WSR Continues Acquisition Binge - Analyst Blog

Texas-based Whitestone REIT (WSR) recently completed the acquisition of a 310,979 square foot upscale community center named 'Village Square at Dana Park' and adjacent land parcels situated in Mesa. The $50.5 million 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 positive absorption to the extent of 1.3 million square foot by the end of first half of 2012 compared with 648,697 square foot in the first half of 2011.  By the end of the second quarter of 2012, the overall retail market vacancy stood at 11.3%. The key submarkets of Phoenix such as Scottsdale, Mesa and Gilbert are the major contributors.

Village Square at Dana Park is positioned between the northwest corner Baseline Road and Val Vista Drive at Superstition Highway 60 in Arizona. The community center experiences per day traffic count exceeding 250,000 cars. The property is 71% leased to a cluster of 50 eminent retail and retail service tenants. The tenant mix of the property comprises of major retail giants and restaurateurs.  Some of the chief tenants are - Barnes & Noble, Inc. (BKS), Coldwater Creek Inc. (CWTR), Jos. A Bank Clothiers Inc. (JOSB) and Chipotle Mexican Grill, Inc. (CMG).

The acquired six developed and one undeveloped land parcels located adjacent to the property span a total of approximately 331,056 square foot. Whitestone intends to use the acquired land parcels for further extension of the property and thereby attract new tenants going forward.

The company is focused on the strategy of broadening 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 added another community center named Fountain Square located in the Scottsdale market of Phoenix. It has twelve 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. With the Mesa based property acquisition, Whitestone now owns a large share of the tenant space in the affluent submarket of Phoenix, spanning over 1 million square feet.  

The company is expected to release its third-quarter 2012 results on November 6, 2012. The Zacks Consensus Estimate for third quarter FFO (fund from operations) is currently pegged at 25 cents per share.

We presently have a long-term Neutral recommendation on the stock. It also carries a short-term Zacks #3 Rank (Hold).

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.

BARNES & NOBLE (BKS): Free Stock Analysis Report

CHIPOTLE MEXICN (CMG): Free Stock Analysis Report

COLDWATER CREEK (CWTR): Free Stock Analysis Report

JOS A BANK CLTH (JOSB): Free Stock Analysis Report

WHITESTONE REIT (WSR): Free Stock Analysis Report

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