Whitestone Reit · NYSE:WSR
Whitestone Reit — Investor Presentation (November 2008)
71 slides from Whitestone Reit's investor presentation, Nov 24, 2008
Slide 1: Whitestone REIT Town Hall Meeting
James C. Mastandrea Chairman & CEO WHITESTONE REIT Town Hall Meeting
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements included herein that state the Company’s or management’s intentions, hopes, beliefs, expectations or predictions of the future are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, which by their nature, involve
Slide 3: Our Mission Is to Serve Our Shareholders and Employees
WHITESTONE REIT OUR MISSION IS TO SERVE OUR … 1) Shareholders by working diligently and efficiently to maximize the value of the enterprise and the real estate properties we own. 2) Fellow Employees by providing development and training while encouraging the pursuit of excellence.
Slide 4: Our Mission: Tenants and Community
WHITESTONE REIT OUR MISSION IS TO SERVE OUR … 3) Tenants by providing quality rental space and a professional community atmosphere. 4) Community by working together in an ethical and honest manner.
Slide 5: Today's Agenda
Today’s Agenda • Whitestone REIT: – Progress to Date – Financial Report • The REIT Industry • Global Financial and Credit Crisis • Whitestone’s Plan
Slide 6: Progress To Date
Progress To Date WHITESTONE REIT
Slide 7: Progress to Date
• Restructured Management • Repositioned Properties • Stabilized Balance Sheet • Reduced Dividends • Aligned Management Interest w/Shareholders Progress to Date WHITESTONE REIT
Slide 8: Restructured Management
OUR REAL ESTATE PROPERTIESOUR REAL ESTATE PROPERTIESWHITESTONEWHITESTONEREITREITLeasing Management Team Management Team ––Vertically Integrated Prop Mgt Acquisitions Capital Markets Asset Mgt Finance Investor Relations Restructured ManagementVertically Integrated SHAREHOLDERS SHAREHOLDERS BOARD OF T
Slide 9: Repositioned Properties: Westchase Renovation
Westchase Renovation Repositioned Properties: WHITESTONE REIT
Slide 10: Westchase Before Renovation
Westchase Before Renovation
Slide 11: Westchase Renovation in Progress
Renovation in Progress Westchase
Slide 12: Westchase During Renovation
During Renovation Westchase
Slide 13: Westchase Renovation Near Completion
Renovation Near Completion Westchase
Slide 14: Westchase Expected Results from Renovation
Westchase Expected Results from Renovation • Capital investment of $0.11 per share • Revenue increase of $0.01 per share in 1st year • Revenue increase by 5th year of $0.03 per share
Slide 15: Stabilized Balance Sheet
Stabilized Balance Sheet WHITESTONE REIT
Slide 16: Stabilized Balance Sheet
Stabilized Balance Sheet • In a challenging credit market: – Replaced short term debt with long term debt – Lowered our interest rate – Generated additional investment capital
Slide 17: Improved Balance Sheet: Debt Maturities
Improved Balance SheetDebt Maturities BEFORE REFINANCING AFTER REFINANCING (millions) (millions)
Slide 18: Interest Rate Comparison Before & After Refinancing
Interest Rate Comparison Interest Rate Comparison Before & After Refinancing
Slide 19: Reduced Dividends To Level Supported by FFO
Reduced Dividends To Level Supported by FFO WHITESTONE REIT
Slide 20: Reduced Dividends – Why?
Reduced Dividends – Why? • Preserve capital during time when credit markets are frozen – Allocate cash for needed property repairs – Softened Houston Market -tenant revenue loss – Align dividends with FFO – Position to capitalize on opportunities
Slide 21: Aligned Management Compensation With Shareholders Interest
Aligned Management Compensation With Shareholders Interest WHITESTONE REIT
Slide 22: Suspended Raise/Bonus
Suspended Raise/Bonus • Suspended Raises • Eliminated Bonuses • Implemented Stock Ownership Program tied to Performance of Company
Slide 23: Financial Report
• Occupancy • Revenue • Net Income • Funds From Operations Financial Report WHITESTONE REIT
Slide 24: Occupancy
Occupancy • Occupancy increased: to 86% at September 30, 2008 from 85% at September 30, 2007 • 53 new & renewal leases totaling194,000 sq ft & $5.6 million in total value • Tenant move-outs of approx. 50,000 sq ft
Slide 25: Occupancy Sept 2007 vs. Sept 2008
Occupancy 85% 86% 80% 82% 84% 86% 88% 90% 'Sep-07 'Sep-08 SEPT 2007 VS. SEPT 2008
Slide 26: Rent Per Square Foot
Rent Per Square Foot • Rent per square foot increased to $12.06 in the 3rd quarter from $11.44 last year, or 5%.
Slide 27: Rent Per Square Foot Sept 2007 vs. Sept 2008
Rent Per Square Foot $11.44 $12.06 $10.25 $11.25 $12.25 'Sep-07 'Sep-08 SEPT 2007 VS. SEPT 2008
Slide 28: Revenues
Revenues • Revenues for the nine months ended September 2008 were $23.1 million versus $21.7 million in 2007, an increase of $1.4 million or 6%. • Revenues for the 3rd quarter 2008 were $7.6 million vs $7.4 million in 2007, an increase of $0.2 million or 3%.
