Whitestone REIT (NYSE: WSR) (“Whitestone” or the “Company”)
announced today that it has mailed a letter to shareholders in
connection with its 2024 Annual Meeting of Stockholders scheduled
to be held on May 14, 2024, urging shareholders to vote the WHITE
proxy card “FOR ALL” of Whitestone’s highly qualified trustees
standing for election. Shareholders of record as of February 21,
2024 will be entitled to vote at the meeting.
The full text of the letter being mailed to
shareholders follows:
Dear Fellow Shareholders:
We are writing to you at a critical moment for
our Company.
Whitestone has been undergoing a series of
transformations since 2022, including at the Board and management
level, to execute on our “reset strategy.” Under the new leadership
of Independent Chairman David Taylor, and CEO David Holeman,
Whitestone’s Board and management team put in place a new reset
strategy that is generating results as demonstrated by the
Company’s recent performance.
Our strong results were driven by the
leadership’s focus on improving operating performance, the
company’s balance sheet, corporate governance and transparency with
our investors. Our communications with our investors, as well as
independent commentary and research from the market, have strongly
validated that the actions we have taken and the strategy and plan
we have in place are working. We are committed to accelerating our
efforts to deliver stronger profitability and long-term value for
our shareholders.
But we are also concerned as a new activist,
Erez Asset Management (“Erez”), threatens to disrupt our progress,
derail our strategy, and destroy our momentum to generate value for
our shareholders. We are not interested in tit-for-tat fight
letters with Erez. But we do feel a duty to explain our perspective
to shareholders, to expose the inconsistent and incoherent strategy
advocated by Erez, which is focused on disrupting the work that is
continuing to take place to drive value. Accordingly, we believe it
is imperative to set the record straight for shareholders as they
decide on the future direction of their Company.
Our Reset Strategy Is Working and Has
Momentum
The last two years have been a transition period
for Whitestone. The Board made the difficult decision of
terminating our former CEO for cause, then naming David Holeman as
our new CEO, and appointing David Taylor as our new Chairman on
January 18, 2022. Although it was a difficult decision, our results
demonstrate that this was the right decision for our
shareholders.
We are proud of Whitestone's
accomplishments under our new leadership, as evidenced
by:
- Strong Operations: Our occupancy reached a
multi-year high of 94.2% in the fourth quarter of 2023. Our average
annual same-store NOI growth since 2022 was a solid +5.3% (the
third highest out of 13 shopping center REITs) 1.
- Positive Earnings Growth: Core FFO per Share
has grown from $0.86 in 2021 to $0.91 for 2023 (up nearly 6%),
despite the impact of higher interest rates.
- Lower Leverage and Proactive Balance Sheet
Management: We reduced leverage (measured as Net Debt /
EBITDA) from 10.2x in 2020 to 7.8x for 2023. We also proactively
renewed our corporate credit facility and extended its maturity to
2027. Furthermore, we have limited near-term debt maturities, with
less than 10% of our debt maturing over the next two years.
- Improved Corporate Governance: We refreshed
our Board with three new candidates, right-sized compensation,
split the Chairman and CEO role, and provided shareholders with
access to bylaws.
- Successful Resolution of Past Litigation
Matters: We concluded the litigation with our former CEO
(with a favorable ruling for Whitestone) and are working to
monetize our stake in Pillarstone, thereby eliminating an overhang
that had weighed on our stock.
The market has recognized our
accomplishments:
- Superior total shareholder returns (TSR):
Sector-leading +25% from the start of Mr. Holeman's tenure through
April 22, 2024 (#1 ranked shopping center REIT out of 13, and
outperforming the MSCI U.S. REIT index, which delivered negative
16% TSR) 2. Even if we stop the measurement period right before the
“Bloomberg leak” on October 26, 2023, we still outperform most
peers (ranked #2 out of 13 with flat total returns) and the MSCI
U.S. REIT index (which delivered negative 27% TSR).
- Outperformance over various standard measurement
periods: Outperformed our peers and the MSCI U.S. REIT
index over the past 1, 3 and 5-year periods 3.
