Urges Shareholders to Vote for All of Whitestone’s Highly Qualified Trustees on the WHITE Proxy Card
Since CEO Change in 2022, Whitestone Has Executed on a Successful Strategy for Value Creation and Delivered Among the Highest REIT Performing Shareholder Returns
Erez Waging Unnecessary, Self-Serving and Misguided Proxy Contest
In conjunction with the definitive proxy filing, Whitestone has mailed a letter to the Company’s shareholders. Highlights from the letter include:
- Stock
Outperformance . Whitestone’s stock has continued to outperform its peers and the MSCI US REIT Index. Since changing CEOs in 2022, Whitestone has the #1 performing stock on a 1-year and 3-year Total Shareholder Return basis and has outperformed on a 5-year basis when compared to peers and the MSCI US REIT Index - High Same Store NOI. Whitestone has achieved some of the highest Same Store Net Operating Income (NOI) growth among peers since 2022, driven by a high-quality portfolio and a management team that is laser-focused on delivering consistent results
- Strong Core FFO Outlook. Whitestone is positioned to continue delivering strong results with the midpoint of 2024 guidance indicating 11% year over year Core Funds From Operations (FFO) per share growth; and
- No Value Added from Erez. We have concerns regarding Erez Asset Management’s short-term focus, failure to bring forward any new, value-enhancing ideas for Whitestone and we believe the election of Erez’s nominees would disrupt Whitestone’s substantial business momentum to-date and diminish the quality and strength of the
Board of Trustees
Whitestone’s definitive proxy materials and other materials regarding the Board’s recommendation for the 2024 Annual Meeting can be found at: https://ir.whitestonereit.com/financial-reporting/documents/default.aspx
The full text of the letter being mailed to shareholders follows:
Dear Fellow Shareholder,
Led by Whitestone’s revised strategy and the leadership of our CEO
However, this wasn’t always the case before 2022. Our prior CEO was putting his own interest ahead of shareholders, unable to lead effectively and his impact on our Company’s performance was detrimental. Accordingly, your Board took action in a deliberate and decisive manner and terminated the prior CEO for cause. Under our new plan, we have paved the path forward to maximize value for Whitestone shareholders. Since appointing
Despite our superior performance, Erez Asset Management (“Erez”), a new opportunistic asset manager with a very limited track record, is attempting to disrupt our progress. Instead of proposing constructive ideas to build on our progress and further enhance value for all shareholders, Erez has demanded a change in Whitestone’s Board with the sole purpose of embarking on an immediate sale or liquidation of our Company without offering any substantive operational, financial or strategic ideas for improvement. While the Whitestone Board is open to all avenues to drive shareholder value, including evaluating a sale of the Company, given the current financial market conditions and in light of the momentum our Company is realizing, we believe that Erez is prioritizing short term gains at the expense of long-term value creation. Erez has nominated two individuals,
Under the leadership of your Board and experienced management team, the Company was its own change agent, implementing a deliberate and long-term strategy that has delivered industry leading total shareholder returns and positioned Whitestone for an even brighter future. Our results confirm that this is the right strategy for Whitestone, and the financial results are the product of our clearly defined strategy and relentless execution.
Erez’s campaign unnecessarily risks derailing our trajectory, stalling our momentum and potentially destroying the value we have created for you.
A vote for Whitestone’s trustees is a vote for the right strategy, the right execution and the right Board. Voting for each of Whitestone’s nominees on the WHITE proxy card is in the best interests of all shareholders.
IN 2022, WHITESTONE APPOINTED NEW LEADERSHIP TO DRIVE OUR NEW STRATEGY
FOR THE BENEFIT OF ALL SHAREHOLDERS
CEO
By focusing on community and convenience with service-oriented tenants in high-income, sun belt-located shopping centers, Whitestone can achieve earnings growth at or near the top of its peer set.
