Whitestone REIT Reports Second Quarter 2021 Results

HOUSTON, Aug. 03, 2021 (GLOBE NEWSWIRE) -- Whitestone REIT (NYSE: WSR) (“Whitestone” or the “Company”) today announced its operating and financial results for the second quarter of 2021. Whitestone seeks to create neighborhood center communities in its high quality open-air shopping centers that it acquires, owns, manages, develops, and redevelops primarily in the largest, fastest-growing and most affluent markets in the Sunbelt.

“Beyond the re-activation of our strategic growth plan, our well-located portfolio produced significant increases in our financial results in the second quarter. Specifically, Whitestone’s strength and resiliency continues to be demonstrated through increasing revenues and occupancy, reduction of debt and successful scaling of expenses. As the economy continues to recover, we have positioned the Company to reap the benefits and deliver long-term value from our strategically chosen business-friendly, high-growth markets.”

- Jim Mastandrea, Chairman and Chief Executive Officer

Financial Summary:
All per share amounts are on a diluted per common share and operating partnership (“OP”) unit basis unless stated otherwise.

• Net Revenues of $30.6 million and $59.7 million in the three and six months ended June 30, 2021, respectively
• Net Income attributable to common shareholders of $0.12 and $0.15 per share in the three and six months ended June 30, 2021, respectively
• Funds from Operations ("FFO") Core of $0.26 and $0.50 per share in the three and six months ended June 30, 2021, respectively
• General and Administrative Expenses, as a percentage of revenue, of 14.6% in the three months ended June 30, 2021. This compares to 16.9% for the year ended December 31, 2020 ⁽¹⁾
• Net Debt to EBITDAre-Adjusted Ratio of 8.2X for the quarter ended June 30, 2021. This compares to 9.4X for the first quarter of 2021 ⁽²⁾
• Same-Store Net Operating Income ("NOI") of $20.2 million for the three months ended June 30, 2021, representing an increase of 8.4% from the three months ended June 30, 2020

Second Quarter Operating and Financial Highlights:
All per share amounts are on a diluted per common share and operating partnership (“OP”) unit basis unless stated otherwise.

• Revenues of $30.6 million vs $29.0 million in prior quarter and $27.6 million in 2Q 2020
• Net Income attributable to common shareholders per share of $0.12 vs $0.03 in prior quarter and $0.01 in Q2 2020
• FFO Core per share of $0.26 vs $0.23 in the prior quarter and $0.22 in 2Q 2020
• Same-store NOI increased 8.4% from 2Q 2020
• Comparable GAAP-based leasing spreads of 6.8% for the quarter
• Debt to EBITDAre-Adjusted improved to 8.2X from 9.4X in the prior quarter and 9.8X in 2Q 2020
• Total Net Debt reduced $47.6 million from a year ago⁽²⁾
• Debt to Gross Book Value improved to 52% vs 56% from a year ago
• G&A, as a percentage of revenue, improved to 14.6% from 15.7% in 2Q 2020
• Annualized Base Rent per leased square foot grew to $19.95 from $19.71 from the prior quarter
• Acquired Lakeside Market in Dallas, TX for $53.24 million on July 8, 2021
  

Financial Results
Reconciliations of Net Income Attributable to Whitestone REIT to FFO, FFO Core and NOI are included herein.

Net income attributable to common shareholders for the quarter ended June 30, 2021 was $5.1 million, or $0.12 per diluted share. Net income attributable to common shareholders for the quarter ended June 30, 2020 was $0.4 million, or $0.01 per diluted share.

FFO for the quarter ended June 30, 2021 was $10.6 million, or $0.24 per diluted share, as compared to $8.4 million, or $0.19 per diluted share for the quarter ended June 30, 2020. FFO Core for the quarter ended June 30, 2021 was $11.9 million or $0.26 per diluted share, compared to $9.6 million, or $0.22 per diluted share for the quarter ended June 30, 2020.