- Bridged the valuation gap vs. peers: The gap
in NTM FFO multiples as of year-end 2021 was 7x, it has shrunk to
less than 2x currently 4.
- Recognition by Research Analyst Community:
Research analysts have positively commented on this
"transformative" period for Whitestone and commended our
efforts.
We are committed to keep delivering
results, improving our corporate governance and maximizing
shareholder value:
- Our 2024 guidance implies 11% in Core FFO per Share growth
year-over-year.
- We carefully evaluate all opportunities to maximize shareholder
value against our going-concern business plan. We are not opposed
to selling the Company or exploring strategic alternatives if they
lead to maximizing shareholder value. Upon receipt of the letter
from Erez, we opted to be transparent with our shareholders and
publicly shared our response to Erez on December 13, 2023, along
with their original letter which called for a “corporate
unwind”.
The Keys to Our Success and the Risks
Posed by Erez’s Misguided Strategy:
Our success has been made possible by the trust,
collaboration and cohesion between our Board and our management
team. Unfortunately, Erez is seeking to interrupt our progress and
derail our value-creation strategy by nominating two interlocked
nominees with no experience in our markets, limited knowledge of
our strategy, and no value-enhancing ideas.
Quite the opposite: their fixation on a "sale of
assets or of the company outright" (per their letter dated November
6, 2023) would crystallize shareholder value under very
adverse market conditions and lead to value destruction and lost
valuation upside.
Clear evidence directly contradicts Erez’s claim
that Mr. Schanzer did not focus on selling the Company. In an
offering memorandum dated November 3, 2023, Erez states that “the
foregoing activist investment strategy is intended to cause
[WHITESTONE] management to commence a bidding process.”
Additionally, in a letter from Erez to the Company dated November
6, 2023 (Exhibit 99.3 of this link), Mr. Schanzer states ”I
sincerely hope that you will embrace the view – as I did – that the
challenge of maximizing value for the shareholders of a small
market cap REIT such as Whitestone can only be surmounted, as a
practical matter, through a well-executed portfolio monetization or
change of control transaction.”
But since Erez has now realized that “running a
full company sale process” is unlikely to “achieve an optimal
outcome” under existing market conditions, they are now
conveniently recommending for Whitestone “not to rush into a sale”.
Their inconsistency is also reflected in their ascribed value for
our assets, which can be worth “at least $16/share” (November 6,
2023), although shareholders would only get “approximately $14 per
share” (November 6, 2023) or “$17.65 per share” based on their
presentation (dated April 22, 2024). It shows that Mr. Schanzer and
Ms. Clark may not have as good a grasp on valuation as they
claim.
As part of their activist campaign and
short-term focus, instead of offering value-enhancing ideas for
Whitestone, Mr. Schanzer and Ms. Clark are more interested in the
following playbook:
- Ignore recent positive momentum and superior total returns of
Whitestone under its new leadership
- Focus primarily on actions undertaken years ago under our old
CEO and his board leadership as chairman
- Distract investors from looking at their own track record of
value destruction at Cedar Realty Trust (“CDR”) and RPT Realty
(“RPT”)
But the facts speak for themselves and are
undeniable, Mr. Schanzer and Ms. Clark are both burdened by their
track record of value destruction at CDR and RPT:
Mr. Schanzer’s Track Record as CEO of
CDR:
- During Mr. Schanzer’s tenure as CEO of Cedar Realty Trust, CDR
total shareholder returns were +36%. Over the same period, WSR
delivered +96% to its shareholders.
- CDR’s underperformance was the result of Mr. Schanzer’s
strategic blunder and his fixation on development projects that CDR
could not finance. Mr. Schanzer is a self-proclaimed capital
allocation expert, but could not develop a sound funding plan for
his ambitious development projects at CDR.
- Right before Mr. Schanzer announced his large-scale development
strategy, CDR’s stock price was $38.15. It sank to
$16.96 within less than 2 years. After sinking his
company’s stock by 56%, Mr. Schanzer indicated to the Board his
intention to pursue an acquisition of CDR. Our investors
should question the character and honesty of a CEO who tanks his
company’s stock, and then offers to buy it from
shareholders.