A number of specific actions were taken in order to drive greater performance:
- Increased accountability
- Streamlined and strengthened the regional leasing and property management teams with clear goals and priorities
- Eliminated micro-management, allowing for faster and better execution
- Restored key relationships within the real estate community, especially with the brokers, dramatically increasing transaction flow
- Focused on the right talent that ultimately resulted in reducing headcount by over 25% versus 2019
These actions resulted in higher morale throughout the organization with employees having more ownership and effective tools for success, and clear objectives that were aligned with the management team, resulting in greater productivity.
These actions have produced substantial results:
- Occupancy has increased 290 basis points (year-end 2021 to year-end 2023), bringing occupancy up to a record 94.2%
- Straight line leasing spreads have now exceeded 17% for seven consecutive quarters
- Same Store Net Operating Income grew 7.9% in 2022, followed by 2.7% in 2023, amongst the highest within the peer group
In addition to operational improvements, management aggressively strengthened the Company’s balance sheet by:
- Amending and extending the Company’s
$515 million credit facility, ensuring that the bulk of the Company maturities extended to 2027 and beyond - Obtaining the Company’s first investment grade credit rating
- Utilizing earnings growth and free cash flow to rapidly improve the Company’s Debt/EBITDAre ratio from 10.2x (2020) to 7.8x (2023)
At the beginning of 2022, Whitestone also was saddled with an investment in
SINCE OUR CEO CHANGE, WHITESTONE REIT HAS A TRACK RECORD OF SUPERIOR PERFORMANCE
Total Shareholder Returns v MSCI US REIT Index
Source: FactSet as of
Note: Total returns include the reinvestment of dividends on the ex-date.
(1) RMS represents the total return performance of the MSCI US REIT Index.
Total Shareholder Returns v Peers
Source: FactSet as of
Note: Total returns include the reinvestment of dividends on the ex-date.
(1) PECO began trading on the NASDAQ on
(2) RMS represents the total return performance of the MSCI US REIT Index.
(3) IVT began trading on the NYSE on
OUR STRONG, THOUGHTFULLY REFRESHED BOARD HAS OVERSEEN A STRATEGY DRIVING SUSTAINABLE VALUE
The Whitestone Board of Trustees brings strong real estate, capital markets, legal, financial and investor relations experience. The majority of the Trustees’ real estate experience is specific to Whitestone’s markets, which is vital to understanding ongoing investments and Company operations. All of our board members have met with shareholders and are committed to translating shareholder feedback into shareholder value.
The board has undergone significant refreshment with 3 of 6 trustees added over the past 2 years. Each of our Board nominees are members added over the last 7 years. This refreshment has:
- Achieved a balance of deep institutional knowledge, diversity and fresh perspectives that complement our long term growth strategy
- Created the right mix of relevant expertise and experience to drive Whitestone forward
Whitestone’s independent board members also have a track record of taking action to protect shareholders, reflected by recent corporate governance and management changes and naming
Most importantly, the Board is overseeing a strategy that is driving value and producing results.
MAKE NO MISTAKE, EREZ’S CAMPAIGN IS DETRIMENTAL TO ALL SHAREHOLDERS
As previously mentioned, Erez’s mission seems to be to establish Bruce Schanzer’s credibility in the REIT activism arena and use
In short, Erez’s founder, Mr.
The Whitestone Board reviews all avenues to drive shareholder value. Erez seems detached from the reality of 2024: with interest rates at multi-year highs, a slow transaction market and a wide bid-ask spread between buyers and sellers. To set the record straight, we carefully evaluate and consider all offers for our Company and are committed to our fiduciary duties to maximize shareholder value. But we do question why Erez is so fixated on effecting an immediate sale or monetization of assets under sub-optimal market conditions and chooses to completely ignore the embedded upside within our portfolio.
THE CHOICE IS CLEAR, WHITESTONE REIT HAS THE RIGHT TEAM AND PLAN TO DRIVE SHAREHOLDER VALUE
Whitestone has led the MSCI US REIT index with over 30% total shareholder return since the management change in
- Occupancy up 290 basis points over two years to a record 94.2%
- Straight line leasing spreads in excess of 17% for seven consecutive quarters
- Strong Same Store Net Operating Income
Whitestone has a laser-focused strategy that is clearly working. Your vote is critical to ensure the Company’s momentum is not interrupted and shareholder value destroyed.
