Whitestone REIT (WSR) 1 Aug 242024 Q2 Earnings call transcript

Ladies and gentlemen, good morning, and welcome to the Whitestone REIT Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Mordy, Director of Investor Relations.

Good morning, and thank you for joining Whitestone REIT's second quarter 2024 earnings conference call.

Joining me on today's call are Dave Holeman, Chief Executive Officer; Christine Mastandrea, Chief Operating Officer; and Scott Hogan, Chief Financial Officer. Please note that some statements made during this call are not historical and may be deemed forward-looking statements. Actual results may differ materially from those forward-looking statements due to a number of risks, uncertainties and other factors. time, of for note important these company's X, Whitestone's today's call time-sensitive release and most a discussion the the filings date, XX-K to of this be may that is detailed information including fact SEC, recent of also August refer may be that earnings period accurate and it news webcast includes a with to for that this Please call the factors. Acknowledging Form XX-Q only XXXX. as The company update information. undertakes no obligation this to been Whitestone's the supplemental second available quarter operating and earnings in with news Relations Investor release financial and data the package filed website are and SEC section. on our have today. I second our call slides on the quarter our which over website to published Dave highlight Executive XXXX now be will Officer. Holeman, turn afternoon, We discussed Chief yesterday topics to

quarters you Thank joining out We another you, very for strong conference XX% Whitestone's second X have and Good extending call. morning, XXXX earnings plus leasing had we David. quarter, spreads. now had thank quarter to

share basis. strengthen signed quarter, $X.XX X.X% straight-line the achieving a X.X% increase sheet In growth year. debt-to-EBITDAre basis renewal our delivered core a $X.XX the cash earnings to per FFO forecast XXXX on internal and at we long-term strong which guidance operations and the X.X%, our for on We we on core business, morning track and grew second growth. We and the remain We same-store FFO reiterated same-store for in FFO $X.XX producing quarter. to $X.XX strategy our over very to of and on NOI revenue over balance our Xx. underpinning core with focus a a continued demand our driving this key our operating increase and share the fundamentals income our leases is of leases strong net with the per XX.X% growth, are top-line Beyond new supply at prior our blended and

ago. Excluding the an quarter, of the ratio proxy a X.Xx was our contest debt-to-EBITDAre fees in X.Xx, year improvement from

was Strategically, possession quickly base a our demand be demand. where at the this to morning. with key end year foot occupancy to determine anchoring of took team of rent our of XX these captured property take net XXXX. We alignment in and us of at These share from to ability surrounding the those able efforts I recently look on basis effective our X. X.X% the and the key annual from a you of with if once XX.X% up our property. up differentiators acquisition harder we a wanted quarter, the We Our differentiators the per results square of differentiators in ago. some $XX, was tenants some will drive neighborhood drive And our to can focus are points growth allow drivers assess Slide key improve we growth terms

centers Our team's X,XXX strength tenants growth spaces. to high square foot is with in leasing X,XXX placing

spaces foot mix our as that Millichap square It XX growth, rents points both to group. versus proven correctly with on net our mix us allowed report, averaging community centers Marcus X.X% is of for operating can the is being outperform higher community surprise and at versus of asking and and will #X. to configured believed the you peer neighborhood year-over-year grew our the X.X% neighborhood last basis years centers. income centers over that long see According Slide have centers group's box outperformance no numbers, and outperform power X,XXX same-store have We Whitestone's belief the & neighborhood data right of This by larger to centers. community national X,XXX by recent

Slide to X. Turning

we Because that we're a capital more on outperformance on is this areas these even centers, but spent acquire income. center, redevelopment correctly our impressive required reconfiguring configured given the of see amount drive to rather You'll generally results. is capital drive not

terms Another in driving is key differentiator results base. of our tenant

of trained selected have X,XXX allowing tenants to to find traffic strong a leasing We a because in team differentiators long-term need trade that driving a really net our mindset push key to plus base retail and more sector. income the capable build-up than as It order attractive should operational team leasing we a in cap again, over of is growing, we tenants us at are operating differentiator. that our by same-store these you tenant believe rate that a of most higher. Once peers

have runway ahead we drive progress valuation we there differentiators. the us continue The as market differentiators results and of with leasing, key results we our pleased these as and believe we execute. are via for acquisition made in more terms solid the on success our and teams consistently more built is became We is more of apparent property and to and to a strategy drive management ability

as members Berry to recently and of replace Board. our David to by our to improvements governance upon will the experienced continue appointment new and who Board independent we we strengthen and announced Taylor our board front, X On intent Trustees refresh make adding Nandita