Cedar’s Stock Price Drops 56% Following
Bruce Schanzer’s Strategic Missteps
- The Company ultimately sold for $29.00,
representing nearly a 25% discount to the price
before Mr. Schanzer announced his ambitious development strategy.
Once again, our investors should carefully evaluate Mr.
Schanzer and his objective to replicate his strategy at CDR with
your Company.
- Mr. Schanzer earned a staggering $31 million pay-out at the
completion of this self-motivated transaction, representing 8% of
the equity value of CDR.
- The sale of CDR in August 2022 was premised on a concept
devised by Mr. Schanzer, which consisted of a cram down of CDR’s
preferred stock amounting to ~$160mm (at liquidation value) and of
preferred shareholders (many of whom were also common shareholders)
into a highly-levered, illiquid vehicle (Wheeler) – this led to
significant value destruction to the preferred shareholders.
- In short, at the same time Whitestone welcomed a new leadership
that decisively implemented a transformational reset strategy in
early 2022, Mr. Schanzer was engaging in a self-serving transaction
that destroyed value for his company’s shareholders and employees.
As summarized by JMP, A Citizen’s Company (March 18, 2024):
- “WSR’s management and board has been actively engaging with
shareholders in the past two years, as part of the company’s
strategy to enhance governance and provide increased transparency
to investors. It has been dealing with a shareholder, Erez… looking
for board representation and a company sale/liquidation. Erez is
managed by Bruce Schanzer, former President/CEO of Cedar Realty,
which sold in early 2022. We view Mr. Schanzer’s tenure at
Cedar as unsuccessful as the stock consistently trailed in
performance. The 10-year period leading to the announcement date of
Cedar’s sale (March 2022), saw the stock decline 22% while the
broader REIT sector increased 85%”
Ms. Clark’s Track Record as EVP –
Transactions of RPT:
- During Ms. Clark’s tenure as EVP-Transactions at RPT, total
shareholder returns were negative 5%. Over the same period, WSR
delivered +38% to its shareholders.
- Ms. Clark has no experience in our markets – real estate is a
local business: deep market knowledge and a broad network of
connections in our markets are critical to our success.
- The two most strategic transactions executed by RPT (the GIC
joint venture and the sale to Kimco) happened after Ms. Clark had
left the company.
- Ms. Clark may have transacted “billions in shopping center
assets” while at RPT, but the shareholder results at RPT reflect
undeniable value destruction during her tenure. We at
Whitestone are more careful with our acquisitions, dispositions and
overall capital recycling strategy. We have built something that
Ms. Clark could not at RPT: a strong portfolio of attractive
shopping centers in desirable markets based on a consistent and
time-tested strategy.
The Path Forward: Board Overseeing Strategy to Drive
Value Creation
Our Board nominees are committed to keep
Whitestone’s momentum going:
Since 2022, Whitestone has been working on a transformation at
both the Board and management level to ensure the Company has the
right leadership as it implements and executes on its reset
strategy to generate value for our shareholders. The new Chairman
David Taylor and Nandita Berry, the Chair of Nominating and
Corporate Governance Committee, led as “change agents” to refresh
the Board. Under their stewardship, the Board appointed/nominated
new independent trustees Amy Feng and Julia Buthman, as well as new
CEO David Holeman as an executive member of the Board – effectively
turning over 50% of the Board to add trustees with necessary skill
sets to oversee strategy execution and value creation at
Whitestone.
Conveniently, Erez has ignored this revitalization of
Whitestone’s Board and has nominated interlocked nominees, Mr.
Schanzer and Ms. Clark. More critically, neither Mr. Schanzer nor
Ms. Clark possess the specialized expertise within our largest
market that Ms. Berry provides our Board.
David Taylor and Nandita Berry,
along with the rest of our Board, all possess the necessary
differentiated experience and expertise needed to continue
delivering superior returns for Whitestone shareholders. Taken
together, they provide a broad range of knowledge and skills that
have benefited Whitestone shareholders and will continue to drive
future value creation.