Vote on the WHITE proxy card for Whitestone’s proposals:
- Elect all 6 of our trustee nominees
- Approve Say on Pay
- Ratify Auditors
Sincerely,
The Whitestone Board of Trustees:
About
Our centers are convenience focused: merchandised with a mix of service-oriented tenants providing food (restaurants and grocers), self-care (health and fitness), services (financial and logistics), education and entertainment to the surrounding communities. The Company believes its strong community connections and deep tenant relationships are key to the success of its current centers and its acquisition strategy. For additional information, please visit www.whitestonereit.com.
Important Additional Information and Where to Find It
Certain Information Regarding Participants in Solicitation
Forward-Looking Statements
This Report contains forward-looking statements within the meaning of the federal securities laws, including discussion and analysis of our financial condition and results of operations, statements related to our expectations regarding the performance of our business, and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or the negative of such terms and variations of these words and similar expressions, although not all forward-looking statements include these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.
Factors that could cause actual results to differ materially from any forward-looking statements made in this Report include: the imposition of federal income taxes if we fail to qualify as a real estate investment trust (“REIT”) in any taxable year or forego an opportunity to ensure REIT status; uncertainties related to the national economy, the real estate industry in general and in our specific markets; legislative or regulatory changes, including changes to laws governing REITs; adverse economic or real estate developments or conditions in
Non-GAAP Financial Measures
This release contains supplemental financial measures that are not calculated pursuant to
EBITDAre:
FFO: Funds From Operations:
Core Funds from Operations (“Core FFO”) is a non-GAAP measure. From time to time, we report or provide guidance with respect to “Core FFO” which removes the impact of certain non-recurring and non-operating transactions or other items we do not consider to be representative of our core operating results including, without limitation, default interest on debt of real estate partnership, extinguishment of debt cost, gains or losses associated with litigation involving the Company that is not in the normal course of business, and proxy contest professional fees.
Management uses FFO and Core FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income (loss) alone as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Because real estate values instead have historically risen or fallen with market conditions, management believes that the presentation of operating results for real estate companies that use historical cost accounting is insufficient by itself. In addition, securities analysts, investors and other interested parties use FFO and Core FFO as the primary metric for comparing the relative performance of equity REITs. FFO and Core FFO should not be considered as an alternative to net income or other measurements under GAAP, as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity. FFO and Core FFO do not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness. Although our calculation of FFO is consistent with that of NAREIT, there can be no assurance that FFO and Core FFO presented by us is comparable to similarly titled measures of other REITs.
NOI: Net Operating Income: Management believes that NOI is a useful measure of our property operating performance. We define NOI as operating revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Other REITs may use different methodologies for calculating NOI and, accordingly, our NOI may not be comparable to other REITs. Because NOI excludes general and administrative expenses, depreciation and amortization, equity or deficit in earnings of real estate partnership, interest expense, interest, dividend and other investment income, provision for income taxes, gain on sale of property from discontinued operations, management fee (net of related expenses) and gain or loss on sale or disposition of assets, and includes NOI of real estate partnership (pro rata) and net income attributable to noncontrolling interest, it provides a performance measure that, when compared year-over-year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from net income. We use NOI to evaluate our operating performance since NOI allows us to evaluate the impact that factors such as occupancy levels, lease structure, lease rates and tenant base have on our results, margins and returns. In addition, management believes that NOI provides useful information to the investment community about our property and operating performance when compared to other REITs since NOI is generally recognized as a standard measure of property performance in the real estate industry. However, NOI should not be viewed as a measure of our overall financial performance since it does not reflect the level of capital expenditure and leasing costs necessary to maintain the operating performance of our properties, including general and administrative expenses, depreciation and amortization, equity or deficit in earnings of real estate partnership, interest expense, interest, dividend and other investment income, provision for income taxes, gain on sale of property from discontinued operations, management fee (net of related expenses) and gain or loss on sale or disposition of assets.
