Whitestone Reit · NYSE:WSR
Whitestone Reit — Proxy Contest (April 2018)
34 slides from Whitestone Reit's proxy contest presentation, Apr 23, 2018
Slide 1: Letter to our Fellow Shareholders
Letter to our Fellow Shareholders Fellow shareholders of Whitestone REIT, our company, KBS Strategic Opportunity REIT, Inc., and our external advisor, KBS Capital Advisors, LLC, have been working diligently for some time to uncover and highlight the opportunities we see to create value and more effe
Slide 2: Whitestone REIT: A Better Way To Enhance Shareholder Value
Whitestone REIT: A Better Way To Enhance Shareholder Value Vote the BLUE Proxy Card 2
Slide 3: Disclaimer
Disclaimer This presentation is for discussion and general informational purposes only and written without regards to the specific investment objective, financial situation, suitability, or the particular need of any specific person who may receive this presentation, and should not be taken as advic
Slide 4: Table of Contents
Table of Contents 1. Portfolio and Operating Performance 2. Shareholder Return Analysis 3. Corporate Governance 4. Executive Compensation 5. Appendix 5 10 20 24 32 4
Slide 5: Portfolio and Operating Performance
Portfolio and Operating Performance 5
Slide 6: Portfolio operating metrics versus peers
Op Source: SNL, Bloomberg and Public Filings (1)Average Base Rent per square foot (PSF), or the components therein, are reported in the companies each public filings for the fiscal year ended 2017 (2)Real Estate Margins are computed by dividing total real estate revenue into total real estate Net Op
Slide 7: Operating Performance of Core Portfolio: Rent Growth
Source: Whitestone REIT 2017 10-K and 2013 10-K, Green Street Advisors (1)Excludes renovated properties Operating Performance of Core Portfolio Rent Growth Real estate operators constantly evaluate their strategies as it relates to managing the balance of rent and occupancy. Whitestone has achieved
Slide 8: Operating Performance of Core Portfolio: Demographics
Source: Whitestone REIT 2017 10-K and earnings transcripts, SNL, ScanUS Operating Performance of Core Portfolio Demographics Whitestone’s portfolio is a true barbell, comprised of assets in wealthier suburban areas and more dense blue-collar areas. Management comments promote an ambition to own “the
Slide 9: Operating Performance of Core Portfolio: Barbell Portfolio
Operating Performance of Core Portfolio “Barbell” Portfolio Management’s communications with shareholders focus on the properties they want investors to believe comprise the entire portfolio. However, digging deeper it is obvious this isn’t the case as there are numerous lower-quality properties. Th
Slide 10: Shareholder Return Analysis
Shareholder Return Analysis 10
Slide 11: Shareholder Return Analysis: Total Return Performance
Source: Bloomberg Note: Total return figures as of 8/25/2010 and are displayed monthly until 4/10/2018 Shareholder Return Analysis Total Return Performance While Whitestone’s total return profile is comparable to the strip center average, Whitestone’s share price today is lower than the price it lis
Slide 12: Total Return Performance Since KBS 13D Filing
Source: Bloomberg (1)KBS’s Schedule 13D Filing was after-market hours on 6/12/2017 (2)WSR 4Q17 Earnings Release is as of 3/1/2018 (3)Today is as of 4/10/2018 Shareholder Return Analysis Total Return Performance KBS Strategic Opportunity REIT’s Schedule 13D filing on 6/13/2017 was followed by a jump
Slide 13: Capital Allocation
Source: SNL and Bloomberg (1)Consensus Net Asset Value per share is the “Mean Consensus NAV per share” as reported by SNL (2)The observed share price is the security’s price at end of trading day as reported by Bloomberg (3)The follow-on offerings are as reported by SNL Note: The time period of the
Slide 14: Debt-to-EBITDA Metrics
Source: Bloomberg (1)Net Debt-to-EBITDA metrics are derived from Bloomberg at the end of the fiscal year (2)Peer average is derived using a weighted average calculation of the results based on the peer companies’ enterprise values at the end of each period Peer Set includes WSR, REG, WRI, ROIC, CDR,
Slide 15: Net Leverage
Source: SNL (1)Net Leverage is estimated by dividing total liabilities less cash into total assets less cash for the period end Total liabilities and cash are as of the end of each period Total assets is calculated using the “Mean Consensus NAV per share” at the end of each period, multiplied by tot
Slide 16: Dividend Yields
Source: SNL (1)Dividend yields are expressed as of current pricing as of 4/10/2018, as reported by SNL (2)Total return figures for Whitestone and the Peer Set are annualized for the period 8/25/2010 to 4/10/2018 Peer Set includes WSR, REG, WRI, ROIC, CDR, FRT, UE, BFS, RPT, UBA, RPAI, KRG, AKR, BRX,
Slide 17: Dividend Coverage
Source: Bloomberg, SNL, Public Filings CAD/Share is derived by subtracting reported capital expenditure (not including development expenses) from reported core FFO/Share (1)CAD Dividend Coverage is derived by dividing dividend/share into CAD/share (2)Peer average is derived using a weighted average
