Whitestone Reit · NYSE:WSR
Whitestone Reit — Shareholder Meeting (August 2008)
75 slides from Whitestone Reit's shareholder meeting presentation, Aug 1, 2008
Slide 1: Welcome Annual Meeting of Shareholders
Welcome Annual Meeting of Shareholders Houston Marriott Westchase Tuesday, July29, 2008
Slide 2: Today's Agenda
Today’s Agenda Yesterday Today Tomorrow
Slide 3: Yesterday
Yesterday
Slide 4: 2003-2007 Occupancy Trend
2003-2007 Yesterday Occupancy Trend 85% 80% 2003-2007 Yesterday Occupancy Trend 85% 80% 75% 70% ‘03 ‘04 ‘05 ‘06 ‘07
Slide 5: Beginning Challenges 2006 & 2007
Beginning Challenges 2006 & 2007 •Business needed turnaround thinking •Unfavorable occupancy & financial trends •Deferred property maintenance •On banks’ watch list Yesterday
Slide 6: Beginning Challenges 2006 & 2007
Beginning Challenges 2006 & 2007 •Litigation • distracted management focus • costly, and • strained external relationships •Company structure conflicted with public listing standards Yesterday
Slide 7: Moving forward to increase cash flow & create shareholder value
Moving forward to increase cash flow & create shareholder value Increase occupancies Resolve costly litigation Redevelop selected properties Diversify geographic risk
Slide 8: Increase Occupancy Program
Increase Occupancy Program Yesterday
Slide 9: Increase Occupancy - 2007
Increase Occupancy - 2007 401,742 sq ft of new leases 440,724 sq ft of renewal leases 842,066 sq ft of total leases 401,742 sq ft of new leases (311,004) sq ft of move outs 90,738 sq ft net gain = 3% increase to 86% total occupancy 3% increase to 86% Total Occupancy
Slide 10: 2002-2007 Quarterly Occupancy Trend
2002-2007 Yesterday Quarterly Occupancy Trend 93% 91% 89% 87% 85% 83% 12/31/0312/31/02 12/31/04 12/31/05 12/31/06 12/31/07 2002-2007 Yesterday Quarterly Occupancy Trend 93% 91% 89% 87% 85% 83% 12/31/0312/31/02 12/31/04 12/31/05 12/31/06 12/31/07
Slide 11: Example Leases Executed
Example Leases Executed • USCensusBureau 11,946 sq ft • AsianSupermarket 42,205 sq ft • PortaMedic 8,723 sq ft • XrayExpress 20,200 sq ft • MerrillCorporation 13,751 sq ft • WaltonConstruction 7,099 sq ft
Slide 12: Recent Accomplishments 2007-2008
•Increased occupancy •Stabilized banking relationships •Geographic diversification begun •Redevelopment program underway •Executive Management Leadership Grads •Litigation concluded Recent Accomplishments Yesterday 2007-2008
Slide 13: Litigation Settlement
Litigation Settlement Yesterday
Slide 14: Exchanged Properties for Shares
•Two properties ($7.8 M book value) • Garden Oaks Shopping Center • Northeast Square Shopping Center •Whitestone Shares & OP Units •293,961.54 – Common Shares •1,068,451.217 – OP Units Litigation Settlement Yesterday Exchanged Properties for Shares 2008
Slide 15: 5-Year Standstill
•Both parties agree not to: •Invest •Merge •Solicit proxies Litigation Settlement Yesterday 5-Year Standstill 2008
Slide 16: Settlement Summary
•Legal Costs $4.6 million •Gain on exchange $3.0 million •Internalized Management •No external management acquisition cost •No ongoing 3rd party fees based on revenue •Necessary for public listing Litigation Settlement Yesterday Settlement Summary 2008
Slide 17: Moving forward to increase cash flow & create shareholder value
Moving forward to increase cash flow & create shareholder value Redevelop selected properties Diversify geographic risk
Slide 18: Redevelopment Program
Redevelopment Program Yesterday
Slide 19: Holly Knight
Yesterday Holly Knight •Renovated to stabilize cash flow •Completed Q2 2008 •Rent: $12 to $14 per sq ft + 17%
Slide 20: Holly Knight Before
Yesterday Holly Knight Before
Slide 21: Holly Knight During
Holly Knight During
Slide 22: Holly Knight After
Yesterday Holly Knight After
Slide 23: Westchase
Yesterday Westchase •Increased gross leasable space •Completion: Sept 2008 •Doubled rents -from $8 to $16 sq ft
Slide 24: Westchase Before
Yesterday Westchase Before
Slide 25: Westchase During
Yesterday Westchase During
Slide 26: During: Endcap
During: Endcap Westchase We: WHITESTONE REIT
Slide 27: Westchase
Yesterday Westchase
Slide 28: Wh da Dee!
Wh da Dee! = I I I i H i Ml ft A Westchase ia We= WHITESTONE REIT 4 pas J ee Lee onal
Slide 29: Westchase
Westchase == WHITESTONE REIT
Slide 30: Westchase After 2008 Expected Completion
Yesterday Westchase After 2008 Expected Completion
Slide 31: Westchase After 2008 Expected Completion
Yesterday Westchase After 2008 Expected Completion
Slide 32: Diversify geographic risk through acquisitions
Moving forward to increase cash flow & create shareholder value Diversify geographic risk through acquisitions
Slide 33: Acquisition Late 2007
Acquisition Late 2007 Yesterday
Slide 34: Pima Norte
Wee Pima Norte =W = WHITESTONE REIT
Slide 35: Potential Acquisitions
Potential Acquisitions To increase cash flow & create shareholder value
Slide 36: Acquisition Focus
•Smaller properties -35,000 to 250,000 sq ft •Larger metro markets outside of Texas •Irreplaceable infill locations •Constructed buildings with land •Upside value add potential • Houston access: 2-1/2 hours away by airplane Acquisition Focus Tomorrow
Slide 37: Diversified Geography
• Houston •4TH largest US city • Chicago •2nd largest US city • Phoenix •5TH largest US city Diversified Geography Tomorrow
Slide 38: Office 45,000 sq. ft.