Operating Results

For the periods ending June 30, 2021 and 2020, the Company’s operating highlights were as follows:

Real Estate Portfolio Update

Community Centered Properties^TM Portfolio Statistics:

As of June 30, 2021, Whitestone wholly owned 58 Community Centered Properties^TM with 5.0 million square feet of gross leasable area ("GLA"). Five of the 58 Community Centered Properties^TM are land parcels held for future development. The portfolio is comprised of 30 properties in Texas, 27 in Arizona and one in Illinois. Whitestone’s Community Centered Properties^TM are located in the MSA's of Austin (4), Chicago (1), Dallas-Fort Worth (8), Houston (15), Phoenix (27) and San Antonio (3). In addition to being business friendly, these are six 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%⁽⁴⁾. The Company’s properties in these markets are generally located on the best retail corners embedded in affluent communities. The Company also owns an 81.4% equity interest in and manages eight properties containing 0.9 million square feet of GLA through its investment in Pillarstone OP.

At the end of the second quarter, the Company’s diversified tenant base was comprised of 1,440 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 more than 15 years for larger tenants. Whitestone’s leases generally include minimum monthly lease payments and tenant reimbursements for payment of taxes, insurance and maintenance, and typically exclude restrictive lease clauses.

Subsequent Event

On July 8, 2021, we acquired Lakeside Market, a property that meets our Community Centered Property^® strategy, for $53.2 million in cash and net prorations. Lakeside Market, a 163,000 square foot property, was 80.5% leased at the time of purchase and is located in Plano, Texas.

Balance Sheet and Liquidity

At June 30, 2021, Whitestone had $22.3 million in cash and cash equivalents, $55.1 million of availability and $160.5 million of capacity under its credit facility.

The Company has undepreciated real estate assets of $1.1 billion at June 30, 2021.

At June 30, 2021, 51 of the Company’s wholly owned 58 properties were unencumbered by mortgage debt, with an undepreciated cost basis of $828.3 million. At June 30, 2021, the Company had total real estate debt, net of cash, of $592.1 million, of which approximately 89% was subject to fixed interest rates. The Company’s weighted average interest rate on all fixed rate debt as of the end of the second quarter was 4.1% and the weighted average remaining term was 3.9 years.

Dividend

On June 11, 2021, the Company declared a quarterly cash distribution of $0.1075 per common share and OP unit for the second quarter of 2021, to be paid in three equal installments of $0.035833 in July, August and September of 2021.

Conference Call Information

In conjunction with the issuance of its financial results, the Company invites you to listen to its earnings release conference call to be broadcast live on Wednesday, August 4, 2021 at 10:00 A.M. Central Time. The call will be led by Jim Mastandrea, Chairman and Chief Executive Officer, and Dave Holeman, Chief Financial Officer. Conference call access information is as follows:

To listen to a 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 conference call will be recorded, and a telephone replay will be available through Wednesday, August 18, 2021. Replay access information is as follows:

The second 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.

Supplemental Financial Information

The second quarter earnings release, supplemental data package and details regarding Whitestone's results of operations, communities and tenants are available in the Investor Relations section of the Company's website at www.whitestonereit.com. 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.

About Whitestone REIT

Whitestone is a community-centered shopping center REIT that acquires, owns, manages, develops and redevelops high-quality open-air neighborhood centers primarily in the largest, fastest-growing and most affluent markets in the Sunbelt. Whitestone seeks to create communities that thrive through creating local connections between consumers in the surrounding communities and a well-crafted mix of national, regional and local tenants that provide daily necessities, needed services, entertainment and experiences. Whitestone is a monthly dividend paying stock and has consistently paid dividends for more than 15 years. Whitestone’s strong, balanced and managed capital structure provides stability and flexibility for growth, and positions Whitestone to perform well through economic cycles. For additional information, please visit www.whitestonereit.com.

Footnotes:

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 include statements about our earnings guidance, future liquidity, performance growth and expectations and other matters and 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 additional 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: uncertainties related to the COVID-19 pandemic, including the unknown duration and economic, operational and financial impacts of the COVID-19 pandemic, and the actions taken or contemplated by U.S. and local governmental authorities or others in response to the pandemic on the Company’s business, employees and tenants, including, among others, (a) changes in tenant demand for the Company’s properties, (b) financial challenges confronting major tenants, including as a result of decreased customers’ willingness to frequent, and mandated stay in place orders that have prevented customers from frequenting, some of Company’s tenants’ businesses and the impact of these issues on the Company’s ability to collect rent from its tenants; (c) operational changes implemented by the Company, including remote working arrangements, which may put increased strain on IT systems and create increased vulnerability to cybersecurity incidents, (d) significant reduction in the Company’s liquidity due to a reduced borrowing base under its revolving credit facility and limited ability to access the capital markets and other sources of financing on attractive terms or at all, and (e) prolonged measures to contain the spread of COVID-19 or the fluctuating government-imposed restrictions implemented to contain the spread of COVID-19; adverse economic or real estate developments or conditions in Texas or Arizona, Houston and Phoenix in particular, including as a result of any resurgences in COVID-19 cases in such areas and the impact on our tenants’ ability to pay their rent, which could result in bad debt allowances or straight-line rent reserve adjustments; the imposition of federal income taxes if we fail to qualify as a real estate investment trust (“REIT”) in any taxable year or forego an opportunity to ensure REIT status; the Company's ability to meet its long-term goals, 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 including, but not limited to, the significant volatility and disruption in the global financial markets caused by the COVID-19 pandemic; 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, including changes to laws governing REITs and the impact of the legislation commonly known as the Tax Cuts and Jobs Act; 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 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.

