Expanded Discussion on Whitestone REIT

As noted a few hours ago we took a small portfolio position (300 shares) in Whitestone REIT (NYSE:WSR) in the Enhanced High Yield Income Portfolio.  This is a very small position that may be expanded if the share price should drop much further.

As a REIT with a current yield of 9.5% after the drop in share price today this issue certainly meets a need of paying a high current yield.

This new position is partially brought about by our familiarity with WSR as we have owned shares in the company off and on a number of times since they came public just over 10 years ago.

The company is technically a shopping center REIT, but we look at them a bit differently as they lean toward leasing to a large variety of smaller tenants versus a much smaller number of large, more big box types of tenants.  Certainly they have large tenants such as Safeway, Whole Foods, Walgreens and Kroger as tenants, but the largest tenant accounts for just 2.6% of revenue.  They are much more focused on having CPAs, lawyers and fitness centers in small spaces.

WSR is almost entirely focused on Phoenix and various areas in Texas with one property located in the Chicago area.  With the exception of the Chicago area they are in high growth areas which typically have high household incomes and seem to be perfect communities for the concept WSR presents (they call their centers “Community Centers”–not shopping centers)

The company pays a 9.5 cent monthly distribution which they are not currently covering.  Over the years they have at times covered the distribution and other times where they have fallen a few pennies short.  This is the key reason the share price has traded in a range of $10-$15/share their entire existence as they have not ever raised the distribution since going public and they continually either barely cover the distribution or don’t fully cover the distribution.  With WSR I don’t think you can count on share price growth and instead must be happy with the tasty distribution.  In this case we would be more than satisfied with a flat share price.

With the stock market sell off today we are not certain what to expect tomorrow, but we have been through many similar times in the markets in recent years and we have always survived quite nicely and we think this purchase will help us through the year.

Leave a Reply

Your email address will not be published.