and right their share with are of the our process. company's that, commitment leadership Buthman, early efforts. their for we and for and better company result for search Chair to for have a X thankful of efforts Governance in Amy XXXX, Committee their Board experience in Board to assuming call of the also we our September. ongoing to time Christine. a commitment Julia efforts. I'd a member over and hope to team. more and conference, with through new we support and with their as of last David forward will leading refreshment strong thank of of I'm up Amy bring the to initiative. I'll Independent our our stepping those the find in They've Julia turn Nandita served do to a our the well the investors you'll Feng value and attending much to attending for shareholder shareholders like Chair We years and We look meet this Both for thing Conference investors grow Bank Nominating America as there. And as changes leading to And valuable Whitestone move And you very wealth for for strong the

morning, everyone. Good

XX.X% ago. and occupancy As leasing year Dave on positive renewal Anchor was the quarter. XX.X%. a XX for at mentioned, We from XX.X% spreads XX.X% we up of spreads quarterly remain XX% overall of of confident and with smaller high monthly internal was are space of leasing leasing track and and remains in combined terms our points new XX.X%, objectives basis a achieved occupancy XXXX our in goals. Occupancy achieving spread

delivering it and Our continues the general strength imperative X.X% continue view of to primary drive we unabated than occupancy same-store re-merchandise to one NOI Rather our reasons quarter. this business, percentage as indication record behind the of our as viewing re-merchandising. the simply of it's an an

continually far Bed as replacing effort and neighborhood plan and newer in the understand re-merchandising business grocery advancing tenants & surrounding are understanding This the ] EoS growth demographic We neighborhood. The the store Arizona. or are extends how replacing focus [ larger spending serving re-merchandising Plaza that in younger with Creek, at Vet and beyond in well our their that increased Picklr Crossing quality continually capture aging we've Canine both Beyond. they Central pets the more from initiative, that Bark offering and revenue past, to Paradise on the existing the is in matched tenants replacing on leasing demographic and properly City we've tracking demand Austin, to with The talked challenged is Quinlan at the such a Bath of team the about in business demand how makes neighborhood. money prospective plans younger

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businesses. investors seen competitors than to requires demands brand Sunbelt sticker. We for attention. acquired critical more centers the service-oriented the the well we've shifting grocery-anchored they're correctly years, to growth believe model number far built configured a and we've last The growth it's high draw to understand attract positioned we've neighborhood that few or are to of with strategy Over an acquisition capture investors' themselves

that and a expand us expertise component able the are reason part difference differentiators is interdependent The understand critical driving However, to it's with results. the is biggest capital. our leasing to deliver is capital redevelopment curate consistent and on also outperform critical our of results. I'll less capital Redevelopment how centers team the to allows properly to of capital. how ability we're often

key to a the and drive properties demand vital it. is to the redevelopment acquired leasing is on we that the tuned capital. allowing we into tenant However, for apply that the agents up in be win a continually demand determine to you a to demand demand, to right neighborhood and with order for center is when pulse ensure actions maintain We This take. the project keeping the

timing Albertsons acquisition CNS. to factor stores have on also that application proposed both Kroger's news seen our redevelopment the capital. recent in We of our in acquisition divested of of be in analysis and expirations, Investors may lease may

shadow-anchored These per X stores stores Safeway Marketplace another are Anthem in and average Street, the list; the also If will $XXX,XXX. centers, X household in market. Towne and a an income $XXX Market we Center well-performing have X-mile Arcadia our Square be Phoenix Scottsdale CNS through, We square with foot our approximately merger strong a on believe goes sales market, approximately Phoenix Fountain of Pinnacle of operator. grocery of and plus

is key the lease investors of was signed strongest We'll value. the nearly value anchored the in The in quarters with XXXX, always, back signed by we neighborhoods. XXXX. quarters next more. If list total as were of on last most lease learn highest look surrounding the $XX quarter XXXX centers As million fourth updated are years, terms that over keep the recent the we these well XX and

success track, that sign and leasing my is While continually space from one thank this another a that able the and been is my for this learn certainly long-term to but busy a that got We've far. to we're thus right biggest team sweat details to operations delivering right team reason necessary the also the and to out right to on of the to thanks their for tenants deliver. ahead, to deliver Scott? we impressive environment second team business. ability the team half the wanting ensure the have It's we've and

We of for good core quarter. were deliver and to $X.XX FFO you, the Thank morning. pleased Christine,

strong by efforts. Dave leasing a discussed, strong was this As very led and Christine quarter

raising the forecast second that increase in delivery our growth X% half the same-store percent the of NOI anticipates X at of Our guidance last we and year, with of quarter more with quarter causes quarter heavily our X.X%, original we range fourth sales the reductions, the the and the end the to and fourth leasing the raised and X.X% same-store kicking to both delivery fourth in G&A on top quarter, similar FFO especially NOI bottom this full in year current in between of range. the will X.X%, and years. Pursuant

we our side, coming was half of debt debt financed we debt second the in due in this maturing In XXXX. $XX secured million out On this the have of secured X.X% laddering essence, year.

