Consistent with its aim to further expand, mainly on the off-market front, Texas-based Whitestone REIT recently announced the acquisition of a class-A community center – The Shops at Pecos Ranch – in Arizona for $18.95 million. The property generates in-place cash flow of roughly $1.6 million, or 8.4% of the purchase price.
The Shops at Pecos Ranch is a 78,767 square-foot community center located in Chandler, a suburb in the growing Southeast Valley of Phoenix, Arizona. Positioned in a densely populated area, the property experiences a traffic count of over 27,000 cars per day. The center is 100% leased to 19 tenants. The tenant base includes popular restaurants and service providers such as Crowded House, Phoenix Children’s Academy, Oregano’s, Tia Rosa, Uncle Bear’s, Club del Sport and others.
Lately, Whitestone is focused on 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. Accordingly, the company acquired an upscale community center named 'Village Square at Dana Park' and adjacent land parcels situated in Mesa, Phoenix, recently.
The recent strategic move by Whitestone is expected to strengthen its presence in the Phoenix area. The company currently owns 15 Community Centers and future development land parcels in the greater Phoenix area – Terravita marketplace, Pima Norte, The Citadel, The Pinnacle of Scottsdale and The Shops at Pinnacle Peak. With the Chandler-based property acquisition, Whitestone now owns a large share of the tenant space in the affluent submarket of Phoenix, spanning over 1.2 million square feet.
After posting positive absorption for four consecutive quarters, the retail market in and around Phoenix market recorded negative absorption of 72,907 square feet in third quarter of 2012, according to a leading commercial real estate services firm, CBRE Group Inc. (CBG - Analyst Report). However, it is notable that year-to-date, the market has positive absorption of 1.2 million square feet. In addition, the average net asking lease rate for existing retail space throughout the area continued to improve in the quarter to $16.10 per square foot from an average rate of $15.95 per square foot in prior-year quarter.
Founded in 1998, Whitestone is a fully-integrated real estate investment trust (REIT) that owns, operates and re-develops community centered properties, which are visibly located properties in established or developing culturally diverse neighborhoods. As of September 30, 2012, Whitestone owned 50 community center properties, spanning approximately 4.2 million square feet, including three development land parcels.
We presently have a long-term ‘Neutral’ recommendation on the stock. However, it carries a Zacks #4 Rank, implying a short-term sell rating.