David Taylor has been
instrumental to Whitestone’s successful strategy and growth.
Mr. Taylor spearheaded the decisive action taken to remove
our former CEO for the benefit of shareholders. Since his
appointment as chairman in 2022, he has overseen significant and
ongoing Board refreshment to ensure a balance of deep institutional
knowledge and fresh perspectives. Further, since Mr. Taylor’s
appointment to the Board, Whitestone has outperformed the NAREIT
Shopping Center Index by 23%. Replacing Mr. Taylor with Mr.
Schanzer or Ms. Clark would add low quality and destructive
performers with a clearly stated desire for liquidation at the
expense of a committed and successful leader at Whitestone.
Nandita Berry brings
exceptional local expertise in our largest market. Ms. Berry has
spent nearly her entire career in leadership roles within Texas,
while neither Mr. Schanzer nor Ms. Clark have any notable
experience in our largest market. As the 109th Texas Secretary of
State, Ms. Berry has significant experience promoting business and
economic opportunities in Texas. Since Ms. Berry’s appointment to
the Board, Whitestone has outperformed the NAREIT Shopping Center
Index by 17%.
The choice is clear, Whitestone has a
cohesive Board and Management team with a track record of value
creation. In contrast, Erez is nominating two interlocked trustees
with a public track record of self-dealing, underperformance and
value destruction, and with the single-minded strategy to sell the
Company under adverse market conditions. Erez is focused on doing
what’s best for his fund and not for the Whitestone
shareholders.
Your vote is critical in ensuring
Whitestone’s positive momentum can continue.
Our trustee nominees are best qualified to
successfully deliver Whitestone’s business plan and drive superior
shareholder value.
Do not allow Erez to derail Whitestone’s
positive trajectory by replacing our trustees with individuals who
lack the necessary skills, have a history of value destruction, and
are bent on selling your Company at the worst possible time.
Protect the value of your investment and
vote the WHITE proxy card today.
1 Peers include AKR, BFS, BRX, FRT, IVT, KIM, KRG, PECO, REG,
ROIC, SITC and UE. Per peer 2022 and 2023 public filings. Some
differences exist in terms of peer reporting of SS NOI, including,
but not limited to adjustments for prior period rents. Best efforts
have been made to utilizecomparable numbers, which do not include
prior period rent adjustments.
2 From 1/18/2022 to 4/22/2024. Peers include AKR, BFS, BRX, FRT,
IVT, KIM, KRG, PECO, REG, ROIC, SITC and UE.
3 Represents the 1, 3 and 5-year periods ending 4/22/2024. Peers
include AKR, BFS, BRX, FRT, IVT, KIM, KRG, PECO, REG, ROIC, SITC
and UE.
4 NTM FFO multiples based on NTM FactSet consensus estimates as
of 12/31/2021 and 4/22/2024. Peers include AKR, BFS, BRX, FRT, IVT,
KIM, KRG, PECO, REG, ROIC, SITC and UE.
5 From 6/15/2011 to 8/22/2022. Other shopping center REITs
average reflects the simple average of AAT, AKR, BFS, FRT, KIM,
KRG, REG, ROIC, RPT, SITC and UBA.
6 From 6/30/2015 (assumed given limited disclosure. Ms. Clark
was promoted to EVP of Transactions between 3/20/2015 and
9/30/2015) to 6/29/2019. Other shopping center REITs average
reflects the simple average of AAT, AKR, ALEX, BFS, BRX, CDR, FRT,
KIM, KRG, REG, ROIC, RPAI, SITC, UBA, UE and WRI.
About Whitestone REIT
Whitestone REIT (NYSE: WSR) is a community-centered real estate
investment trust (REIT) that acquires, owns, operates, and develops
open-air, retail centers located in some of the fastest growing
markets in the country: Phoenix, Austin, Dallas-Fort Worth, Houston
and San Antonio.
Our centers are convenience focused: merchandised with a mix of
service-oriented tenants providing food (restaurants and grocers),
self-care (health and fitness), services (financial and logistics),
education and entertainment to the surrounding communities. The
Company believes its strong community connections and deep tenant
relationships are key to the success of its current centers and its
acquisition strategy. For additional information, please visit
www.whitestonereit.com.