Same Store NOI: Management believes that Same Store NOI is a useful measure of the Company’s property operating performance because it includes only the properties that have been owned for the entire period being compared, and it is frequently used by the investment community. Same Store NOI assists in eliminating differences in NOI due to the acquisition or disposition of properties during the period being presented, providing a more consistent measure of the Company’s performance. The Company defines Same Store NOI as operating revenues (rental and other revenues, excluding straight-line rent adjustments, amortization of above/below market rents, and lease termination fees) less property and related expenses (property operation and maintenance and real estate taxes), Non-Same Store NOI, and NOI of our investment in Pillarstone OP (pro rata). We define “Non-Same Stores” as properties that have been acquired since the beginning of the period being compared and properties that have been sold, but not classified as discontinued operations. Other REITs may use different methodologies for calculating Same Store NOI, and accordingly, the Company's Same Store NOI may not be comparable to that of other REITs.
Net debt: We present net debt, which we define as total debt net of insurance financing less cash plus our proportional share of net debt of real estate partnership, and net debt to pro forma EBITDAre, which we define as net debt divided by EBITDAre because we believe they are helpful as supplemental measures in assessing our ability to service our financing obligations and in evaluating balance sheet leverage against that of other REITs. However, net debt and net debt to pro forma EBITDAre should not be viewed as a stand-alone measure of our overall liquidity and leverage. In addition, other REITs may use different methodologies for calculating net debt and net debt to pro forma EBITDAre, and accordingly our net debt and net debt to pro forma EBITDAre may not be comparable to that of other REITs.
RECONCILIATION OF NON-GAAP MEASURES | ||||||
Initial Full Year Guidance for 2024 | ||||||
(in thousands, except per share and per unit data) | ||||||
Projected Range Full Year 2024 | ||||||
Low | High | |||||
FFO (NAREIT) and Core FFO per diluted share and OP unit | ||||||
Net income attributable to | $ | 16,600 | $ | 19,600 | ||
Adjustments to reconcile to FFO (NAREIT) | ||||||
Depreciation and amortization of real estate assets | 34,252 | 34,252 | ||||
Depreciation and amortization of real estate assets of real estate partnership (pro rata) | 133 | 133 | ||||
FFO (NAREIT) | $ | 50,985 | $ | 53,985 | ||
Adjustments to reconcile to Core FFO | ||||||
Adjustments | — | — | ||||
Core FFO | $ | 50,985 | $ | 53,985 | ||
Dilutive shares | 51,262 | 51,262 | ||||
OP Units | 695 | 695 | ||||
Dilutive share and OP Units | 51,957 | 51,957 | ||||
Net income attributable to | $ | 0.32 | $ | 0.38 | ||
FFO (NAREIT) per diluted share and OP Unit | $ | 0.98 | $ | 1.04 | ||
Net income attributable to | $ | 0.32 | $ | 0.38 | ||
Core FFO per diluted share and OP Unit | $ | 0.98 | $ | 1.04 |
RECONCILIATION OF NON-GAAP MEASURES | ||||||||
(continued) | ||||||||
(in thousands) | ||||||||
Year Ended | ||||||||
2023 | 2022 | |||||||
PROPERTY NET OPERATING INCOME | ||||||||
Net income attributable to | $ | 19,180 | $ | 35,270 | ||||
General and administrative expenses | 20,653 | 18,066 | ||||||
Depreciation and amortization | 32,966 | 31,707 | ||||||
(Equity) deficit in earnings of real estate partnership (1) | 3,155 | (239 | ) | |||||
Interest expense | 32,866 | 27,193 | ||||||