Office 45,000 sq. ft.
Slide 39: Office 30,000 sq. ft.
Office 30,000 sq. ft.
Slide 40: Retail 85,000 sq. ft.
Retail 85,000 sq. ft.
Slide 41: Mixed-Use 45,000 sq. ft.
Mixed-Use 45,000 sq. ft.
Slide 42: Mixed-Use 101,000 sq. ft.
Mixed-Use 101,000 sq. ft.
Slide 43: Today: Our Challenges
Today Our Challenges 85% "7 = WHITESTONE REIT .
Slide 44: Financial Markets Collapsed August 2007
Financial Markets Collapsed August 2007
Slide 45: Economy Financial Market Impact
Economy Financial Market Impact •Distressed lenders •Scarce capital •Increased borrowing rates and fees •Investors want higher returns •REIT stocks decreased 30%
Slide 46: Real Estate Value Cycle
Expansion Time to Sell Real Estate Value Cycle Contraction Time to Buy Growth Over Time TIME VALUE Bottom
Slide 47: Our Operating Strategy
Our Operating Strategy Today we are in Recovery •Drive our occupancies •Revenues •Net Cash Flow •Reposition our potential value add properties •Expand into new markets •Replace our costly inventory with - - Properties We are Proud to Own
Slide 48: Our Financing Strategy
Our Financing Strategy Today we are in Recovery •Restructure our balance sheet •Lower our borrowing cost •Increase our cash position •Increase our financial flexibility •Increase Funds From Operations •Raise equity by selling shares
Slide 49: Management Decades of Experience
Management Decades of Experience
Slide 50: Experience – Training – Diversity
Experience – Training – Diversity Today Developing our People •Real Estate & Capital Markets Experience •Senior Management & Operating Group - -200+ years •Executive Management Leadership Training •16 Graduates July 2008 •Diversity of personnel •48 people – 12 different languages
Slide 51: Whitestone's Platform
Whitestone’s Platform attr We WHITESTONE REIT nes
Slide 52: Properties
Today Properties Industrial Retail Office 20.21% 38.44% 41.36%
Slide 53: Our Starting Point
Our Starting Point •35 properties •31 Texas : Houston •2 Texas : Dallas •1 Texas : San Antonio •1 Arizona : Carefree (adjacent to Scottsdale ) •$225 million asset value •3 million sq ft (approx.)
Slide 54: Office (Headquarters) Texas: Houston
Office (Headquarters) Texas : Houston
Slide 55: Office Texas: Houston
Office Texas : Houston
Slide 56: Texas: Houston
att, Aull 73 Texas: Houston ao
Slide 57: Industrial Texas: Houston
Industrial Texas : Houston
Slide 58: Industrial Texas: Houston
Industrial Texas : Houston
Slide 59: Retail Texas: Houston
Retail Texas : Houston
Slide 60: Tomorrow: A look toward our future
Tomorrow A look toward our future
Slide 61: 2004-2008 Occupancy Trend
2004-2008 Yesterday Occupancy Trend 90% 85% 80% 75% 70% ‘04 ‘05 ‘06 ‘07 ‘08
Slide 62: Challenges & Opportunities
Tomorrow Challenges & Opportunities
Slide 63: Challenges
•Current Portfolio Limitations • Deferred maintenance • Low rents • High tenant turnover •Capital & credit market tightening •Raising institutional investor awareness •Disposition of non-core properties Challenges Tomorrow
Slide 64: Non-Core Asset
Non-Core Asset —
Slide 65: Non-Core Asset
Non-Core Asset
Slide 66: Non-Core Asset
Non-Core Asset
Slide 67: Non-Core Asset
DAIRY ASHFORD | ie BUSINESS pig -Non-Core Asset
Slide 68: Opportunities
Opportunities Tomorrow • Increase cash flow with our internalized leasing, management, and redevelopment experience • Purchase value added properties at significant discounts • Raise Institutional equity • List shares
Slide 69: Our Mission: Our Shareholders
Our Mission is to serve Our Shareholders by working diligently and efficiently to maximize the value of the real estate properties we own, and collectively, the value of the enterprise;
Slide 70: Our Mission: Our Tenants
Our Mission is to serve Our Tenants by providing quality rental space and a professional community atmosphere, at a fair rental rate;
Slide 71: Our Mission: Our Vendors
Our Mission is to serve Our Vendors by working together in an ethical and honest manner;
Slide 72: Our Mission: Our Fellow Employees
Our Mission is to serve Our Fellow Employees by providing development and training while encouraging them to pursue excellence in every aspect of their personal and professional lives.
Slide 73: Forward Looking Statement
Forward Looking Statement This presentation includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934. The information in this presentation includes certain forward-looking statements that
Slide 74: Questions & Answers
Questions & Answers
Slide 75: Thank You!
Thank You!