Equity Offering by Whitestone REIT


Texas-based real estate investment trust (:REIT) Whitestone REIT (WSR) has recently announced a public offering of 4.0 million shares to enhance its liquidity. The company has also decided to grant the underwriters a 30-day option to purchase up to an additional 0.6 million shares to cover the over-allotment options.

Robert W. Baird & Co. Inc acted as the sole book-running manager of the offering. Whitestone intends to utilize the proceeds from the transaction to repay debt and for other general corporate purposes, including redevelopment activity. The secondary offering is likely to provide financial flexibility to Whitestone to seize accretive investment opportunities, which could in turn go a long way in enhancing top-line growth.

Whitestone is focused on its strategy of portfolio optimization and increasing the tenant mix. Recently, the company acquired a 125,898 square foot community center titled Paradise Plaza  in Phoenix, Arizona, for $16.3 million. As of June 30, 2012, Whitestone owned 46 community center properties spanning approximately 3.6 million square feet, including two development land parcels.

Since its inception in 1998, Whitestone has owned, operated and re-developed community centered properties, which are located in established or developing culturally diverse neighborhoods. Whitestone has a diversified tenant base concentrated on service offerings including medical, education and casual dining. As of June 30, 2012, Whitestone had cash and cash equivalents of $3.9 million and $101.0 million available under its revolving credit facility.

Whitestone, which competes with the likes of General Growth Properties Inc. (GGP), recently reported second quarter 2012 recurring funds from operation (:FFO) of 23 cents per share, missing the Zacks Consensus Estimate by 4 cents. We presently have a long-term 'Neutral' recommendation on the stock. Also, it 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.

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