Whitestone REIT announced its operating and financial results for the second quarter of 2020 along with an update on its business activities due to the ongoing COVID-19 pandemic. Whitestone 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 provide daily necessities, needed services and entertainment to their respective communities which are not readily available online.
All per share amounts are on a diluted per common share and operating partnership (“OP”) unit basis unless stated otherwise.
Second Quarter Operating and Financial Highlights:
- Net Income attributable to common shareholders for the quarter ended June 30, 2020 was $0.4 million, or $0.01 per diluted share
- Funds from Operations (“FFO”) was $8.4 million, or $0.19 per share
- FFO Core was $9.6 million or $0.22 per share
- 81% of total Q2 2020 contractual rents have been collected
- Rental rates on comparable new and renewal leases signed for the twelve months ended June 30, 2020 increased 6.7% and 12.4%, respectively, on a GAAP basis
- Same-store Net Operating Income decreased 7.9% and 4.4% for the three and six month periods, respectively
- Paid quarterly dividend of $0.105 per share
COVID-19 Update Summary (as of August 3, 2020)
- All 53 community centers are open and have remained open throughout the pandemic
- 94% of total tenants are open and operating (based on ABR)
- 81% of total Q2 2020 contractual rents have been collected
- 86% of total July contractual rents have been collected to date
- Entered into rent deferral agreements representing 5% of Q2 2020 revenue
- Entered into rent deferral agreements representing 2% of July revenue
- Grew cash and cash equivalents to $45.0 million, a $8.2 million, or 22.3% increase since Q1-2020
- Bad debt/uncollectable revenue for the quarter was $2.8 million, or $0.07 per share, primarily due to COVID-19 pandemic and included $500,000 or $0.01 per share non-cash straight line receivables
Jim Mastandrea, Chairman and Chief Executive Officer of Whitestone REIT commented, “Our properties continue to perform well as our service-focused, community-centered tenants pursue creative ways to serve their local neighborhoods. We continue to support our entrepreneurial tenants as they persevere through these uncertain times. We also continue to demonstrate the resiliency of our portfolio as demonstrated by our strong rental collections. Our results underscore our entrepreneurial tenants’ sustainability through tough times and Whitestone’s ability to craft the right mix of tenants to serve the needs of our high household income neighborhoods in the high growth markets of Texas and Arizona. To date, we have seen minimal store closings in our diverse tenant mix and believe that Whitestone, our tenants and our communities will emerge stronger than ever as the pandemic subsides.”
Mr Mastandrea added, “Our focus continues to be on protecting the health of our employees, tenants and the communities that we serve. As local economies recover, we plan to build on the progress we demonstrated in the beginning of the year in our continuing efforts to position the Company to drive long term shareholder value.”
Financial Results
Reconciliations of Net Income Attributable to Whitestone REIT to FFO and FFO Core are included herein.
Net Income attributable to common shareholders for the quarter ended June 30, 2020 of $0.4 million, or $0.01 per diluted share, inclusive of $2.8 million, or $0.07 per share, related to credit loss and straight-line rent reserve, primarily due to the impact of the COVID-19 pandemic. Net income attributable to common shareholders for the quarter ended June 30, 2019 was $3.3 million, or $0.08 per share.
FFO for the quarter ended June 30, 2020 was $8.4 million, or $0.19 per share, as compared to $10.0 million, or $0.24 per share for the quarter ended June 30, 2019. The decrease is primarily due to the $2.8 million of bad debt/uncollectable revenue primarily related to the impact of the COVID-19 pandemic. FFO Core for the quarter ended June 30, 2020 was $9.6 million or $0.22 per share, compared to $11.1 million, or $0.27 per share for the quarter ended June 30, 2019.