Important Additional Information and Where to Find
It
Whitestone REIT has filed a definitive proxy statement on
Schedule 14A (the “2024 Proxy Statement”) and a WHITE proxy card
with the U.S. Securities and Exchange Commission (the “SEC”) in
connection with the solicitation of proxies for its 2024 Annual
Meeting of Shareholders (the “2024 Annual Meeting”). SHAREHOLDERS
ARE STRONGLY ENCOURAGED TO READ THE 2024 PROXY STATEMENT (INCLUDING
ANY AMENDMENTS OR SUPPLEMENTS THERETO), THE WHITE PROXY CARD, AND
ANY OTHER DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may
obtain a free copy of the 2024 Proxy Statement, any amendments or
supplements to the 2024 Proxy Statement and other documents that
the Company files with the SEC from the SEC’s website at
www.sec.gov or the Company’s website at
https://ir.whitestonereit.com/corporate-profile/default.aspx as
soon as reasonably practicable after such materials are
electronically filed with, or furnished to, the SEC.
Certain Information Regarding Participants in
Solicitation
Whitestone REIT, its trustees and certain of its executive
officers may be deemed to be participants in the solicitation of
proxies from Company shareholders in connection with the matters to
be considered at the 2024 Annual Meeting Information regarding the
direct and indirect interests, by security holdings or otherwise,
of the persons who may, under the rules of the SEC, be considered
participants in the solicitation of shareholders in connection with
the 2024 Annual Meeting is included in the 2024 Proxy Statement of
the, which was filed with the SEC on April 4, 2024. To the extent
securities holdings by the Company’s trustees and executive
officers as reported in the 2024 Proxy Statement have changed, such
changes have been or will be reflected on Statements of Change in
Ownership on Forms 3, 4 or 5 filed with the SEC, which can also be
found through the Company’s website
(https://ir.whitestonereit.com/corporate-profile/default.aspx) in
the section “Investor Relations” or through the SEC’s website.
These documents are available free of charge as described
above.
Forward-Looking Statements
This Report contains forward-looking statements within the
meaning of the federal securities laws, including discussion and
analysis of our financial condition and results of operations,
statements related to our expectations regarding the performance of
our business, and other matters. These forward-looking statements
are not historical facts but are the intent, belief or current
expectations of our management based on its knowledge and
understanding of our business and industry. Forward-looking
statements are typically identified by the use of terms such as
“may,” “will,” “should,” “potential,” “predicts,” “anticipates,”
“expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or
the negative of such terms and variations of these words and
similar expressions, although not all forward-looking statements
include these words. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other
factors, some of which are beyond our control, are difficult to
predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking
statements.
Factors that could cause actual results to differ materially
from any forward-looking statements made in this Report include:
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; uncertainties related to the
national economy, the real estate industry in general and in our
specific markets; legislative or regulatory changes, including
changes to laws governing REITs; adverse economic or real estate
developments or conditions in Texas or Arizona, Houston and Phoenix
in particular, including the potential impact of public health
emergencies, such as COVID-19, on our tenants’ ability to pay their
rent, which could result in bad debt allowances or straight-line
rent reserve adjustments; increases in interest rates, including as
a result of inflation operating costs or general and
administrative expenses; our current geographic concentration in
the Houston and Phoenix metropolitan area makes us susceptible to
local economic downturns and natural disasters, such as floods and
hurricanes, which may increase as a result of climate change,
increasing focus by stakeholders on environmental, social, and
governance matters, financial institution
disruption; availability and terms of capital and financing,
both to fund our operations and to refinance our indebtedness as it
matures; decreases in rental rates or increases in vacancy rates;
harm to our reputation, ability to do business and results of
operations as a result of improper conduct by our employees, agents
or business partners; litigation risks; lease-up risks, including
leasing risks arising from exclusivity and consent provisions in
leases with significant tenants; our inability to renew tenant
leases or obtain new tenant leases upon the expiration of existing
leases; risks related to generative artificial intelligence tools
and language models, along with the potential interpretations and
conclusions they might make regarding our business and prospects,
particularly concerning the spread of misinformation; our inability
to generate sufficient cash flows due to market conditions,
competition, uninsured losses, changes in tax or other applicable
laws; geopolitical conflicts, such as the ongoing conflict between
Russia and Ukraine, the conflict in the Gaza Strip and unrest in
the Middle East; the need to fund tenant improvements or other
capital expenditures out of operating cash flow; the extent to
which our estimates regarding Pillarstone REIT Operating
Partnership LP's financial condition and results of operations
differ from actual results; and the risk that we are unable to
raise capital for working capital, acquisitions or other uses on
attractive terms or at all 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, FFO, NOI and net debt.
