Whitestone Expands in Phoenix - Analyst Blog

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Texas-based Whitestone REIT (WSR) recently announced the completion of the acquisition of a community center - Fountain Square - for $15.4 million. The acquisition depicts Whitestone's ongoing expansion spree mainly on the off-market front.

The strategic move by Whitestone is expected to strengthen its presence in the Phoenix area. The retail market in and around Phoenix is currently going through a positive trend in terms of net absorption and vacancy rates. The market witnessed 1.3 million square feet of positive absorption by the end of first half of 2012 compared with 648,697 square feet in the first half of 2011. By the end of second quarter of 2012, the overall retail market vacancy stood at 11.3%. The key submarkets of Phoenix like Scottsdale, Mesa and Gilbert are the major contributors.

With the acquisition, Whitestone now owns a large share of the tenant space in the affluent submarket of Phoenix, spanning around 870,000 square feet. It has eleven Community Centers in the greater Phoenix area - such as Terravita marketplace, Pima Norte, The Citadel, The Pinnacle of Scottsdale and The Shops at Pinnacle Peak.

Fountain Square, which spans 118,209 square feet, is located on the northwest corner of Bell Road and Seventh Street in the northern Phoenix market. The property is currently 76% leased and has been purchased at below replacement cost.

Whitestone expects the 24% unoccupied property space to reduce going forward, with the completion of a new 20,000 square foot Planet Fitness location that is currently under construction. The property currently houses more than 25 well known diversified tenants focused on service offerings including medical, education, and casual dining. Some of the major tenants of Fountain Square are - McDonald's Corp. (MCD) , Weight Watchers International, Inc. (WTW) and Safeway Inc. (SWY) .

The company is focused on its strategy of escalating its footprint by tactically acquiring commercial properties in high-growth markets. Whitestone mainly targets the U.S. properties situated in thickly populated and culturally diverse submarkets in Phoenix, Chicago, Dallas, San Antonio and Houston. Recently, the company acquired a 125,898 square foot community center - Paradise Plaza - in Phoenix for $16.3 million.

Founded in 1998, Whitestone is a fully integrated real estate company that owns, operates and re-develops community centered properties, which are visibly located properties in established or developing culturally diverse neighborhoods. As of June 30, 2012, Whitestone owned 46 community center properties spanning approximately 3.6 million square feet, including two development land parcels.

The company will likely release its third quarter 2012 earnings on November 6, 2012. The Zacks Consensus Estimate for third quarter 2012 FFO (fund from operations) is pegged at 25 cents per share. We presently have a long-term Neutral recommendation on the stock. It also carries a Zacks #3 Rank (a short-term Hold rating).

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

MCDONALDS CORP (MCD): Free Stock Analysis Report

SAFEWAY INC (SWY): Free Stock Analysis Report

WHITESTONE REIT (WSR): Free Stock Analysis Report

WEIGHT WATCHERS (WTW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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