Slide 18: Dividend Coverage (cont'd)
(1)CAD is derived by subtracting reported capital expenditure (not including development expenses) from reported core FFO, for the cumulative periods from 2011 to 2017 (2)Increase in Debt is the cumulative difference of reported Net Debt (as reported by SNL at period ends) differences year over year
Slide 19: General & Administrative Expenses
Source: SNL and Public Filings (1) Reported G&A as of the end of the period (2)Total assets is calculated using the “Mean Consensus NAV per share” at the end of the period, multiplied by the total diluted shares (including OP units) See Appendix for peer set information Shareholder Return Analysis G
Slide 20: Corporate Governance
Strategic Opportunity Relr KBS Corporate Governance
Slide 21: Green Street Corporate Governance Score
(1) Green Street introduced a major methodology change in 2015 whereas Maryland REITs that have not opted out of MUTA are increasingly more penalized Source: Green Street Advisors Corporate Governance Green Street Corporate Governance Score The REIT industry stacks up favorably vs. corporate America
Slide 22: Corporate Governance Stacking Up to Peers
Source: Green Street Advisors, KBS (1)Corporate governance scores for the strip center REITs are based on Green Street assessment of the defined peer set (2)Whitestone is not covered by Green Street Advisors Peer Set includes the pure-play strip center REITs in Green Street coverage universe: UE, KI
Slide 23: ISS Governance QualityScore
Source: Yahoo Finance (1)ISS Governance Quality Scores as of April 1, 2018 Proxy Peer Set includes: IRET, CUZ, PSB, STAG, GPT, GOOD, RPT, CDR, OLP, ADC, BFS, MNR, UBA, WSR SNL Peer Set includes: DDR, REG, BRX, WRI, RPAI, RPT, KIM, AKR, CDR, KRG, ROIC, UE, FRT, BFS, UBA, WSR Corporate Governance ISS
Slide 24: Executive Compensation
Strategic portunity KBS |: Executive Compensation
Slide 25: Executive Compensation Relative to Size
Source: SNL, Public Filings, Bloomberg (1)Pay of Top Named Executives is the addition of Total Compensation for the CEO and up to two other top executives as reported in the proxy statements The analysis was performed for the periods from 2014 to 2017, and the results were derived using a weighted a
Slide 26: Executive Compensation Relative to Size (cont'd)
Source: SNL, Public Filings, Bloomberg *Not to scale (1)Pay of Top Named Executives is the addition of Total Compensation for the CEO and up to two other top executives as reported in the proxy statements (2)Size of Company is the enterprise value at the end of the period (3)The Peer Average is deri
Slide 27: Executive Compensation Relative to G&A and NOI
Source: SNL, Public Filings, Bloomberg (1) Pay of Top Named Executives is the addition of Total Compensation for the CEO and up to two other top executives as reported in the proxy statements from the periods from 2014 to 2017. (2)Reported G&A is as of the end of year 2017 (3)Reported CEO Comp and N
Slide 28: Executive Compensation Relative to Return
Source: SNL, Public Filings, Bloomberg (1)Pay of Top Named Executives is the addition of Total Compensation for the CEO and up to two other top executives as reported in the proxy statements The analysis was performed for the periods from 2014 to 2017, and the results were derived using a weighted a
Slide 29: Golden Parachute
GOOD is excluded from the analysis as their compensation format (externally-advised) is not comparable Executive Compensation Golden Parachute Whitestone’s executive compensation plan includes egregiously large payouts to management in the event of a Change in Control (CIC). CIC payments to the top
Slide 30: Compensation Plan Structure
Source: Public Filings Executive Compensation Compensation Plan Structure During Whitestone’s most recent earnings call, management noted on several occasions that its compensation program was recently changed to become more shareholder friendly. However, when evaluating the components of the compen
Slide 31: Compensation Plan Structure (cont'd)
Source: SNL, Public Filings, Bloomberg (1)Refers to base salary for all Named Executive Officers (NEOs) as a percentage of total compensation (2)Performance ranking percentile relative to Company-defined peer set See Appendix for peer set information Executive Compensation Compensation Plan Structur
Slide 32: Appendix
Strategic. Opportunity KBS Appendix
Slide 33: Peer set information and data availability
*GOV was used in place of FPO, because FPO was acquired by GOV in 2017 Appendix First Full Year Timeline Peer 2010 2011 2012 2013 2014 2015 2016 2017 WSR REG WRI SNL Peer Set Subject Proxy Peer Set Overlap ROIC FRT UE RPAI KRG AKR BRX KIM DDR WHLR CDR BFS RPT UBA ADC CUZ GOV GOOD GPT IRET MNR OLP PS
Slide 34: Contact Information
Contact Information Contact: Morrow Sodali LLC (800) 662-5200 KBS@morrowsodali.com or visit www.enhancewhitestone.com 34