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 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 does not reflect
working capital changes, cash expenditures for capital improvements
or principal payments on indebtedness.
FFO: Funds From Operations: The National Association of Real
Estate Investment Trusts (“NAREIT”) defines FFO as 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. We calculate FFO in a manner consistent with
the NAREIT definition and also include adjustments for our
unconsolidated real estate partnership.
Core Funds from Operations (“Core FFO”) is a non-GAAP measure.
From time to time, we report or provide guidance with respect
to “Core FFO” which removes the impact of certain
non-recurring and non-operating transactions or other items we do
not consider to be representative of our core operating results
including, without limitation, default interest on debt of real
estate partnership, extinguishment of debt cost, gains or losses
associated with litigation involving the Company that is not in the
normal course of business, and proxy contest professional
fees.
Management uses FFO and Core FFO as a supplemental measure to
conduct and evaluate our business because there are certain
limitations associated with using GAAP net income (loss) alone as
the primary measure of our operating performance. Historical cost
accounting for real estate assets in accordance with GAAP
implicitly assumes that the value of real estate assets diminishes
predictably over time. Because real estate values instead have
historically risen or fallen with market conditions, management
believes that the presentation of operating results for real estate
companies that use historical cost accounting is insufficient by
itself. In addition, securities analysts, investors and other
interested parties use FFO and Core FFO as the primary metric
for comparing the relative performance of equity REITs.
FFO and Core FFO should not be considered as an alternative to
net income or other measurements under GAAP, as an indicator of our
operating performance or to cash flows from operating, investing or
financing activities as a measure of liquidity. FFO and Core
FFO do not reflect working capital changes, cash expenditures for
capital improvements or principal payments on indebtedness.
Although our calculation of FFO is consistent with that of
NAREIT, there can be no assurance that FFO and Core FFO
presented by us is comparable to similarly titled measures of other
REITs.
NOI: Net Operating Income: Management believes that NOI is
a useful measure of our property operating performance. We define
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, our NOI may not be comparable to
other REITs. Because NOI excludes general and administrative
expenses, depreciation and amortization, equity or deficit in
earnings of real estate partnership, interest expense, interest,
dividend and other investment income, provision for income taxes,
gain on sale of property from discontinued
operations, management fee (net of related expenses)
and gain or loss on sale or disposition of assets, and
includes NOI of real estate partnership (pro rata) and net
income attributable to noncontrolling interest, 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. We use NOI to evaluate our operating performance
since NOI allows us to evaluate the impact that factors such as
occupancy levels, lease structure, lease rates and tenant base have
on our results, margins and returns. In addition, management
believes that NOI provides useful information to the investment
community about our 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 our
overall financial performance since it does not reflect the level
of capital expenditure and leasing costs necessary to maintain the
operating performance of our properties, including general and
administrative expenses, depreciation and amortization, equity or
deficit in earnings of real estate partnership, interest expense,
interest, dividend and other investment income, provision for
income taxes, gain on sale of property from discontinued
operations, management fee (net of related expenses) and gain or
loss on sale or disposition of assets.
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 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.