Currently, an more XX% of eye X in revolver have keep the rates including on will on our out not matures bit a debt. We of debt we revolver and X-month options. laddering variable our extension XXXX,

on approximately FFO continue balancing in should Non-same-store and at walk updated the the terms to one and increases, impact and we our increased. core get conjunction Slide XX. and But our out. these it of reiterated see out expense intend acquisitions balance X also to [Technical Looking forecast Difficulty] We the extent timing contributors. We how increased NOI growth interest other will we there. in the guidance

underlying more growth Our engine more becomes to investors. visible goal sure is that and to make our

in noise that, growth order keep comments will our open eliminating continuing by questions. We brief drive today, NOI will and we the for deliver by will this same-store and growth. With I line to to bottom-line do both

Instructions] [Operator Hau from line first Truist the Securities. question with Our is Anthony of

So right? curious, chart So then the just on Page for an ground in you today you for are those in X the see what in Dallas, strongly. -- markets? uptick rent the moderated San rental seeing and guys growth presentation, And Austin on Antonio trend for

space. our We're seeing markets, just are the leases turning still. and all of of what strength in site a matter when It's Anthony,

So don't negative real a I a shift in way. see

getting on of are. our markets. are And frankly, fact, it full track across And the is occupancy. difficulty with In I'm some that's to still markets quite seeing what all our continuing expectations

we've our re-merchandising why to work continued efforts growth. base the to of the that's strengthen So

watch that Got then you. little a right now? hearing owners your news are list any you're struggling there Are restaurant like like restaurant some And that's McDonald's bit. tenants on

fast our now. fast about right meet What as talked watch that quite and to starting the on pricing food bit, Not is casual. a I is has we're finding, been this same list think

something for And less a meal car. versus so what people desirable the be are be opting a of good eating sitting down like would in choice a and having would that hamburger

Germain Securities. is question of Mitch next with Our Citizens from line the JMP

it So part guidance looking little your kind in the a appears bit you're based year. of the at of of deceleration on same-store back a

what talk can of is just Just the kind you about expectation there?

year, was. to the This compare of first is the first if looking growth sequential and Mitch, thanks compared But that for second were be think half a at lower of the question. half year, Scott. growth. will look XXXX, of half still We're the same-store you I the the at the half little same-store to to year bit that the second than

of year, You may bit little lower. the half quarter recall, in second we a a was had last that

was one little reasons this reason that's one quarter the why the we why of So year a -- second higher.

Mitch, Yes. Dave. it's

did saw, As same-store for increase we year. guidance you the our

with We portfolio. the and I of bit So and we're with performance think pleased the on above I original -- the bottom point, we're top think guidance. performance, pleased our Scott's very it up end, to the a moved

Got you.

an a of control. there? little contemplated of guidance of know happening your is provide what's a update happening know of your bit didn't You Anything note now. out this lot some on there is I right I in Pillarstone.

A Mitch, happening. lot Dave again.

I think for really our we're redemption, the process. we mentioned that way go our that collection through we and phase expecting in proceeds through as working

to of kind we that and I of those a guidance disciplined think our collect we're process. $XX we earlier million and had through -- expected that's in proceeds this to change on, organized year about communicated funds no working

the Are assets with for entity from Pillarstone sale?

of now, all And of have assets of contracts working order the part in of they a the some for as of in X to we're $XX BK. about place or plan all obviously redemption. we're assets. Obviously, liquidated understand the the meet of get working assets, reorganization. to Right are, we They through million Whitestone's

pretty Christine, Got last you. quarter-over-quarter year, a And meaningful me. from then obviously, fourth occupancy XQ. increase quarter last for you in had

part that of a a the But You're active. point the obviously, fact back comments are of this bit starting at the little more higher year referenced year. the seasonally your

do level kind comfortable So you a to of bit consistently? this is portfolio little a more occupancy think start perform for to where

said, I at place that there's at a this that quite active the mean, get -- I I we can good mean, profitability like that. because we're is with still an XX.X% XX.X%. portfolio to think re-merchandising Well, be effort looking a confident I'm But there the achieved I But end of can in I year.

Our next of line Alliance question Global is the Mehta from Gaurav with Partners.

non-recurring half I of 'XX. items any you wanted ask to second guidance your the the within guidance G&A? include G&A your for Does on

No.

in of increase So the half bit more second that's expect of proxy little In and be normal. in the $X.X to the cost first million, year, had the a half, G&A. the of we we defense majority around

Some of into the and were the first with matters. fees front-loaded year the the of legal associated legal other half bankruptcy

year. the do half G&A in expect normalized we a of So more second the

Okay.