Slide 29: Revenue 9 and 3 Months Ended Sept 30
$21.7 $23.1 $7.4 $7.6 $0 $5 $10 $15 $20 $25 9 Mos 3 Mos 2007 2008 9 AND 3 MONTHS ENDED SEPT 30: 2007 VS. 2008 (millions) Revenue
Slide 30: Property Net Operating Income
Property Net Operating Income • Property NOI for the nine months ended September 2008 was $13.6 million versus $12.9 million in 2007, an increase of $0.7 million or 5% • Property NOI for the 3rd quarter 2008 was $4.3 million vs $4.3 million in 2007
Slide 31: Property Net Operating Income Chart
Property Net Operating Income 9 AND 3 MONTHS ENDED SEPT 30: 2007 VS. 2008 (millions) $12.9 $13.6 $4.3 $4.3 $0 $2 $4 $6 $8 $10 $12 $14 9 Mos 3 Mos 2007 2008
Slide 32: Net Income
Net Income • Net Income for the nine months ended Sept 2008: was $1.3 million versus $0.2 million in 2007, an increase of $1.1 million – Gain from litigation settlement of $2.3 million – Offset by: • Loan fees from extension of $0.7 million • Interest Cost of $0.4 million
Slide 33: Net Income (cont.)
Net Income (cont.) • Net loss for the quarter was $0.2 million versus net income of $0.2 million in 2007, a decrease of $0.4 million – Eliminated litigation cost of $0.2 million – Offset by • Loan fees from extension of $0.3 million • Interest cost of $0.2 million
Slide 34: Net Income Chart
Net Income 9 AND 3 MONTHS ENDED SEPT 30: 2007 VS. 2008(millions) $0.2 $1.3 $0.2 -$0.2 -$0.5 $0.0 $0.5 $1.0 $1.5 9 Mos 3 Mos 2007 2008
Slide 35: Funds From Operations (FFO)
Funds From Operations (FFO) • FFO was $2.9 million for the nine months ended September 2008 vs. $4.7 million in 2007, a decrease of $1.6 million or 34% – Loan fees from extension of $1 million – Interest Cost of $0.6 million
Slide 36: Funds From Operations (FFO) (cont.)
Funds From Operations (FFO) (cont.) • FFO was $1.2 million for the quarter vs. $1.7 million in 2007, a decrease of $0.5 million or 29% – Eliminated litigation cost of $0.3 million – Offset by • Loan fees from extension of $0.4 million • Interest Cost of $0.3 million
Slide 37: Funds From Operations (FFO) Chart
Funds From Operations (FFO) (millions) 9 AND 3 MONTHS ENDED SEPT 30: 2007 VS. 2008 $4.7 $2.9 $1.7 $1.2 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 9 Mos 3 Mos 2007 2008
Slide 38: Dividends
• Dividends were lower than previous year due to fewer shares and OP units outstanding Dividends
Slide 39: Dividends 9 and 3 Months Ended Sept 30
Dividends 9 AND 3 MONTHS ENDED SEPT 30: 2007 VS. 2008 $7.1 $6.8 $2.4 $2.2 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 9 Mos 3 Mos 2007 2008 (millions)
Slide 40: Balance Sheet
WHITESTONE REIT Balance SheetBalance Sheet
Slide 41: Total Assets
Total Assets • Total Assets decreased by $7 million from December 2007 – Two properties exchanged for stock $4 million – Distribution in excess of net income of $3 million
Slide 42: Assets
Assets $175 $168 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 'Dec-07 'Sep-08 (millions)
Slide 43: Liabilities
Liabilities • Total liabilities increase by $4.3 million from December 2007 – Increased mortgage loans of $5.2 – Decreased dividends payable of $0.7 million
Slide 44: Liabilities Chart
Liabilities $83.4 $10.8 $88.6 $9.9 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 'Dec-07 'Dec-08
Slide 45: Equity
Equity • Shareholders equity decreased by $5.7 million – Treasury shares exchanged for properties of $2.5 million – Dividends in excess of net income of $3.2 million
Slide 46: Equity (cont.)