Net debt: We present net debt, which we define as total debt net
of insurance financing less cash plus our proportional share
of net debt of real estate partnership, and net debt to pro forma
EBITDAre, which we define as net debt divided by EBITDAre because
we believe they are helpful as supplemental measures in assessing
our ability to service our financing obligations and in evaluating
balance sheet leverage against that of other REITs. However, net
debt and net debt to pro forma EBITDAre should not be viewed as a
stand-alone measure of our overall liquidity and leverage. In
addition, other REITs may use different methodologies for
calculating net debt and net debt to pro forma EBITDAre, and
accordingly our net debt and net debt to pro forma EBITDAre may not
be comparable to that of other REITs.
Whitestone REIT and Subsidiaries |
RECONCILIATION OF NON-GAAP MEASURES |
Initial Full Year Guidance for 2024 |
(in thousands, except per share and per unit
data) |
|
|
|
|
Projected Range Full Year 2024 |
|
Low |
High |
FFO (NAREIT) and Core FFO per diluted share and OP
unit |
|
|
|
|
|
Net income attributable to Whitestone REIT |
$ |
16,600 |
|
|
$ |
19,600 |
|
Adjustements to reconcile to FFO (NAREIT) |
|
|
Depreciation and amortization of real estate assets |
|
34,252 |
|
|
|
34,252 |
|
Depreciation and amortization of real estate assets of real estate
partnership (pro rata) |
|
133 |
|
|
|
133 |
|
FFO (NAREIT) |
$ |
50,985 |
|
|
$ |
53,985 |
|
Adjustements to reconcile to Core FFO |
|
|
Adjustments |
|
— |
|
|
|
— |
|
Core FFO |
$ |
50,985 |
|
|
$ |
53,985 |
|
|
|
|
Dilutive shares |
|
51,262 |
|
|
|
51,262 |
|
OP Units |
|
695 |
|
|
|
695 |
|
Dilutive share and OP Units |
|
51,957 |
|
|
|
51,957 |
|
|
|
|
Net income attributable to Whitestone REIT per diluted share |
$ |
0.32 |
|
|
$ |
0.38 |
|
FFO (NAREIT) per diluted share and OP Unit |
$ |
0.98 |
|
|
$ |
1.04 |
|
|
|
|
Net income attributable to Whitestone REIT per diluted share |
$ |
0.32 |
|
|
$ |
0.38 |
|
Core FFO per diluted share and OP Unit |
$ |
0.98 |
|
|
$ |
1.04 |
|
Whitestone REIT and Subsidiaries |
RECONCILIATION OF NON-GAAP MEASURES |
(in thousands, except per share and unit
data) |
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2023 |
|
|
|
2021 |
|
FFO (NAREIT) AND CORE FFO |
|
|
|
|
Net income attributable to Whitestone REIT |
|
$ |
19,180 |
|
|
$ |
12,048 |
|
Adjustments to reconcile to FFO:(1) |
|
|
|
|
Depreciation and amortization of real estate assets |
|
|
32,811 |
|
|
|
28,806 |
|
Depreciation and amortization of real estate assets of real estate
partnership (pro rata) (2) |
|
|
1,613 |
|
|
|
1,674 |
|
Loss on disposal of assets, net |
|
|
522 |
|
|
|
90 |
|
Gain on sale of properties from continuing operations, net |
|
|
(9,006 |
) |
|
|
(266 |
) |
Gain on sale of property from discontinued operations |
|
|
— |
|
|
|
(1,833 |
) |
Gain on sale or disposal of properties or assets of real estate
partnership (pro rata)(2) |
|
|
— |
|
|
|
(19 |
) |
Net income attributable to noncontrolling interests |
|
|
270 |
|
|
|
205 |
|
FFO (NAREIT) |
|
$ |
45,390 |
|
|
$ |
40,705 |
|
Adjustments to reconcile to Core FFO: |
|
|
|
|
Early debt extinguishment costs |
|
|
— |
|
|
|
— |
|
Default interest on debt of real estate partnership (1)(2) |
|
|
1,375 |
|
|
|
— |
|
Core FFO |