Second real the which had quarter. taxes second taxes the should expect 'XX? half for How about were on question property of we the I estate was second real estate property lower in

of process in taxes often litigate State to So there's and long dispute you and the a Texas, tax refunds. get property

when know get don't You you'll those.

a the than tax we second quarter normally refunds would. more had in few So we

a So second for so Texas. of where quarter the I the the normalize taxes to number second settlements reason be -- on we would is is in in much we expect the closer property year. first and just half of lower quarter And the to we've favorable were had properties

the transactions. And maybe on Okay. then lastly

of I expected update call, second any maybe had Was the those on think in you there last properties about talked $XX million on selling quarter. dispositions?

Gaurav, on efforts it's Dave. track. recycling our are Yes,

quarter. the the of pipeline We on closed still in of before the quarter, -- and of think do close to we disposition on in balance in closed I year. have And the on second think we a assets second couple couple a acquisitions. the the I right one

acquisitions of $XXX in we've done I million of $XX million the last about over years think and dispositions. couple

Our to balance plan is those. continue to

another the initial coming probably to day And continuing where to upside the $XX we've X of as significantly an So more there's think balance year. million those got million be dispositions are assets and to of well. buy well. we We're able $XX in going spread

[Operator Instructions] Riley John B. Securities. line Our of Massocca next question is the from with

kind in -- little but it increased if hairs of that? the So I'm guidance. but driver sorry bit, expense expectation interest execution mortgage Is timing I'm anything to the Just earlier the kind versus in the missed recently to the color was prior with quarter on I versus on just a just you change did? were do trying a or splitting disposition this last mean, expectations of what of outlook. your I that What's get call, guidance little

of increase plan the guidance No, be recycling into the is dispositions. of the neutral. the where a the the the year, capital first in interest we half in majority we the second -- is But have half -- the outpacing are just a little year of expense acquisitions plan the bit and to

and that, so bit bit you have little higher little just a interest And with higher expense. a NOI

impact virtually on ahead amount bottom-line be $XX be is that to Maybe FFO versus we're million to the the acquisitions nothing. going year. $XX so to would million for And the dispositions

Just a to you give this. for sense

there last then? the original on guidance the anticipation In that was have quarter earlier been in would timing the -- XQ in dispositions

dates the of things. Yes, I predicted these

very the being know you permanent. in a just different. kind timeframe when And don't expense volatility interest seems of I element can interested But assumed in given from variable a seeing? It expense perspective of that just was kind when set of week we're be given is interest that like expectation? that all of the guess, I the what

the at the quarter, interest curve at And second a of this looking variable XX% to would of forecast. the of end the as And rate the year. we down out we're low-Xs at high-Xs, the we're the X-month quarter. -- take end quarter's SOFR look the going in for the of to at range through that look year, we the Well, balance be least

maybe terms your to a of consumers. And consumers consumers to recycling in of you're those you closer portfolio any capital does own that rent kind at ability I exposure mean, of kind that higher-income as income you at kind you look versus how your push your have are seeing of of buckets, [Technical plan? different little Difficulty] high-income to lower-income low-income extent to difference shape properties thinking consumers? the kind about versus are

question. Good

properties incomes I think most of positioned a come opportunities we couple really those HHIs. growth. we've from why of see higher high And and job those That's acquisitions things. our in where our growth and

the So do mid-range. with upside about of a lower has what's consumers. we've to we've as happening there. very that properties, they're We see been on lot with thing still those the lower-income have this fortunate been been growth that don't on to a those see really we able end. some of concerning Truly, incomes. They're the of exposure Where well not

So yet. haven't we anything these unfortunate. said, very what's for I people right, that again, seen feel to and happening, bad being But of as it's

things out we balance like everybody a for way. area. hopefully, But said, towards the good will of a I year So exposure that in in don't lot the end of have

minimal. very it's fact, In

So capital as move continue kind the to that curve? is up you thought HHI mean, recycle, look at I to of process

I with higher the John, HHIs a biggest value It the it's of we continued part add but and little also our recycling Dave. acquisition, just ability we've have recycled bit new -- to -- the ABRs. is through part higher is mean, is.

is. to on greatest where continuing opportunity we the focus So think

further Holeman, CEO, I there questions, conference would As Dave are now for to closing over his hand no the comments.

with progress in us second Thank morning. At everyone to and this look the joining of pleased really year. our you. for the quarter Thanks performing forward we're Whitestone, balance the for

any love We in with fall and of interact to to. be would out would you that will investors among like the

reach out Dave. day. us. a So Have great Thanks, please to

now you your participation. REIT Whitestone concluded. for of has Thank you. The conference Thank

disconnect now lines. may your You