) |
Gain on sale of assets and properties of discontinued operations,
net |
|
|
— |
|
|
|
— |
|
|
|
(701 |
) |
|
|
— |
|
Management fee, net of related expenses |
|
|
(14 |
) |
|
|
(48 |
) |
|
|
(64 |
) |
|
|
(149 |
) |
Loss on disposal of assets and properties of continuing operations,
net |
|
|
37 |
|
|
|
3 |
|
|
|
152 |
|
|
|
256 |
|
NOI of real estate partnership (pro rata) |
|
|
1,714 |
|
|
|
1,875 |
|
|
|
5,152 |
|
|
|
5,885 |
|
Net income attributable to noncontrolling interests |
|
|
42 |
|
|
|
198 |
|
|
|
184 |
|
|
|
342 |
|
NOI |
|
$ |
22,051 |
|
|
$ |
22,700 |
|
|
$ |
67,005 |
|
|
$ |
68,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
September 30, |
|
September 30, |
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTIZATION |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
Net income
attributable to Whitestone REIT |
|
$ |
1,807 |
|
|
$ |
7,835 |
|
|
$ |
7,908 |
|
|
$ |
12,965 |
|
Depreciation and amortization |
|
|
6,789 |
|
|
|
6,477 |
|
|
|
19,865 |
|
|
|
19,044 |
|
Equity in earnings of real estate partnership |
|
|
(524 |
) |
|
|
(502 |
) |
|
|
(1,480 |
) |
|
|
(1,762 |
) |
Interest expense |
|
|
6,679 |
|
|
|
6,419 |
|
|
|
19,738 |
|
|
|
18,705 |
|
Provision for income taxes |
|
|
102 |
|
|
|
92 |
|
|
|
324 |
|
|
|
261 |
|
Gain on sale of assets and properties of continuing operations,
net |
|
|
(37 |
) |
|
|
(4,380 |
) |
|
|
(37 |
) |
|
|
(4,629 |
) |
Gain on sale of assets and properties of discontinued operations,
net |
|
|
— |
|
|
|
— |
|
|
|
(701 |
) |
|
|
— |
|
Management fee, net of related expenses |
|
|
(14 |
) |
|
|
(48 |
) |
|
|
(64 |
) |
|
|
(149 |
) |
Loss on disposal of assets and properties of continuing operations,
net |
|
|
37 |
|
|
|
3 |
|
|
|
152 |
|
|
|
256 |
|
EBITDA adjustments for real estate partnership |
|
|
1,651 |
|
|
|
1,812 |
|
|
|
4,900 |
|
|
|
5,692 |
|
Net income attributable to noncontrolling interests |
|
|
42 |
|
|
|
198 |
|
|
|
184 |
|
|
|
342 |
|
EBITDA |
|
$ |
16,532 |
|
|
$ |
17,906 |
|
|
$ |
50,789 |
|
|
$ |
50,725 |
|
|
|
|
|
|
|
|
|
|
Whitestone
REIT and Subsidiaries 2019 FINANCIAL
GUIDANCE |
|
|
Projected
Range |
|
|
Full Year 2019 |
|
|
Prior Guidance |
|
Updated Guidance |
|
|
Low |
|
High |
|
Low |
|
High |
Net income attributable to Whitestone REIT |
|
$ |
0.21 |
|
$ |
0.25 |
|
$ |
0.55 |
|
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to
FFO(1): |
|
|
|
|
|
|
|
|
Depreciation
expense, amortization, gain on disposal of assets |
|
|
0.69 |
|
|
0.69 |
|
|
0.68 |
|
|
|
0.68 |
|
(Gain) loss
on sale or disposal of assets or properties |
|
|
— |
|
|
— |
|
|
(0.34 |
) |
|
|
(0.34 |
) |
Net income
attributable to redeemable operating partnership |
|
|
— |
|
|
— |
|
|
0.01 |
|
|
|
0.01 |
|
FFO |
|
$ |
0.90 |
|
$ |
0.94 |
|
$ |
0.90 |
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile FFO to FFO Core: |
|
|
|
|
|
|
|
|
Share based
compensation expense |
|
|
0.16 |
|
|
0.16 |
|
|
0.15 |
|
|
|
0.15 |
|
Early debt
extinguishment costs of real estate partnership |
|
|
— |
|
|
— |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
FFO
Core |
|
$ |
1.06 |
|
$ |
1.10 |
|
$ |
1.06 |
|
|
$ |
1.10 |
|
|
|
|
|
|
|
|
|
|
Whitestone REIT (NYSE:WSR)
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From Sep 2023 to Sep 2024