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Whitestone's (WSR) Pinnacle Phase II Attains High Occupancy

Zacks Equity Research

Whitestone REIT WSR achieved more than 90% occupancy for its newest ground-up development, Pinnacle of Scottsdale Phase II, in Scottsdale, AZ. This was achieved through addition of new tenants, including Merrill Lynch, Starbucks Corporation SBUX and Orange Theory Fitness.

The construction of Pinnacle Phase II Expansion was completed in first-quarter 2017 and involved a total construction cost of $7.0 million. The expansion took place on a land that Whitestone had acquired next to Pinnacle of Scottsdale property in 2011. The company expects annual net operating income on the property to be around $0.9 million, surpassing its initial estimates. The first phase is anchored by Safeway.

Amid a challenging environment in the retail real estate market, with dwindling mall traffic and store closures amid aggressive growth in online sales, Whitestone REIT’s strategy of having a portfolio of “E-commerce resistant” neighborhood, community and lifestyle retail centers in the thriving markets in the Sunbelt, helps it to stand out.

The expansion of Pinnacle is also in sync with this strategy and the demand for space at the properties is reflected by the combined 96% occupancy for Pinnacle Phase I and Phase II properties.

Notably, Pinnacle of Scottsdale boasts of solid trade area demographics, with median household income of $112,000 within a three-mile radius and solid traffic counts with a 50,000 vehicle per day at the intersection of Scottsdale and Pinnacle Peak roads. In addition, the company’s focus on offering convenience and unique services assures a steady footfall at the property.

Moreover, Whitestone’s Chairman and Chief Executive Officer – James C. Mastandrea – highlighted that “Maricopa County is the fastest growing county in the United States per the latest census report”.  

Per Mastandrea, following its IPO, the company aimed at growing its asset base in Arizona, especially the areas of Scottsdale, Chandler, Gilbert and Mesa. Currently, with 27 properties in the Phoenix MSA, the company remains well poised to leverage on the growing community.

Whitestone REIT currently has a Zacks Rank #3 (Hold). The company delivered positive surprises in each of the last four quarters, with an average beat of 27.3%. In addition, it is trading at a discount to the industry average.

However, shares of Whitestone REIT underperformed the Zacks categorized REIT and Equity Trust – Other industry over the past one year. Whitestone REIT’s shares descended 13.2% against the industry’s growth of 4.4% over this time span.

Stocks to Consider

Investors can also consider better-ranked stocks in the REIT space like Equity LifeStyle Properties, Inc. ELS, Prologis, Inc. PLD and PS Business Parks, Inc. PSB. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Equity LifeStyle Properties currently has a long-term growth rate of 4.7%.

Prologis’ estimates for 2017 funds from operations (“FFO”) per share moved north nearly 3.8% to $2.76, over the past 30 days.

Moreover, PS Business Parks’ estimates for 2017 FFO per share climbed 1.2% to $5.93, over the past 30 days.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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