Equity (cont.) • Minority interest decreased by $6.2 million – OP units exchanged for properties of $4.7 million – Distributions in excess of net income of $1.5 million
Slide 47: Equity Chart
Equity $52.8 $47.1 $21.9 $28.0 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 'Dec-07 'Sep-08 Minority Interest Shareholders' Equity (millions)
Slide 48: Challenges: Hurricane Ike
ike WHITESTONE REIT Challenges
Slide 49: Cent Only & Circuit City
99 Cent Only & Circuit City • 99 Cent Only Stores pulling out of Texas – Two Whitestone properties ( Houston ) • Circuit City filed Chapter 11 – One Whitestone property
Slide 50: Cent Only + Circuit City
99 Cent Only + Circuit City • $0.02 lost revenue per share • $0.02 lost revenue per share
Slide 51: Hurricane Ike
• 31 Properties damaged • Public Adjuster hired • Property and business interruption insurance in place • Cost to Whitestone pending insurance settlement Hurricane Ike ike
Slide 52: Global Financial & Credit Crisis: The Challenge for Public REITs
Global Financial & Credit Crisis: The Challenge for Public REITs WHITESTONE REIT
Slide 53: Challenge - Earnings Growth
Challenge -Earnings Growth • REIT earnings increase limited by leases • Internally generated capital – Limited by 90% payout requirement • Capital gains are not recurring – Can be retained if offset by capital losses – Can be retained if the required tax is paid – Can be distributed to shareholders
Slide 54: Challenge: Attracting Investor Capital During Crisis
Challenge: Attracting Investor Capital During Crisis • Operational and financial trends • Active redevelopment program • Pipeline of attractive acquisitions • Geographic diversification • Strong balance sheet • Management ownership • Experienced Board • Proven Investment Banker
Slide 55: Challenge – Sustaining Dividends
Challenge – Sustaining Dividends As of Nov 5th, 16 US and 4 Canadian REITs cut or suspended dividends and more are expected to follow.
Slide 56: Dividend Cuts
Dividend Cuts: % Cut 6 out of 16 in this example cut dividends by 100% Source: SNLi : Dada Dispatch: REIT, REOC dividend cuts and suspensions Nov 5, 2008
Slide 57: Dividend Cuts
Dividend Cuts “REITs would be well served to reduce their dividends to between 90% and 100% of taxable net income and use the dividend savings to shore up balance sheets” -RBC Capital Market Analysts 10/9/08 Report
Slide 58: Dow Jones Industrial Average vs. Equity All REIT Index
Dow JonesDow Jones IndustrialIndustrial AverageAverage Dow Jones Equity All REIT Index
Slide 59: Current Economic Crisis
Current Economic Crisis • Government bailout • Unemployment rising • Economy slowing into a Recession • Consumer confidence low • Declining retail sales • Capital markets frozen
Slide 60: Public REITs Facing a Bloodbath
Public REITS “Facing a BloodBath” “Concerns about the credit market and economy primarily drove the 13% drop in REITs over the past four days” “REITs now trade at a 31.3% discount to the Street’s mean estimate of real estate NAV.” SNLi Nov. 7, 2008
Slide 61: General Growth Properties Facing Chapter 11
General Growth Properties Facing Chapter 11 if unable to refinance or extend $1 billion debt due next month. Another $3.1 billion in debt is due next year. Houston properties: Baybrook Mall Deerbrook Mall First Colony Mall Woodlands Mall Willowbrook Mall The Woodlands - Houston Chronicle Nov 12, 200
Slide 62: General Growth Properties Stock Price
General Growth Properties STOCK PRICE MAY 08 TO OCT 08 May-Jun-Jul-08 Aug-Sep-Oct0808 080808 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 GGP Developers Diversified STOCK PRICE MAY 08 TO OCT 08 May-Jun-Jul-08 Aug-Sep-Oct0808 080808 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.0
Slide 63: Developers Diversified Stock Price
Developers Diversified STOCK PRICE MAY 08 TO OCT 08 May-Jun-Jul-08 Aug-Sep-Oct0808 080808 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00
Slide 64: Prologis Stock Price
Prologis STOCK PRICE MAY 08 TO OCT 08 May-Jun-Jul-08 Aug-Sep-Oct-08 0808 0808 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 PLD
Slide 65: Weingarten Stock Price
$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 WRI WeingartenWeingartenSTOCK PRICE MAY 08 TO OCT 08
Slide 66: Weingarten Realty Investors NYSE:WRI
Weingarten Realty Investors NYSE:WRI3 months 8/13/08 – 11/12/08 High $17.08 Low $15.91 – 52 wk low (52.34%) 8/13/08 to 11/12/08
Slide 67: AmREIT Stock Price
AmREIT STOCK PRICE MAY 08 TO OCT 08 May-Jun-Jul-08 Aug-Sep-Oct-08 0808 0808 $5.40 $5.60 $5.80 $6.00 $6.20 $6.40 $6.60 $6.80 $7.00 $7.20 AMY
Slide 68: AmREIT AMEX:AMY
AmREIT AMEX:AMY 3 months 8/13/08 – 11/12/08 High $4.45 Low $3.82 – 52 wk low (40.43%) 8/13/08 to 11/12/08
Slide 69: KIMCO Realty
KIMCO Realty NYSE:KIM 3 months 8/13/08 – 11/12/08 High $19.33 Low $16.85 52 wk low=$16.65 (17.85%) 8/13/08 to 11/12/08
Slide 70: Our Strategic Plan
• Redevelop • Occupancy & Revenue •Geographic Diversification •Disposition/Acquisition Restructure Balance Sheet •Public Listing Our Strategic Plan WHITESTONE REIT
Slide 71: Question/Answer Thank You
James C. Mastandrea Chairman & CEO Question/Answer Thank You.
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