Non-GAAP Financial Measures

This release contains supplemental financial measures that are not calculated pursuant to U.S. generally accepted accounting principles (“GAAP”) including EBITDAre, EBITDAre-Adjusted, FFO, FFO Core, and NOI. Following are explanations and reconciliations of these metrics to their most comparable GAAP metric.

EBITDAre: The National Association of Real Estate Investment Trusts (“NAREIT”) defines EBITDAre as net income computed in accordance with GAAP, plus interest expense, income tax expense, depreciation and amortization and impairment write-downs of depreciable property and of investments in unconsolidated affiliates caused by a decrease in value of depreciable property in the affiliate, plus, or minus losses and gains on the disposition of depreciable property, including losses/gains on change in control and adjustments to reflect the entity’s share of EBITDAre of the unconsolidated affiliates and consolidated affiliates with non-controlling interests. The Company calculates EBITDAre in a manner consistent with the NAREIT definition. Management believes that EBITDAre represents a supplemental non-GAAP performance measure that provides investors with a relevant basis for comparing REITs. There can be no assurance the EBITDAre as presented by the Company is comparable to similarly titled measures of other REITs. EBITDAre should not be considered as alternatives to net income or other measurements under GAAP as indicators of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. EBITDAre does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

EBITDAre-Adjusted: The Company also presents EBITDAre-Adjusted as an additional supplemental measure as we believe it is reflective of the core operating performance of our portfolio of properties. EBITDAre-Adjusted is defined as NAREIT EBITDAre excluding charges and gains related to non-cash and non-operating transactions and other events that could affect the comparability of operating results. Specific examples of items excluded from EBITDAre-Adjusted include, but are not limited to, share-based compensation and management fees, net of related costs. There can be no assurance that EBITDAre-Adjusted as presented by the Company is comparable to similarly titled measures of other REITs. EBITDAre-Adjusted should not be considered an alternative to net income or other measurements under GAAP as indicators of operating performance or to cash flows from operating, investing or financing activities as measures of liquidity. EBITDAre-Adjusted does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

FFO: Funds From Operations: 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 (loss) (calculated 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: Funds From Operations 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, debt extension costs, non-cash share-based compensation expense and rent support agreement payments received from sellers on acquired assets. In addition, the Company believes that FFO Core is a useful supplemental measure for the investing community to use in comparing the Company to other REITs as many REITs provide some form of adjusted or modified FFO. 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: Net Operating Income: 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, pro rata share of NOI of unconsolidated entities 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.

Same Store NOI: Management believes that Same Store NOI is a useful measure of the Company’s property operating performance because it includes only the properties that have been owned for the entire period being compared, and that it is frequently used by the investment community. Same Store NOI assists in eliminating differences in NOI due to the acquisition or disposition of properties during the period being presented, providing a more consistent measure of the Company’s performance. The Company defines Same Store NOI as operating revenues (rental and other revenues, excluding straight-line rent adjustments, amortization of above/below market rents, and lease termination fees) less property and related expenses (property operation and maintenance and real estate taxes), Non-Same Store NOI, and NOI of our investment in Pillarstone OP (pro rata). We define “Non-Same Stores” as properties that have been acquired since the beginning of the period being compared and properties that have been sold, but not classified as discontinued operations. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Company's Same Store NOI may not be comparable to that of other REITs.

Investor and Media Relations:
Rebecca Elliott,
VP of Corporate Communications
Whitestone REIT
(713) 435-2228
Relliott@whitestonereit.com