Interest, dividend and other investment income | (51 | ) | (65 | ) | ||||
Provision for income taxes | 450 | 422 | ||||||
(Gain) loss on sale of properties, net | (9,006 | ) | (16,950 | ) | ||||
Management fee, net of related expenses | 16 | 112 | ||||||
Loss on disposal of assets, net | 522 | 192 | ||||||
NOI of real estate partnership (pro rata)(1) | 2,553 | 3,023 | ||||||
Net income attributable to noncontrolling interests | 270 | 530 | ||||||
NOI | $ | 103,574 | $ | 99,261 | ||||
Non-Same Store NOI (2) | (4,370 | ) | (3,322 | ) | ||||
NOI of real estate partnership (pro rata) (1) | (2,553 | ) | (3,023 | ) | ||||
NOI less Non-Same Store NOI and NOI of real estate partnership (pro rata) | 96,651 | 92,916 | ||||||
Same Store straight-line rent adjustments | (2,284 | ) | (1,466 | ) | ||||
Same Store amortization of above/below market rents | (862 | ) | (933 | ) | ||||
Same Store lease termination fees | (698 | ) | (135 | ) | ||||
Same Store NOI (3) | $ | 92,807 | $ | 90,382 |
RECONCILIATION OF NON-GAAP MEASURES | |||||||
(continued) | |||||||
(in thousands) | |||||||
Year Ended | |||||||
2023 | 2020 | ||||||
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION FOR REAL ESTATE (EBITDAre) | |||||||
Net income attributable to | $ | 19,180 | $ | 6,034 | |||
Depreciation and amortization | 32,966 | 28,303 | |||||
Interest expense | 32,866 | 25,770 | |||||
Provision for income taxes | 450 | 379 | |||||
Net income attributable to noncontrolling interests | 270 | 117 | |||||
(Equity) deficit in earnings of real estate partnership (1) | 3,155 | (921 | ) | ||||
EBITDAre adjustments for real estate partnership (1) | 617 | 3,484 | |||||
Loss (gain) loss on sale or disposal of assets, net | (8,484 | ) | 364 | ||||
Gain on loan forgiveness | — | (1,734 | ) | ||||
EBITDAre | 81,020 | 61,796 | |||||
Year Ended | |||||||
Debt/EBITDAre Ratio | 2023 | 2020 | |||||
Outstanding debt | $ | 640,549 | $ | 645,163 | |||
Less: Cash | (4,572 | ) | (25,777 | ) | |||
Deposit due to real estate partnership debt default | (13,633 | ) | - | ||||
Add: Proportional share of net debt of unconsolidated real estate partnership (1) | 8,685 | 8,912 | |||||
Total Net Debt | $ | 631,029 | $ | 628,298 | |||
EBITDAre | $ | 81,020 | $ | 61,796 | |||
Ratio of debt to pro forma EBITDAre | 7.8 | 10.2 |
(1) We rely on reporting provided to us by our third-party partners for financial information regarding the Company's investment in Pillarstone OP. Because Pillarstone OP financial statements as of
Investor and Media Contact:
Director of Investor Relations
(713) 435-2219
ir@whitestonereit.com
Photos accompanying this announcement are available at:
https://www.globenewswire.com/NewsRoom/AttachmentNg/be5fbb20-d9af-476a-86cf-22a945ed1e44
https://www.globenewswire.com/NewsRoom/AttachmentNg/68364c3c-4fc0-4b3e-a041-b69e81ffbac8
https://www.globenewswire.com/NewsRoom/AttachmentNg/c90fbed0-f978-47e9-9de2-feb6358e28c3
WSR Total Shareholder Return v the MSCI US REIT Index
Source: FactSet as of March 26 , 2024.Note: Total returns include the reinvestment of dividends on the ex-date.(1)RMS represents the total return performance of the MSCI US REIT Index.
WSR Total Shareholder Return v Peers
Source: FactSet as of March 26 , 2024.Note: Total returns include the reinvestment of dividends on the ex-date.(1)PECO began trading on the NASDAQ on July 15 , 2021.(2)RMS represents the total return performance of the MSCI US REIT Index.(3)IVT began trading on the NYSE on October 12, 2021 .
Whitestone Board of Trustees
Whitestone REIT's Board of Trustees
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