Operating Results
For the periods ending June 30, 2020 and 2019, the Company’s operating highlights were as follows:
| Second Quarter 2020 | Second Quarter 2019 | |||||
| Occupancy: | ||||||
| Wholly Owned Properties | 89.2% | 89.4% | ||||
| Same Store Property Net Operating Income Growth(1) | (7.9)% | 1.0% | ||||
| Rental Rate Growth – Total (GAAP Basis): | 11.3% | 5.6% | ||||
| New Leases | 3.4% | 5.3% | ||||
| Renewal Leases | 13.5% | 5.7% | ||||
| Leasing Transactions: | ||||||
| Number of New Leases | 21 | 35 | ||||
| New Leases – Annualized Revenue (millions) | $5.2 | $10.7 | ||||
| Number of Renewal Leases | 43 | 57 | ||||
| Renewal Leases – Annualized Revenue (millions) | $9.8 | $15.4 | ||||
(1) Excludes straight-line rent, amortization of above/below market rates and lease termination fees in both periods.
Real Estate Portfolio Update
Community Centered PropertiesTM Portfolio Statistics:
As of June 30, 2020, Whitestone wholly owned 58 Community Centered PropertiesTM with 5.0 million square feet of gross leasable area (“GLA”). Five of the 58 Community Centered PropertiesTM 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 Retail Community Centered PropertiesTM are located in Austin (4), San Antonio (3), Chicago (1), Dallas-Fort Worth (8), Houston (15) and the greater Phoenix metropolitan area (27). 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% (1). The Company’s retail 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 1,382 tenants, with the largest tenant accounting for only 2.8% of annualized base rental revenues. Lease terms range from less than one year for smaller tenants to over 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.
(1) Source: Claritas, as of April 2017.
COVID-19 Update Summary
During the second quarter of 2020, the COVID-19 pandemic continued to impact the Company’s operations. As of the end of the second quarter, approximately 94% (% of ABR) of the Company’s tenants were open for business. Cash collections for the quarter totaled 81% of contractual rents. These strong collections are a result of the Company’s strategic locations, well-crafted tenant mix and the efforts of its team members in proactively working with tenants to assist them through these difficult times. Cash collections in July are trending up with 86% collected to date. Agreed upon deferrals of rent were 5% of revenue for the quarter and 2% of revenue for the month of July so far.
Balance Sheet and Liquidity
As of August 3, 2020, Whitestone had $45.0 million in cash and cash equivalents, $1.2 million of availability and $110.5 million of capacity under its credit facility. At June 30, 2020, Whitestone had $39.9 million of cash and cash equivalents on its balance sheet, $1.2 million of availability and $110.5 million of capacity under its credit facility.
Whitestone has one $9 million mortgage loan maturing in 2020, that it expects to refinance in the third quarter, and no real estate debt maturing in 2021.
The Company has undepreciated real estate assets of $1.1 billion at June 30, 2020.
At June 30, 2020, 50 of the Company’s wholly owned 58 properties were unencumbered by mortgage debt, with an undepreciated cost basis of $804.7 million. At June 30, 2020, the Company had total real estate debt, net of cash, of $636.9 million, of which approximately 84% 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 4.8 years.
Dividend
On June 16, 2020, the Company declared a quarterly cash distribution of $0.105 per common share and OP unit for the third quarter of 2020, to be paid in three equal installments of $0.035 in July, August, and September of 2020. Going forward, Whitestone’s Board of Trustees will continue to evaluate dividend declarations each quarter. Whitestone intends to maintain compliance with REIT taxable income distribution requirements.
Conference Call Information
In conjunction with the issuance of its financial results, the Company invites you to listen to the its earnings release conference call to be broadcast live on Thursday, August 6, 2020 at 10:00 A.M. Central Time. The call will be led by James C. Mastandrea, Chairman and Chief Executive Officer, and David K. Holeman, Chief Financial Officer. Conference call access information is as follows:
| Dial-in number for domestic participants: | (866) 548-4713 |
| Dial-in number for international participants: | (323) 794-2093 |
The conference call will be recorded, and a telephone replay will be available through Thursday, August 20, 2020. Replay access information is as follows:
| Replay number for domestic participants: | (844) 512-2921 |
| Replay number for international participants: | (412) 317-6671 |
| Passcode (for all participants): | 8963892 |
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 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
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 REIT
Whitestone 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 provide 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.
Contact Information:
www.whitestonereit.com
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Contact Information:
www.whitestonereit.com
