Whitestone REIT WSR revealed the commencement of expansion work at Pinnacle of Scottsdale and sold the ½ acre portion of the entitled land parcel. The move will allow the company to enhance its leasable space at this Safeway-anchored neighborhood center by 24%.
REITs usually consider the location and trade area strength while purchasing or expanding a property. From that point of view, the expansion of this 113,108-square foot center in the Phoenix market seems a strategic fit given the high affluence – $142,000 average household income – of the adjoining community within its three-mile radius. Moreover, the center sees over 55,000 vehicles per day, reflecting high traffic at the center.
Notably, the company has commenced construction work for the extension on the adjacent land that it had purchased in 2011. As a result, leasable space would increase by approximately 27,100 square feet. The company estimates this additional space to produce annual net operating income over $700,000 upon lease up. The company revealed that in the new space, Tomaso’s Italian Restaurant has already committed for its second location.
Pinnacle of Scottsdale already houses renowned retailers like Starbucks Corporation SBUX, Hornacek’s Golf Shop and Jalapeno Inferno. There are also a host of other dining and service providers at the center.
In addition to the expansion work, Whitestone REIT sold off the ½ acre of land from the total land parcel of 4.45 acres that it is using for the expansion, for $1.1 million. This land parcel is slated to be used for a high density residential project. The move not only helped the company to cover its original land cost but also increases the prospect of more residents in the adjacent area, creating additional demand for its tenants’ products and services.
Conclusion
Going forward, Whitestone’s focus on value creation in its community centers with concentration on local service-oriented tenants is expected to keep it on the growth curve. Importantly, the ‘internet-resistant’ nature of its neighborhood centers shields it from the threats of rising online sales. The company, which posted an earnings surprise of 36.00% in fourth quarter 2015, currently has a Zacks Rank #2 (Buy).
Investors interested in the REIT industry may also consider stocks like DCT Industrial Trust Inc. DCT and PS Business Parks Inc. PSB. Both these stocks hold the same Zacks Rank as Whitestone.
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