|
$ |
46,765 |
|
|
$ |
40,705 |
|
|
|
|
|
|
FFO PER SHARE AND OP UNIT CALCULATION |
|
|
|
|
Numerator: |
|
|
|
|
FFO |
|
$ |
45,390 |
|
|
$ |
40,705 |
|
Core FFO |
|
$ |
46,765 |
|
|
$ |
40,705 |
|
Denominator: |
|
|
|
|
Weighted average number of total common shares - basic |
|
|
49,501 |
|
|
|
45,486 |
|
Weighted average number of total noncontrolling OP units -
basic |
|
|
694 |
|
|
|
772 |
|
Weighted average number of total common shares and noncontrolling
OP units - basic |
|
|
50,195 |
|
|
|
46,258 |
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
Unvested restricted shares |
|
|
1,312 |
|
|
|
850 |
|
Weighted average number of total common shares and noncontrolling
OP units - diluted |
|
|
51,507 |
|
|
|
47,108 |
|
|
|
|
|
|
FFO per common share and OP unit - basic |
|
$ |
0.90 |
|
|
$ |
0.88 |
|
FFO per common share and OP unit - diluted |
|
$ |
0.88 |
|
|
$ |
0.86 |
|
|
|
|
|
|
Core FFO per common share and OP unit - basic |
|
$ |
0.93 |
|
|
$ |
0.88 |
|
Core FFO per common share and OP unit - diluted |
|
$ |
0.91 |
|
|
$ |
0.86 |
|
Whitestone REIT and Subsidiaries |
RECONCILIATION OF NON-GAAP MEASURES |
(continued) |
(in thousands) |
|
Year Ended December 31, |
|
|
2023 |
|
|
|
2020 |
|
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
AMORTIZATION FOR REAL ESTATE (EBITDAre) |
|
|
|
|
Net income attributable to Whitestone REIT |
$ |
19,180 |
|
|
$ |
6,034 |
|
Depreciation and amortization |
|
32,966 |
|
|
|
28,303 |
|
Interest expense |
|
32,866 |
|
|
|
25,770 |
|
Provision for income taxes |
|
450 |
|
|
|
379 |
|
Net income attributable to noncontrolling interests |
|
270 |
|
|
|
117 |
|
(Equity) deficit in earnings of real estate partnership (1) |
|
3,155 |
|
|
|
(921 |
) |
EBITDAre adjustments for real estate partnership (1) |
|
617 |
|
|
|
3,484 |
|
Loss (gain) loss on sale or disposal of assets, net |
|
(8,484 |
) |
|
|
364 |
|
Gain on loan forgiveness |
|
— |
|
|
|
(1,734 |
) |
EBITDAre |
|
81,020 |
|
|
|
61,796 |
|
|
|
|
|
|
Year Ended December 31, |
Debt/EBITDAre Ratio |
|
2023 |
|
|
|
2020 |
|
Outstanding debt |
$ |
640,549 |
|
|
$ |
645,163 |
|
Less: Cash |
|
(4,572 |
) |
|
|
(25,777 |
) |
Deposit due to real estate partnership debt default |
|
(13,633 |
) |
|
|
- |
|
Add: Proportional share of net debt of unconsolidated real estate
partnership (1) |
|
8,685 |
|
|
|
8,912 |
|
Total Net Debt |
$ |
631,029 |
|
|
$ |
628,298 |
|
|
|
|
|
EBITDAre |
$ |
81,020 |
|
|
$ |
61,796 |
|
|
|
|
|
Ratio of debt to pro forma EBITDAre |
|
7.8 |
|
|
|
10.2 |
|
|
|
|
|
(1) We rely on reporting provided to us by our third-party partners
for financial information regarding the Company's investment in
Pillarstone OP. Because Pillarstone OP financial statements as of
December 31, 2023 and 2022 have not been made available to us, we
have estimated proportional share of net deb based on the
information available to us at the time. |
Investor and Media Contact:
David MordyDirector, Investor
RelationsWhitestone REIT(713) 435-2219ir@whitestonereit.com
Photos accompanying this announcement are available
at:https://www.globenewswire.com/NewsRoom/AttachmentNg/86062beb-19a1-45f7-9823-2154b86b87afhttps://www.globenewswire.com/NewsRoom/AttachmentNg/cf8120c5-b987-4481-9f4f-a19af1510b03
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